Stitch Fix shares tumble after hours as number of active clients stagnates
When Stitch Fix, a subscription fashion service, had its initial public offering last November, investors were skeptical. How many people would continue to pay for constant wardrobe updates?
In its first quarters as a public company, Stitch Fix SFIX, +1.96% defied the skeptics and posted consistent growth, raising hopes that it could succeed where other subscription services have failed. The stock had gained 73% this year through Monday’s close. Monday’s fiscal fourth-quarter results show that the bullish thesis may be coming apart at the seams. Stitch Fix reported earnings of 18 cents a share for the quarter, beating estimates of 6 cents a share, while revenue was just barely shy of analysts’ consensus expectations.
But the key figure for this or any other subscription-based company is how many customers it can keep engaged. Stitch Fix missed estimates for active clients, which were expected to reach 2.8 million. Instead, that figure stagnated at 2.7 million, exactly where it had been at the end of the previous quarter, although that still is 25% higher than a year earlier. Shares fell by one-fifth in after-hours trading.
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Monday’s shocker will increase pressure on the company to hit estimates in coming quarters. It has said it is growing its market with clothing for men, children and plus-size women. Analysts had expected the company to reach 3 million active clients by the fiscal first quarter, according to FactSet. On Monday, the company also announced plans to expand into the U.K. by the end of this fiscal year.
An expanded version of this report appears on WSJ.com.
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