Shares of try-before-you-buy mail-order clothier Stitch Fix (NASDAQ: SFIX) got destroyed today, crashing 36.2% through noon ET after reporting a huge earnings miss.
Heading into earnings, analysts were already pessimistic, forecasting that Stitch Fix would lose $0.19 per share on $318.5 million in quarterly sales. But while the company eked out a small beat on sales, reporting $319.6 million, its earnings were simply atrocious -- a $0.30 per-share loss.
Stitch Fix Q4 earnings (er, losses)
Stitch Fix's Q4 sales declined 12.4% year over year, while losses grew 25% -- and that was the good news.
The bad news is that Stitch Fix's losses from discontinued operations were only $0.01 per share (so better than last year's loss). In contrast, the loss from continuing operations, a more important number, was $0.29 per share, up more than 70% from a year ago. If that trend keeps up much longer, Stitch Fix won't have any money left to lose.
Despite the horrible numbers, Chief Executive Officer (CEO) Matt Baer boasted that Stitch Fix hit "the high end of our guidance on both the top and bottom line," which sounds like good news (but investors don't seem to be buying it).
Is Stitch Fix stock a sell?
Management's guidance for the coming year didn't help. Forecasting numbers for fiscal Q1 2025, Stitch Fix said sales will range from $303 million to $310 million, a 15% to 17% decline year over year, so even worse than Q4's 12% decline. For all of fiscal 2025, management is seeing sales probably down 13% to 17%.
And profits? Stitch Fix didn't raise any hopes that it might turn profitable anytime soon, forecasting only positive "adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization]" (a verynon-GAAP number). It also explained that it can't give guidance on earnings as calculated according to generally accepted accounting principles (GAAP) because it "cannot reasonably predict [its] restructuring and other one-time costs, net other income (expense), provision for income taxes, and stock-based compensation expense."
Investors don't seem to find that encouraging, and I can't blame them.
Should you invest $1,000 in Stitch Fix right now?
Before you buy stock in Stitch Fix, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Stitch Fix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $740,704!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 23, 2024
Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Stitch Fix. The Motley Fool has a disclosure policy.
