Stitch Fix (SFIX) 2nd Quarter Earnings: What to Expect

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Online subscription and personal styling company Stitch Fix (SFIX) is set to report second quarter fiscal 2019 earnings results after the closing bell Monday.

The last time I talked about Stitch Fix I laid out a blueprint for how the company can fix what doubters and momentum traders, who focus solely on a quarter-to-quarter performance basis, were unable to see. I advised long-term investors to focus instead on the big picture and use the stock's decline as a buying opportunity. Those who listened have done well.

Since falling to a 52-week low of $16.05 on Dec. 24, SFIX shares of have skyrocketed as much as 85%. The shares are up 50% year to date, besting the 9.5% rise in the S&P 500 index. Even with the recent surge, the stock is still some 50% below its 52-week high of $52.44. Investors are wary of the company’s ability to disrupt the traditional apparel industry in an era where emerging competitive threats from the likes of Amazon (AMZN) are real.

The Street’s average price target is around $30, which is about 5% above current levels. To keep the stock in its upward trajectory, on Monday Stitch Fix CEO Katrina Lake, who has done a solid job growing the company’s active clients base, must convince a skeptical analyst community that the subscription fashion retailer can be profitable.

For the three months that ended January, Wall Street expects the San Francisco-based company to earn 5 cents per share on revenue of $364.89 million. This compares to the year-ago quarter when earnings came to 2 cents per share on revenue of $295.91 million. For the full year, ending August, earnings are projected to be 17 cents per share, down from 34 cents a year ago, while full-year revenue of $1.51 billion would rise 23% year over year.

Those numbers alone won’t be what drives the stock price. The company’s holiday-season first quarter numbers came in ahead of expectations, which served as a catalyst for the stock surge which I’ve described above. Q1 revenue rose 24% to $366 million, while adjusted earnings per share reached 10 cents — more than tripling the year-ago results. But as with any subscription service, the Street wasn’t particularly impressed with its user growth and engagement forecast.

In December the management guided for active clients to be “relatively flat” with first-quarter levels, which reached 2.93 million (up 22% year over year), short of consensus estimates for 2.95 million. Will flat user growth stop the momentum? From my perspective, the company is delivering on many of its stated objectives. And the fact that the company, despite its relatively new IPO status, is already profitable should be an encouraging sign of what lies ahead.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Earnings , Investing Ideas , Stocks , Technology
Referenced Symbols: SFIX

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