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Earnings

Stitch Fix user growth to remain flat in holiday quarter; shares fall

(Reuters) - Online personal styling service Stitch Fix Inc SFIX.O on Monday said it did not expect to increase the number of its active subscribers in the holiday quarter, as customers focused on gift-buying rather than themselves, sending shares down 14 percent.

The San Francisco-based company’s shares, which rose nearly 8 percent after reporting first-quarter revenue and profit beat, reversed course to fall 14 percent to $22.35 in after-hours trade, following the holiday-season forecast.

Unlike other retailers, Stitch Fix said it does not expect to benefit from the holiday quarter as it sees more shoppers focusing on buying gifts for others than themselves.

“We are just less active in marketing,” compared with other retailers during the holiday season, President and Chief Operating Officer Mike Smith, told Reuters in an interview, adding that the company tries to avoid being overly promotional during popular shopping days like Black Friday and Cyber Monday.

Stitch Fix is a subscription-based styling service, which mails customers apparel and accessories selected for them by a personal stylist.

For the fiscal second quarter ending in January, Stitch Fix said it expects the number of active clients - those who received a package of curated clothing in the preceding 12-month period - to be relatively flat from the first quarter, while revenue per client is expected to grow.

Stitch Fix forecast its second-quarter net revenue in the range of $360 million to $368 million, while analysts are expecting revenue of $362 million.

The company’s active subscriber count rose 22 percent to 2.9 million in the first-quarter ended Oct. 27, mainly driven by its diverse assortments, but missed analysts’ expectations of 2.95 million.

Stitch Fix, which has invested heavily in expanding its men’s and kid’s offerings and has plans to introduce its services in the United Kingdom, said it added several brands, including Michael Kors, Madewell and the North Face for women. The company also added more sizes for men.

Net income attributable to the company’s shareholders rose to $10.7 million, or 10 cents per share, from $1.3 million, or 4 cents per share, a year earlier, topping forecasts of 3 cents per share, according to IBES data from Refinitiv.

Revenue surged 24 percent to $366.2 million, beating expectations of $358 million.

Reporting by Nivedita Balu in Bengaluru and Melissa Fares in New York; Editing by James Emmanuel and Lisa Shumaker

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