What happened
Shares of Stitch Fix (SFIX -1.67%) were all over the map on Wednesday, climbing as much as 16.3% in early trading, dropping 6.8%, and now trading up 0.5% at noon EST. Fiscal first-quarter earnings were reported after the market closed on Tuesday, and investors don't quite know what to do with this stock.
So what
Revenue fell 22% in the quarter to $455.6 million, and the net loss was $55.9 million, or $0.50 per share. Guidance for the fiscal second quarter, which would include the holiday season, is for $410 million to $420 million in revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of negative $5 million to positive $5 million.
If you squint, financials are expected to get slightly better given the $7.4 million adjusted EBITDA loss in the fiscal first quarter. But the company will still be losing money, and there's no clear turnaround in sight.
Now what
Stitch Fix looks like it's fundamentally broken as a company, losing customers and not being able to sell retail products for a profit in what's supposed to be a very profitable segment. Based on today's reaction, the market doesn't quite know what to do with the stock either. It's not often you have a big move higher only to plunge within hours of the market opening.
Given the mounting losses and lack of a clear direction for the business, this is a stock I'm staying out of. The risk is high, and I don't see much of a reward on the horizon.
