Stitch Fix shares plummet after company cuts guidance for the year

Stitch Fix shares tumbled in extended trading Tuesday after the online styling service offered a weak outlook for its fiscal third quarter and slashed its forecast for the full year, as it struggles to grow its subscriber base.

In its latest quarter, the company said it experienced challenges with onboarding new customers and converting clients. Stitch Fix reported a per-share loss in line with analysts’ estimates, and revenue slightly above expectations, for the three-month period ended Jan. 29.

Looking ahead, however, Stitch Fix is being much more cautious about its prospects for future growth. Chief Executive Elizabeth Spaulding said the company’s active client count is not where she wants it to be. That’s despite a recently introduced option for shoppers to buy single items from its website, without a subscription, known as Freestyle.

Stitch Fix shares shed more than 17% in extended trading.

Here’s how the retailer did in its fiscal second quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

• Loss per share: 28 cents vs. 28 cents expected
• Revenue: $516.7 million vs. $514.8 million expected

Stitch Fix reported a net loss of $30.9 million, or 28 cents per share, compared with a loss of $21 million, or 20 cents a share, a year earlier. That was exactly in line with analysts’ estimates for the quarter.

Revenue grew to $516.7 million from $504.1 million a year earlier, beating estimates of $514.8 million.

The company counted active clients of a little more than 4 million, an increase of 4% from the year-ago period. Revenue per client came in $549 during the period.

Stitch Fix defines an active client as a customer who either checked out a curated style box, called a Fix, or ordered an item using the retailer’s direct-buy option in the preceding 52 weeks, measured on the last day of that period.

For its third quarter, Stitch Fix expects net revenue to be between $485 million and $500 million, which would represent a decline of 10% to 7% from the prior year. Analysts had been looking for sales of $560.5 million.

For its fiscal year, which ends July 30, Stitch Fix sees revenue flat to slightly down year over year, assuming that the number of active clients is flat through the end of the 12-month period. Analysts had expected revenue to be up 8.1% for the year.

The company said it is actively evaluating its marketing spend to better manage improvements to onboarding and conversion. As a result, it said it has withdrawn a previously provided outlook for full-year adjusted earnings before interest, taxes and amortization.

Find the full press release from Stitch Fix here.

This story is developing. Please check back for updates.