Stitch Fix, Inc. SFIX reported fourth-quarter fiscal 2024 results, wherein the bottom and top lines beat the Zacks Consensus Estimate. The top line deteriorated from the year-earlier quarter's level. Meanwhile, the bottom line improved year over year.
The company’s fiscal fourth-quarter performance reflects its ongoing efforts to transform the business, with results meeting expectations despite challenges. The quarter was marked by continued focus on operational efficiency, cost savings and client engagement improvements.
Key initiatives included enhancing customer experiences through AI-driven personalization and reimagining product assortments to better meet evolving client preferences. The company also expanded its offering flexibility, allowing more tailored product selections and deeper customer relationships. These efforts, part of a broader transformation strategy, aim to drive future growth, with a focus on returning to revenue growth by fiscal 2026.
Stitch Fix, Inc. Price, Consensus and EPS Surprise
Stitch Fix, Inc. price-consensus-eps-surprise-chart | Stitch Fix, Inc. Quote
More on Stitch Fix’s Q4 Results
Stitch Fix reported an adjusted loss of 12 cents per share, narrower than the Zacks Consensus Estimate of an adjusted loss of 19 cents. The metric was also narrower than the loss of 19 cents reported in the year-ago quarter.
SFIX recorded net revenues of $319.6 million, which surpassed the Zacks Consensus Estimate of $317 million. Also, the metric declined 12.4% from the year-ago quarter due to lower net active clients.
The number of active clients engaged in ongoing operations was 2,508,000, marking a year-over-year decline of 19.6%. The average net revenues generated per active client from ongoing operations were $533, representing an increase of 4.5% from the previous year.
Insight Into SFIX’s Margins & Expenses
In the fiscal fourth quarter, the Zacks Rank #4 (Sell) company’s gross profit declined 11.4% to $142.5 million from $160.9 million in the year-ago period. However, the gross margin expanded 50 basis points (bps) year over year to 44.6%, supported by improvements in transportation leverage. We expected the gross profit to decline 10.2% year over year to $144.5 million.
Selling, general and administrative expenses (SG&A) up 0.3% from $183.8 million in the prior-year quarter to $184.4 million. SG&A expenses, as a percentage of net revenues, were 57.7%, up 730 bps from 50.4% in the prior-year quarter. Advertising was 9% of net revenues, up 210 basis points year over year.
Stitch Fix reported an adjusted EBITDA of $9.5 million compared with $13.1 million in the year-ago quarter, reflecting its ongoing cost-management discipline.
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SFIX’s Financial Snapshot: Cash, Inventory & Equity Overview
The company ended the fiscal fourth quarter with cash and cash equivalents of $162.9 million, short-term investments of $84.1 million, no debt, net inventory of $97.9 million and shareholders’ equity of $187 million.
The net cash provided by operating activities from continuing operations was $28.2 million and the free cash flow was $4.5 million.
Stitch Fix’s FY25 Guidance
For the first quarter of fiscal 2025, Stitch Fix anticipates revenues to be between $303 million and $310 million, indicating a 15-17% year-over-year decline. Adjusted EBITDA is expected to be in the range of $5-$9 million, indicating a margin of 1.7-2.9%. The gross margin is projected to remain steady between 44% and 45% for both the first quarter and the full year, with advertising expenses constituting approximately 8-9% of revenues.
Additionally, inventory levels are expected to rise in the first quarter due to the fall/winter product cycle but will stabilize in the fiscal second quarter, with improved inventory turns throughout the remainder of the fiscal year. This outlook indicates that Stitch Fix is focusing on careful cost management while navigating seasonal inventory fluctuations and maintaining stable margins.
The outlook for SFIX in fiscal 2025 reflects a cautious yet optimistic approach, with total revenues expected to range between $1.11 billion and $1.16 billion, indicating a 12-16% year-over-year decline when adjusted to a standard 52-week period. The company is also projecting total adjusted EBITDA to be between $14 million and $28 million with a margin of 1.3-2.4%. It also expects to achieve positive free cash flow despite variability between quarters due to inventory purchase timing.
SFIX stock has gained 54.3% in the past six months against the industry’s 5.6% decline.
Stocks to Consider
Some better-ranked stocks are Nordstrom Inc. JWN, Abercrombie & Fitch Co. ANF and Crocs, Inc. CROX.
Nordstrom is a leading fashion specialty retailer in the United States. The company offers an extensive selection of both branded and private-label merchandise. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Nordstrom’s fiscal 2024 sales indicates growth of 0.6% from the fiscal 2023 figure. JWN has a negative trailing four-quarter average earnings surprise of 17.8%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 13.1%, respectively, from the fiscal 2024 levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Crocs offers a wide variety of footwear products, including sandals, wedges, flips and slides that cater to people of all ages. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Crocs’ 2024 earnings and sales indicates growth of 6.8% and 4%, respectively, from the year-ago figures. CROX has a trailing four-quarter average earnings surprise of 14.9%.
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