Richard B. Levine/Zuma Press
Stitch Fix Inc.
Holdings Inc., another subscription service, and the threat of
Investors, concerned about deceleration, questioned just how many people would be interested in what is a fairly unique way of shopping.
Yet in its second earnings report as a public company, Stitch Fix continues to prove that there is a market for its service.
It added 100,000 clients in the quarter, reaching 2.5 million, a growth rate of 31% year-over-year. Net revenue reached $295.9 million, beating analysts’ estimates of $291 million, and notching the company’s fourth consecutive quarter of revenue growth in the 25% range year-over-year.
The stock, which was initially offered at $15 a share, has gained 63% since November. It rose 6% on Monday in anticipation of strong numbers, closing at $24. Yet shares fell 6% in aftermarket trading, a reflection of the company’s earnings miss. It posted adjusted earnings of 2 cents per share, beneath analysts’ 6-cents estimate. The company incurred a one-time tax expense of $4.7 million. Gross margins have also come down as it has expanded into new categories and lowered its prices.
Yet growth remains far more robust than the bears anticipated. “It has yet to hit a wall,” says
an analyst at RBC Capital Markets. “What’s unknown is just how many people want to shop this way. Four million? Six million?”
Stitch Fix has certainly distinguished itself from Blue Apron, which by its second quarter as a public company was blowing up. Selling perishable meals is particularly challenging but clothing faces its own hurdles, including competition from Amazon’s Prime Wardrobe and
Trunk Club. They could eventually slow Stitch Fix’s growth. Yet if the company continues to expand into more products, price points, styles, and sizes, as it has been doing, it is hard to see a wall appearing soon.