Stitch Fix (SFIX) reported second quarter results above guidance yesterday afternoon. Just like last quarter, the company issued revenue guidance for the next quarter that was mostly above estimates while the profit outlook fell short of expectations.
Stitch Fix grew its active client count by 31% year-over-year to 2.5 million during the second quarter. Revenue grew 24% to $296 million versus $287-294 million guidance while EBITDA fell 24% to $18 million versus $11.5-15.5 million guidance.
The company continued to invest in recently launched categories, technology headcount, and marketing.
Gross margin fell 190 basis points year-over-year to 43% due mostly to planned investments in Men's, Plus-size, and Premium Brands, as well as increased shrink and higher shipping costs. Advertising spend nearly doubled to $20 million.
Stitch Fix guided for third quarter revenue of $5-10 million with revenue up 24% at the midpoint to $300-310 million. The company narrowed fiscal 2018 EBITDA guidance to $45-55 million from $40-60 million and raised the low end of sales guidance to $1.19-1.22 billion. The outlook reflects the following principles: drive sustainable top-line growth that ensures a great client experience, balance growth with profitability, and maintain a long-term, ROI-based view on their investments.
This report gave both the Bulls and Bears something to chew on.
The stock opened lower, likely due to the soft third quarter outlook and tempered profit guidance for the full year. However, the stock quickly pared those losses as roughly 40% of the 10 million share float is sold short.