SFIX
$21.79
Stitch Fix
($.43)
(1.94%)
Earnings Details
3rd Quarter April 2020
Monday, June 8, 2020 4:05:00 PM
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Summary

Stitch Fix Misses

Stitch Fix (SFIX) reported a 3rd Quarter April 2020 loss of $0.33 per share on revenue of $371.7 million. The consensus estimate was a loss of $0.18 per share on revenue of $401.4 million. The Earnings Whisper number was for a loss of $0.13 per share. Revenue fell 9.1% compared to the same quarter a year ago.

The company said it expects positive revenue growth in the fourth quarter, or revenue above $432.2 million. The current consensus revenue estimate is $404.7 million for the quarter ending July 31, 2020.

Results
Reported Earnings
($0.33)
Earnings Whisper
($0.13)
Consensus Estimate
($0.18)
Reported Revenue
$371.7 Mil
Revenue Estimate
$401.4 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Stitch Fix Announces Third Quarter Fiscal Year 2020 Financial Results

SAN FRANCISCO, June 08, 2020 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal styling service, has released its financial results for the third quarter of fiscal year 2020 ended May 2, 2020, and posted a letter to its shareholders on its investor relations website.

Third quarter highlights

  • Active clients of 3.4 million, an increase of 9% year over year
  • Net revenue per active client of $498, an increase of 6% year over year
  • Net revenue of $371.7 million, a decrease of 9% year over year
  • Net loss of $33.9 million
  • Adjusted EBITDA loss of $40.3 million and adjusted EBITDA ex. SBC loss of $20.7 million
  • Diluted loss per share of $0.33

“We are proud of the way our team has responded quickly and thoughtfully to unprecedented challenges over the past several months, and the results we delivered in these extraordinary times,” said Stitch Fix founder and CEO Katrina Lake. “We grew active clients to 3.4 million, an increase of 9% year over year, and grew net revenue per active client by 6% year over year, our eighth consecutive quarter of growth and a reflection of our loyal and engaged client base. In a time period where the broader apparel and accessories market saw sales decline 80%, we delivered $372 million in net revenue and expect a return to positive growth in Q4. We believe our business model and balance sheet uniquely position us to thrive in retail’s next era, and we’re excited to demonstrate that in the quarters ahead.”

Lake added, “Our results give us confidence in the resilience and increasing relevance of our model as more people than ever before seek out a better online shopping experience, rooted in what is meaningful and right for them. Through a combination of innovating the Fix model and expanding Direct Buy, we are excited to expand the Stitch Fix ecosystem, and unlock personal styling for everybody.”

Please visit the Stitch Fix investor relations website at https://investors.stitchfix.com to view the financial results included in the letter to shareholders. The Company intends to continue to make future announcements of material financial and other information through its investor relations website. The Company will also, from time to time, disclose this information through press releases, filings with the Securities and Exchange Commission, conference calls, or webcasts, as required by applicable law.

Conference Call and Webcast Information

Katrina Lake, Founder and Chief Executive Officer of Stitch Fix, Mike Smith, President, Chief Operating Officer, and interim Chief Financial Officer of Stitch Fix, and Elizabeth Spaulding, President of Stitch Fix, will host a conference call at 2:00 p.m. Pacific Time today to discuss the Company’s financial results and outlook. A live webcast will be accessible on Stitch Fix’s investor relations website at investors.stitchfix.com. Interested parties can also access the call by dialing (800) 236-0877 in the U.S. or (323) 794-2094 internationally, and entering conference code 8685457.

A telephonic replay will be available through Monday, June 15, 2020, at (888) 203-1112 or (719) 457-0820, passcode 8685457. An archive of the webcast conference call will be available shortly after the call ends at https://investors.stitchfix.com.

About Stitch Fix, Inc.

