Stitch Fix swings to a quarterly loss and softens outlook on shipping delays; shares plunge

Stitch Fix on Monday reported a narrower-than-expected loss for its latest quarter, but the company missed analysts' expectations for revenue and outlook as shipping delays and lower customer spend ate into sales.

The stock plunged 21% in extended trading.

The subscription styling service lowered its revenue forecast for the current quarter and fiscal year, citing ongoing uncertainty stemming from the coronavirus pandemic and longer purchase cycles resulting from delivery issues.

Here's what the company reported for the quarter ended Jan. 30 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Stitch Fix reported a fiscal second-quarter net loss of $21 million, or 20 cents per share, down from a profit of $11.4 million, or 11 cents per share, a year earlier. Analysts surveyed by Refinitiv were expecting a loss per share of 22 cents.

Net sales rose 12% to $504.1 million, falling short of expectations of $512.2 million. Shipping delays over the holiday season meant that the company was forced to work through a backlog and couldn't record revenue for all boxes shipped during the quarter. Stitch Fix recognizes revenue when clients check out items, not when the company ships the order.

The company also said that its overall holiday sales were softer than expected as consumers shifted from spending money on themselves to buying gifts for others. However, it saw its strongest January on record.

For the fiscal third quarter, Stitch Fix is expecting net sales of $505 million to $515 million, representing growth of 36% to 39%, and an adjusted loss before interest, taxes, depreciation and amortization of $5 million to $9 million. Executives said that it's been a "mixed bag" on shipping and processing delays so far in February, and they expect the trend to continue through the rest of the fiscal third quarter.

For the full fiscal year 2021, the company now expects revenue to grow 18% to 20%, down from its prior outlook of 20% to 25%. Wall Street was forecasting revenue growth of 22.6% for the fiscal year.

The company added 110,000 new active clients during the quarter for a total roster of almost 3.9 million. Stitch Fix said it's added more active clients in the first half of fiscal 2021 than it did for all of the previous fiscal year.

Customers are spending less on average, though. Active clients spent $467 on average, down 7% compared with the same time a year ago.

Stitch Fix defines active clients as people who have bought an item directly from its website in the preceding 52 weeks from the last day of the quarter.

Read the full shareholder letter here.