What happened
Shares of Stitch Fix (SFIX -0.45%) were soaring Wednesday morning following its quarterly earnings report last night. The stock of the online personal fashion company shot higher by as much as 39%. Shares were still up by 29% at 10:45 a.m. ET. But longtime shareholders may still not be thrilled with their investment in Stitch Fix. To put today's move in perspective, Stitch Fix shares are still down by about 95% from the stock's pandemic high in early 2021.
So what
That enormous decline is likely playing a role in the magnitude of today's stock move. But the catalyst for today's jump was the company's fiscal 2023 third-quarter earnings results. Stitch Fix's business has been struggling as fashion shoppers adjust their habits and move back to in-store shopping habits.
While quarterly revenue of $395 million declined 20% year over year, it beat analyst estimates and was at the high end of the company's own expectations. Stitch Fix said it also has been doing better at controlling costs and will continue to pare back its business expenses. That positive news is helping shares move higher, and so are the investors who had short positions on Stitch Fix stock.
Now what
In strategic cost-cutting moves, Stitch Fix is reducing its distribution warehouses from five to three and considering exiting the UK market that it entered about four years ago. With its business seemingly positioned to head in a better direction, many investors may be closing short positions today.
As of mid-May, more than 16% of the company float is being shorted. That is a setup for a short squeeze and may explain today's outsize gain.
