Investors this year have had a bleak outlook on Stitch Fix (SFIX -1.28%) stock. And to date, the company's operating results haven't challenged that bearish narrative.

The fiscal 2022 year-end earnings update landed in mid-September, showing mounting challenges around growth, profitability, and cash flow. Management tried to put a positive spin on the declines, which are partly due to wider headwinds affecting many e-commerce stocks, but even an eventual rebound in the industry might not be enough to turn Stitch Fix back into a growth stock.

Let's take a closer look.

More bad news

Stitch Fix twice lowered its annual sales guidance for fiscal 2022, but growth was still disappointingly weak through late July. Revenue declined 16% year over year, reflecting a pullback in demand for its apparel. That was the second straight time the company has described weakening customer acquisition trends that are pressuring management's short-term outlook.

The data looks worse if you dig a bit deeper. Sure, Stitch Fix posted an 8% increase in average annual spending -- up to $546 per active client -- during the fiscal fourth quarter. But it shed clients at an accelerating rate with its customer base falling 9% year over year compared to the previous quarter's 5% drop. If investors were hoping for a stabilizing trend here, they were disappointed.

Profitability challenge

The weakening growth trends are amplifying Stitch Fix's financial challenges. Quarterly net losses jumped to $93 million, and operating losses hit $99 million, down from a $21 million profit a year ago.

Management is motivated to clean up the company's finances. "Returning to profitability is of utmost importance," CEO Elizabeth Spaulding said in the earnings call. Yet losses are projected to continue into the next fiscal year. The good news is adjusted EBITDA losses should moderate, falling from 7% of sales last quarter to around 2% to 3% of sales in the fiscal 2023 first quarter.

Looking ahead

Stitch Fix entered the new fiscal year with too much inventory, so investors can expect continued pressure on earnings as it cuts prices and tries to offload excess holdings. The bigger worry is that there's no clear evidence yet the company is returning to its prior path of steady customer additions. Instead, its influence appears to be waning in the industry. There are far more successful apparel retailers, after all, like Lululemon, which are rapidly growing sales in their e-commerce segments.

It is possible that the combination of cost cuts and management's growth initiatives will power a sharp spike in earnings, pushing the stock higher in response. Stitch Fix shares are primed for such a rebound if operating trends improve, considering they're down a whopping 80% since the start of 2022.

But most investors will want to watch this potential rebound story from the sidelines. A quick return to profitability and steady customer growth seems unlikely. Stitch Fix's last few quarterly reports demonstrate the company struggles to gain new customers at a time when shoppers are looking more critically at their apparel spending.

That's why the stock might not recover this year and could disappoint shareholders in 2023 and beyond. There are better growth stock options available today, and investors should look to those companies for market-beating returns.