Personalized clothing company Stitch Fix (NASDAQ:SFIX) fell short of analysts' expectations in Q2 FY2024, with revenue down 19.8% year on year to $330.4 million. Next quarter's revenue guidance of $305 million also underwhelmed, coming in 5.7% below analysts' estimates. It made a GAAP loss of $0.29 per share, improving from its loss of $0.58 per share in the same quarter last year.
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Stitch Fix (SFIX) Q2 FY2024 Highlights:
- Revenue: $330.4 million vs analyst estimates of $332.3 million (0.6% miss)
- EPS: -$0.29 vs analyst expectations of -$0.22 (32.6% miss)
- Revenue Guidance for Q3 2024 is $305 million at the midpoint, below analyst estimates of $323.3 million
- The company dropped its revenue guidance for the full year from $1.34 billion to $1.31 billion at the midpoint, a 2.2% decrease
- Free Cash Flow was -$26.07 million, down from $16.91 million in the previous quarter
- Gross Margin (GAAP): 43.4%, up from 41% in the same quarter last year
- Active Clients: 2.81 million
- Market Capitalization: $378.4 million
One of the original subscription box companies, Stitch Fix (NASDAQ:SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Apparel, Accessories and Luxury GoodsWithin apparel and accessories, not only do styles change more frequently today than decades past as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel, accessories, and luxury goods companies have made concerted efforts to adapt while those who are slower to move may fall behind.
Sales Growth A company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. Stitch Fix's annualized revenue growth rate of 1.3% over the last five years was weak for a consumer discretionary business.
Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Stitch Fix's recent history shows a reversal from its already weak five-year trend as its revenue has shown annualized declines of 18.5% over the last two years.
We can better understand the company's revenue dynamics by analyzing its number of active clients, which reached 2.81 million in the latest quarter. Over the last two years, Stitch Fix's active clients averaged 13.9% year-on-year declines. Because this number is higher than its revenue growth during the same period, we can see the company's monetization has fallen.
This quarter, Stitch Fix missed Wall Street's estimates and reported a rather uninspiring 19.8% year-on-year revenue decline, generating $330.4 million of revenue. The company is guiding for a 22.8% year-on-year revenue decline next quarter to $305 million, a deceleration from the 19.9% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 5.9% over the next 12 months.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Stitch Fix's demanding reinvestments to stay relevant with consumers have drained company resources. Its free cash flow margin has been among the worst in the consumer discretionary sector, averaging negative 1.7%.
Stitch Fix burned through $26.07 million of cash in Q2, equivalent to a negative 7.9% margin. This caught our eye as the company shifted from cash flow positive in the same quarter last year to cash flow negative this quarter.
Key Takeaways from Stitch Fix's Q2 Results We struggled to find many strong positives in these results. Its full-year revenue guidance missed and its declining active clients fell short of Wall Street's estimates. Furthermore, its cash burn and EPS loss were much worse than expected. Overall, the results could have been better. The company is down 9.8% on the results and currently trades at $2.96 per share.