3.9k Share this

Stitch Fix Inc. shares fell 6.1% in Wednesday trading, closing at a record low, after the company reported a quarter-over-quarter decline in active clients.

The company attributed the 4% decrease to a mix-up in traffic signals as it tries to bring onboard a new set of clients for the Freestyle service, which offers clients the chance to purchase personalized outfits.

“In our efforts to launch and promote Freestyle, we chose to direct visitors coming to Stitchfix.com towards the Freestyle experience,” said Chief Executive Elizabeth Spaulding on the earnings call, according to a FactSet transcript.

“It is important to note that Stitchfix.com is the primary landing page for customers interested in ordering a Fix. Therefore, in leading clients to the Freestyle experience first, we inadvertently created friction for those seeking a Fix.”

Stitch Fix SFIX, +0.29% offers clients the option to regularly receive merchandise through an automatic delivery system that’s based on a style quiz. These “Fix” packages can be sent every few weeks or every few months.

The company is making changes to how it directs client traffic around its site.

See: Gap khaki pants sales were up 33% in January versus 2019 as shoppers get dressed to go out again

The problems drove a downgrade of Stitch Fix shares to hold from buy at Truist Securities. Analysts there slashed their price target to $12 from $40.

“While our long-term thesis around the attractiveness of the Stitch Fix
membership model and expansion into direct buy continues to hold, we find the execution so far to be challenged,” Truist wrote in its note.

Stitch Fix reported a wider fiscal second-quarter loss, though the result was ahead of expectations. Revenue missed Street expectations. The company also lowered its full-year outlook. The company had just over 4 million active clients in the quarter.

“We think the company’s decision to increase emphasis on the Freestyle offering makes sense, as we find it to be a more compelling consumer proposition than the legacy Fix business (the TAM [total addressable market] of people who want to pick their own clothes is a lot larger than the TAM of people who want to receive clothes sight-unseen),” wrote Wedbush analysts in a note.

“However, the transition is proving to be far more challenging than expected.”

Wedbush maintained its neutral stock rating, but lowered its price target to $9 from $21.

Wells Fargo analysts note this is the second straight “disappointing” quarter for Stitch Fix. Analysts are concerned that the company didn’t benefit greatly from the COVID-19 shift to e-commerce, and won’t gain from the recovery either.

Also: Here’s how retailers are tackling the delivery challenges that come with skyrocketing e-commerce sales post-COVID

“Essentially, if apparel demand starts shifting back to physical stores, then Stitch Fix wouldn’t necessarily see a significant improvement in trends,” Wells Fargo wrote.

“In other words, the key question here is ‘If the business was weak when consumers were unable/unwilling to go to physical stores, why would it be better when consumers are willing to go back to stores?’ As a result, we think there is meaningful uncertainty about Stitch Fix ’s recovery prospects post-COVID.”

Wells Fargo rates Stitch Fix shares underweight with an $8 price target, down from $14.

Stitch Fix’s price target was also cut at Stifel (down to $12 from $23, stock rated hold) and BMO Capital Markets (down to $11 from $25, stock rated market perform).

Stitch Fix shares have plummeted nearly 79% over the past year while the S&P 500 index SPX, -1.28% has gained 9.7%.

Source: This post first appeared on http://marketwatch.com/

3.9k Share this
You May Also Like

Iranian, Turkish, And Israeli Drones Will Be Built In Other Countries

Iran’s inauguration of a factory to build military drones in Tajikistan on…

Roger Penske Finally Gets The Indianapolis 500 He’s Dreamed Of Since Buying Indianapolis Motor Speedway In 2019

Roger Penske gives the command to start engines at the 105th Indianapolis…

Why Is It Normal For You To Worry About Retirement Before You Retire?

getty The clock is ticking towards your final day on the job.…

What’s Behind Nvidia Stock’s 5x Rise Since Late 2018?

CHINA – 2022/05/12: In this photo illustration, a Nvidia logo is displayed…

Trump Approved Of ‘Hang Mike Pence’ Chants During Capitol Riot, Staffers Reportedly Learned

Topline White House Chief of Staff Mark Meadows told his colleagues during…

ADDX bags $58M to reduce min. private investment by 10x via smart contracts

ADDX, a blockchain and smart contract-based digital securities platform from Singapore raised…

Injective partners with Wormhole to bring 10 new blockchains to the platform

Decentralized finance (DeFi) protocol Injective (INJ) has partnered with Wormhole to integrate…

Starbucks to Exit From Russia

The coffee chain said it and its licensee would permanently wind down…