Stitch Fix is an online personal styling service that is reinventing the shopping experience by delivering one-to-one personalization to our clients through the combination of data science and human judgment. Stitch Fix was founded in 2011 by CEO Katrina Lake. Since then, we’ve helped millions of women, men, and kids discover and buy what they love through personalized selections of apparel, shoes, and accessories, curated by Stitch Fix stylists and algorithms. For more information about Stitch Fix, please visit https://www.stitchfix.com

Forward-Looking Statements

This press release and related conference call and webcast contain forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact could be deemed forward looking, including but not limited to statements regarding our future financial performance, including our guidance on financial results for the fourth quarter and full year of fiscal 2020; the resilience of our U.S. warehouse network, ongoing improvement in client demand, and early momentum resulting from a much larger migration of retail spend online; our ability to eliminate our Fix backlog by the end of June; our redeployment of marketing spend to capitalize on improving consumer optimism in the quarters ahead; market trends, growth, and opportunity; profitability; competition; the timing and success of expansions to our offering and penetration of our target markets, such as the launch of our offering in the United Kingdom and the expansion of Shop New Colors and Shop Your Looks, our enhancements to our direct buy functionality, including the introduction of “Trending for you”; the continued success of our direct-buy functionality, the growth vector we think it represents, and our plan to use it as a client acquisition vehicle; our ability to leverage our engineering and data science capabilities to drive efficiencies in our business and enhance our ability to personalize; our plans to continue to roll out new features to extend our personalization platform and drive an even stronger personalized eCommerce model; our plans related to client acquisition, engagement, and retention, including any impact on our costs and margins and our ability to determine optimal marketing and advertising methods; and the search for a new CFO. These statements involve substantial risks and uncertainties, including risks and uncertainties related to the development of, and responses to, the COVID-19 pandemic; our ability to generate sufficient net revenue to offset our costs; the growth of our market and consumer behavior; our ability to acquire, engage, and retain clients; our ability to provide offerings and services that achieve market acceptance; our data science and technology, stylists, operations, marketing initiatives, and other key strategic areas; risks related to international operations; and other risks described in the filings we make with the Securities and Exchange Commission (“SEC”). Further information on these and other factors that could cause our financial results, performance, and achievements to differ materially from any results, performance, or achievements anticipated, expressed, or implied by these forward-looking statements is included in filings we make with the SEC from time to time, including in the section titled “Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended  February 1, 2020. These documents are available on the SEC Filings section of the Investor Relations section of our website at: https://investors.stitchfix.com. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties, and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefs and assumptions only as of the date such statements are made.

 
 
Stitch Fix, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share amounts)
     
  May 2, 2020 August 3, 2019
Assets    
Current assets:    
Cash and cash equivalents $96,840  $170,932 
Short-term investments 144,744  143,276 
Inventory, net 165,077  118,216 
Prepaid expenses and other current assets 51,810  49,980 
Total current assets 458,471  482,404 
Long-term investments 86,919  53,372 
Property and equipment, net 64,597  54,888 
Operating lease right-of-use assets 134,216   
Deferred tax assets 34,357  22,175 
Other long-term assets 3,069  3,227 
Total assets $781,629  $616,066 
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable $82,890  $90,883 
Operating lease liabilities 23,066   
Accrued liabilities 70,667  69,734 
Gift card liability 8,894  7,233 
Deferred revenue 14,689  11,997 
Other current liabilities 3,724  2,784 
Total current liabilities 203,930  182,631 
Operating lease liabilities, net of current portion 142,568   
Deferred rent, net of current portion   24,439 
Other long-term liabilities 12,551  12,996 
Total liabilities 359,049  220,066 
Stockholders’ equity:    
Class A common stock, $0.00002 par value 1  1 
Class B common stock, $0.00002 par value 1  1 
Additional paid-in capital 327,039  279,511 
Accumulated other comprehensive income (loss) 1,515  (187)
Retained earnings 94,024  116,674 
Total stockholders’ equity 422,580  396,000 
Total liabilities and stockholders’ equity $781,629  $616,066 
         
         


Stitch Fix, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(In thousands, except share and per share amounts)
     
  For the Three Months Ended For the Nine Months Ended
  May 2, 2020 April 27, 2019 May 2, 2020 April 27, 2019
Revenue, net $371,726  $408,893  $1,268,325  $1,145,409 
Cost of goods sold 220,115  224,445  713,225  632,644 
Gross profit 151,611  184,448  555,100  512,765 
Selling, general, and administrative expenses 197,666  189,015  592,497  491,024 
Operating income (loss) (46,055) (4,567) (37,397) 21,741 
Interest (income) expense (1,372) (1,463) (4,502) (4,032)
Other (income) expense, net 569  (391) 1,431  (964)
Income (loss) before income taxes (45,252) (2,713) (34,326) 26,737 
Provision (benefit) for income taxes (11,349) (9,761) (11,676) (2,965)
Net income (loss) $(33,903) $7,048  $(22,650) $29,702 
Other comprehensive income (loss):        
Change in unrealized gain (loss) on available-for-sale
securities, net of tax
 994  140  1,069  162 
Foreign currency translation (1,773) (190) 633  (71)
Total other comprehensive income (loss), net of tax (779) (50) 1,702  91 
Comprehensive income (loss) $(34,682) $6,998  $(20,948) $29,793 
Net income (loss) attributable to common stockholders:        
Basic $(33,903) $7,048  $(22,650) $29,681 
Diluted $(33,903) $7,048  $(22,650) $29,682 
Earnings (loss) per share attributable to common stockholders:        
Basic $(0.33) $0.07  $(0.22) $0.30 
Diluted $(0.33) $0.07  $(0.22) $0.29 
Weighted-average shares used to compute earnings (loss) per
share attributable to common stockholders:
        
