Shares of Stitch Fix (SFIX -1.79%) were down 2.7% as of 9:40 a.m. ET on Wednesday, following the online personalized-apparel retailer's Tuesday afternoon release of its results for the fourth quarter of fiscal 2022.
The main catalysts driving this drop were quarterly revenue and earnings that missed Wall Street's expectations, a decline in the company's number of active clients, and disappointing revenue guidance for its first quarter and full-year fiscal 2023.
Here's an overview of Stitch Fix's quarter and outlook that focuses on six key metrics.
Image source: Getty Images.
1. Revenue declined by 16%
In its fiscal fourth quarter, which ended July 30, net sales fell 16% year over year to $481.9 million, which missed the $489 million Wall Street had expected. That result was also weaker than the company's own guidance of $485 million to $495 million.
It's a challenging macroeconomic environment for retailers, especially for those that sell consumer discretionary products. Inflation is high, and some consumers have cut back on spending because of concerns that the economy could slip into a recession.
But not all such retailers are struggling. Athletic wear specialist Lululemon Athletica (LULU 0.77%), for instance, grew its revenue 29% year over year in its most recently reported quarter. Better yet, its profit growth was even stronger, meaning its profit margin expanded.
2. Active clients fell by 9%
| Metric | Fiscal Q4 2022 | Change YOY (Decline) |
|---|---|---|
| Number of active clients | 3,795,000 | (9%) |
| Average net annual revenue per active client | $546 | 8% |
Data source: Stitch Fix. The company considers an active client to be any customer who has bought at least one item in the past 52 weeks. YOY = year over year.
The company continues to struggle to grow its customer base. Last quarter, the number of active clients declined 5% year over year.
3. Its operating loss was nearly $99 million
In its fiscal fourth quarter, Stitch Fix's operating loss was $98.6 million, compared to an operating income of $20.7 million in the prior-year period.
4. The bottom line flipped to negative from positive
Its quarterly net loss was $96.3 million, or $0.89 per share, compared to net income of $28 million, or $0.19 per share, in the year-ago period. This result was worse than the loss of $0.62 per share that analysts had projected.
5. Operating cash flow flipped to negative from positive
In the fiscal fourth quarter, Stitch Fix used $39.1 million in cash running its operations, compared to generating cash of $19.4 million in the year-ago period.
While the company gobbled up cash running its operations in both the fiscal third and fourth quarters, its cash flow for the full year was positive, $55.4 million to be exact.
It ended the quarter in solid shape on the liquidity front, with $213 million in cash, cash equivalents, and short-term investments.
6. Fiscal 2023 revenue is expected to decline by 10% to 15%
For the fiscal first quarter of 2023 (ending Oct. 29, 2022), management guided for revenue in the range of $455 million to $465 million. That would amount to a drop of 20% to 22% year over year. Going into the report, Wall Street had been modeling for fiscal first-quarter revenue of $522.7 million, so the company's outlook was considerably weaker than analysts had been projecting.
For the full fiscal year (ending July 29), management expects revenue of $1.76 billion to $1.86 billion. That would amount to an annual decline of 10% to 15%. This outlook was also lighter than analysts had been expecting, which was for annual revenue of $2.1 billion.
In short, Stitch Fix turned in another weak quarter and its outlook is uninspiring. Rather than being tempted to bottom-fish Stitch Fix stock, investors "would be better off paying up for shares of companies with business models that have proven capable of generating profitable and solid revenue growth," as I've previously written.
Lululemon is one such growth stock, as mentioned above. (Click here to read my most recent Lululemon earnings report.)
