What happened

Shares of Stitch Fix (SFIX 1.57%) were taking another hit last month after the online personalized styling service posted another disappointing earnings report. In the second half of the month, the broader market malaise over rising interest rates weighed on Stitch Fix as a recession only makes its chances for a recovery less likely. The stock also sold off sharply on the August CPI report on Sept. 13.

According to data from S&P Global Market Intelligence, Stitch Fix stock finished September down 21%. As you can see from the chart below, the stock fell sharply on the earnings report and continued to slide from there.

SFIX Chart

SFIX data by YCharts

So what

Stitch Fix actually began the month on a strong note, up double digits at one point. Though there was no news out on the company, the bullish market sentiment seemed to lift the stock. 

However, that ended after the August consumer price index report came in hotter than expected, pushing the stock down 13%; unprofitable stocks have been especially sensitive to inflation and the high-interest rate environment.

The stock traded sideways for the next week until the company reported fiscal fourth-quarter earnings on Sept. 20. Stitch Fix missed estimates on both top and bottom lines as the company's pandemic-era struggles continued. 

Revenue fell 16% to $481.9 million, missing estimates of $489 million. Active clients fell 9% to 3.8 million, a sign that its pre-pandemic momentum has entirely disappeared and the company is in disarray under new CEO Elizabeth Spaulding.

On the bottom line, the company reported an adjusted EBITDA loss of $31.8 million and a GAAP loss of $0.89 per share, worse than estimates of $0.62.

The stock wavered as investors momentarily put aside the disappointing report, but it resumed its decline over the last week of the month as the broad market fell on concerns about rising interest rates and a potential recession.

Now what

Stitch Fix's guidance may have been even worse than its fourth-quarter earnings report. For fiscal 2023, the company expects revenue of $1.76 billion to $1.86 billion, down 14% from the prior year, and it called for an adjusted EBITDA loss of $25 million to $45 million.

The launch of its direct buy offer, Freestyle, failed to bring in new customers, and at this point it seems unlikely that a positive catalyst will emerge to turn around the stock. Though management blamed its struggles on the macro-level economy, that's only a small part of the story here as most of the apparel sector is outperforming Stitch Fix.