Stitch Fix (SFIX) will report its first quarter as a public company tomorrow afternoon.
Stitch Fix says it is reinventing the shopping experience by delivering one-to-one personalization to clients through the combination of data science and human judgment. For a $20 fee, Stitch Fix will ship you a box with five articles of clothing based on a survey that you fill out to determine your style and preferences. The $20 fee serves as credit for the first item and but you can ship anything you font want back free of charge and there is a discount if you keep all five items.
The company scaled its business quickly, profitably and in a capital-efficient manner, having raised only $42.5 million of equity capital before raising $120 million in an IPO last month. The company has achieved positive cash flow from operations on an annual basis since 2014, while continuing to make meaningful investments to drive growth.
Still, the IPO was not 'well-received'. The company sold 8 million shares at $15/share after initially planning to sell 10 million shares at $18-20/share. Concerns over slowing growth higher marketing costs hampered demand for the offering. Competition from Amazon (AMZN) and the debacle of consumer-facing IPO Blue Apron (APRN) also seemed to scare investors away from the IPO.
After growing revenue 113% to $730 million in fiscal 2016 (ended July), revenue growth slowed to 34% to $977 million in fiscal 2017. Adjusted EBITDA grew 72% in 2016 but fell 17% to $60 million last year.
The stock briefly dipped below the $15 offering price the day after the IPO but subsequently rallied over 50% in to the low-to-mid-$20s.
Sell-side analysts were mixed on the stock when they rolled out coverage last week. With the stock at $24, four firms said ‘hold' while three firms said ‘buy'.
It is important to note that the company preannounced first quarter results in its IPO filing in early November, so investors shouldn't expect a blow-out report tomorrow.
The company preannounced first quarter net revenue +25% year-over-year to $294.5-295.5 million with adjusted EBITDA down 64% at the midpoint to $8.5-11.5 million.
Management may offer guidance for the second quarter and/or fiscal 2018. Analysts expect revenue to grow 21% with adjusted EBITDA down 5% in fiscal 2018.
With a $2.3 billion market capitalization, the stock trades at ~2x fiscal 2018 sales estimates or ~40x EBITDA estimates.