Stitch Fix (SFIX 26.05, +0.35, +1.36%) will report second
quarter (January) results this afternoon in a Letter to Shareholders on its
website; management will host a call at 5:00 PM.
Stitch Fix is an online customized apparel shopping platform. This will be the company's sixth earnings report as a public company.
The company tends to report revenue and EBITDA above its forecast while guiding revenue in-line and EBITDA below consensus for the following quarter. In fact, the company has guided next-quarter adjusted profit (EBITDA) below estimates in all five quarterly reports.
Shares surged last Summer after revenue growth accelerated to 29% in the April quarter, but the stock has since gotten crushed two quarters in a row in response to earnings. Last Fall, the momentum stock fell 35% in one day after narrowly missing on the top line and guiding down EBITDA and revenue for the December quarter. In December, the company missed user growth expectations and guided down EBITDA.
Stitch Fix guided for second quarter EBITDA of $8-12 mln (-45%) on revenue of $360-368 mln (+23%). The company guided for a flat active client count sequentially as it planned to pull back on advertising during the holiday quarter. Unlike most retailers, the holiday quarter is not the strongest seasonally because consumers use the service for themselves rather than as a gift.
Last quarter, Stitch Fix guided for fiscal 2019 EBITDA of $20-40 mln (down 44% yr/yr at the midpoint) on revenue of $1.49-1.53 bln (+23%).
The Street expects third quarter EBITDA down 67% in the low-to-mid single digit mlns with revenue up 21%.
Stitch Fix has a ~$2.5 bln valuation and trades at ~1.5x sales or ~65x EV/EBITDA. Some 36% of 36M share float was recently sold short. The high short interest is representative of a battleground stock in terms of valuation. While Stitch Fix has executed well, the company will have to maintain healthy growth with cost discipline to scale sustainable profits. The weekly options imply a near 20% move in the stock by Friday.
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