Shares of Stitch Fix fell more than 14% in after-hours trading on Tuesday, as the company posted heavy losses for the fiscal fourth quarter.
Here’s how the company fared during the fiscal fourth quarter ending August 1 compared to Refinitiv’s estimates Loss per share: 44 cents vs. 16 cents per share, expected Revenue: $ 443.4 million vs. $ 414.9 million expected
The online grooming service reported a fourth-quarter loss of $ 44.5 million, or 44 cents a share, compared with earnings of $ 7.2 million, or 7 cents a share, a year ago.
Revenue for the quarter increased to $ 443.4 million, an increase of about 11% from the $ 432.1 million a year earlier after adjusting for an additional week in the fourth quarter of 2019. Stitch Fix’s active customers grew to 3.5 million, up 9% year-over-year. The company defines active customers as people who have purchased an item directly from its website, called a “Fix,” in the previous 52 weeks since the last day of the quarter.
The company, a styling service that sells boxes of clothing that people pay to keep or return by subscription, rebounded from a difficult fiscal third quarter. Sales fell 9% in that quarter as they were hampered by backorders due to the coronavirus pandemic. At the time, CEO and founder Katrina Lake said she expected a return to revenue growth for the fiscal fourth quarter, as more of its stores reopened.
In a conference call with investors, Lake said the company has changed its inventory mix to focus on athletics rather than blazers and other items typically worn in the office. She said women’s sportswear revenue was up more than 350% in the fourth quarter compared to the prior year after adjustments. She said key brands, like Reebok and Beyond Yoga, were popular with customers.
In the quarter, the company added a shopping styles “feed-based” feature called Trends for you. Stitch Fix said its weekly direct purchase orders grew more than 30% in the first two weeks of adding the feature. It also uses an algorithm-based recommendation engine to customize direct purchase customer options. Stitch Fix COO Mike Smith told investors in a conference call that the company plans to automate more and improve efficiencies.
In June, Stitch Fix said it would lay off 1,400 hairstylists in California by the end of September, or about 18% of its workforce. Stitch Fix said it plans to eventually hire 2,000 stylists in other parts of the United States, where the cost of living is lower, such as Dallas or Minneapolis. but said it must balance cost reduction with the need for investment, such as adding square footage for increase inventory.