What happened

Stitch Fix (SFIX 0.26%) continues to lose style points among investors. Shares were down another 9.4% today as of 11:30 a.m. ET, even though there was no specific company financial news to cause the downturn. Deep wounds and long memories are the likely culprit, as many investors linger on the ugly quarterly update provided back in September.  

Stitch Fix stock is now down 83% so far in 2022.  

So what

The reason for Stitch Fix going out of style isn't hard to see. The company concluded its fiscal 2022 (the three months ended in July) with a 16% year-over-year decline in sales. Meanwhile, losses continued to mount. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) loss was $31.8 million.  

It might seem excusable, considering inflation has been a pesky problem this year and one that has begun to impact consumer spending trends. However, according to the U.S. Census Bureau's figures, overall spending on clothing keeps climbing this year as the economy continues to reopen and normalize from the early pandemic. Clothing store sales were up 7.8% year over year through the first nine months of the year.  

That makes Stitch Fix's situation look all that more dire. Clearly, the company's customer base is looking elsewhere right now to restock their wardrobes.

Now what

At some point, there could be value in what Stitch Fix has managed to build. After all, shares currently trade for a skimpy 0.16 times trailing-12-month revenue. However, absent any positive outlook for growth or profitability, there's little to help the stock. To kick off its fiscal 2023, management has predicted at least a 20% year-over-year decline in sales and adjusted EBITDA losses being as much as $15 million.

The good news is that Stitch Fix still had $213 million in cash and short-term investments and zero debt. If it can keep the stitching from coming completely undone, perhaps an acquisition of its operations would be in order -- like what just happened for fellow online apparel site Poshmark. For now, there's little to sustain any long-term rally in Stitch Fix shares, absent a positive development in the company's financial performance.