Stitch Fix tumbles after projecting 'softer' results for the first quarter of 2020
- Online styling service Stitch Fix tanked as much as 15% on Wednesday after projecting "softer" earnings results in its next quarter.
- CEO Katrina Lake blamed the first-quarter guidance to summer products' lower margins and slashed ad spending bringing in fewer clients.
- The company's fiscal fourth-quarter figures were mixed, with Stitch Fix beating estimates for earning and revenue but posting slowing revenue growth and contracting gross margins.
- Watch Stitch Fix trade live here.
Online apparel retailer Stitch Fix plummeted as much as 15% early Wednesday after projecting its next quarter will see "softer" earnings results.
The company exceeded analyst expectations with fiscal fourth-quarter figures, posting better-than-expected earnings and revenue. Stitch Fix rolled out an a la carte shopping option to join its clothing subscription boxes, and expanded its recommendation programs to allow customers to shop for complementary products.
"These gains are a testament to the strength of our data science capabilities, CEO Katrina Lake said in the report.
The company's rosy fourth-quarter figures weren't enough to sway investors, as its disappointing first-quarter expectations drove the stock lower in after-hours trading. The chief executive projected "softer" growth in the first quarter of 2020 due to lower margins on summer products and marketing cuts. A slashed advertising budget will likely result in fewer clients contributing to first-quarter revenue, Lake said.
Here are the key figures:
Earnings per share: $0.07, versus the $0.03 estimate
Revenue: $432.1 million, versus the $431.6 million estimate
2019 expenses: $679.6 million, versus $493 million the previous year
1Q net revenue forecast: between $438 million and $442 million
The fourth-quarter figures were "generally negative" due to contracting revenue growth and gross margins, RBC Capital Markets analysts wrote in a Tuesday note. The firm lowered its price target for Stitch Fix to $38 per share from $43, still implying an 89% upside.
The analysts reiterated an "outperform" rating for Stitch Fix stock, praising its consecutive quarters of 20% or greater revenue growth and new attempts at boosting client growth.
Stitch Fix closed at $20.06 per share Tuesday, up about 17% year-to-date.
The company has six "buy" ratings, six "hold" ratings, and no "sell" ratings, with a consensus price target of $26.89, according to Bloomberg data.
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