Basic 102,650,155  100,301,078  102,084,729  99,619,426 
Diluted 102,650,155  103,615,159  102,084,729  103,575,702 
                 


Stitch Fix, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
   
  For the Nine Months Ended
  May 2, 2020
  April 27, 2019
Cash Flows from Operating Activities         
Net income (loss) $(22,650)  $29,702 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:         
Deferred income taxes  (12,307)   (3,832)
Inventory reserves  18,383    2,805 
Stock-based compensation expense  47,475    23,815 
Depreciation, amortization, and accretion  16,264    10,191 
Other  615    24 
Change in operating assets and liabilities:         
Inventory  (65,200)   (27,818)
Prepaid expenses and other assets  (4,481)   (5,969)
Operating lease right-of-use assets and liabilities  1,728     
Accounts payable  (7,569)   20,083 
Accrued liabilities  1,192    18,504 
Deferred revenue  2,692    4,288 
Gift card liability  1,661    1,251 
Other liabilities  1,709    2,164 
Net cash provided by (used in) operating activities  (20,488)   75,208 
Cash Flows from Investing Activities         
Purchases of property and equipment  (18,651)   (24,517)
Purchases of securities available-for-sale  (191,894)   (233,151)
Sales of securities available-for-sale  26,286    2,414 
Maturities of securities available-for-sale  132,082    21,500 
Net cash used in investing activities  (52,177)   (233,754)
Cash Flows from Financing Activities         
Proceeds from the exercise of stock options, net  6,236    9,284 
Payments for tax withholding related to vesting of restricted stock units  (7,884)   (4,350)
Net cash provided by (used in) financing activities  (1,648)   4,934 
Net increase (decrease) in cash, cash equivalents, and restricted cash  (74,313)   (153,612)
Effect of exchange rate changes on cash  221    (75)
Cash, cash equivalents, and restricted cash at beginning of period  170,932    310,366 
Cash, cash equivalents, and restricted cash at end of period $96,840   $156,679 
Components of Cash, Cash Equivalents, and Restricted Cash         
Cash and cash equivalents $96,840   $143,829 
Restricted cash – current portion      250 
Restricted cash – long-term portion      12,600 
Total cash, cash equivalents, and restricted cash $96,840   $156,679 
Supplemental Disclosure         
Cash paid for income taxes $117   $191 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:         
Purchases of property and equipment included in accounts payable and accrued liabilities $4,338   $4,166 
Capitalized stock-based compensation $1,701   $1,277 
Vesting of early exercised options $   $209 
Leasehold improvements paid by landlord $7,406   $ 
          

Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). However, management believes that certain non-GAAP financial measures provide users of our financial information with additional useful information in evaluating our performance. We believe that adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, and that this supplemental measure facilitates comparisons between companies. We also provide adjusted EBITDA excluding the impact of stock-based compensation expense (“ex. SBC”), which management believes provides useful information to investors and others in understanding our operating performance and facilitates comparisons between companies. We believe free cash flow is an important metric because it represents a measure of how much cash from operations we have available for discretionary and non-discretionary items after the deduction of capital expenditures. These non-GAAP financial measures may be different than similarly titled measures used by other companies.

Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. There are several limitations related to the use of our non-GAAP financial measures as compared to the closest comparable GAAP measures. Some of these limitations include:

  • adjusted EBITDA ex. SBC excludes the non-cash expense of stock-based compensation, which has been, and will continue to be for the foreseeable future, an important part of how we attract and retain our employees and a significant recurring expense in our business;
  • adjusted EBITDA and adjusted EBITDA ex. SBC excludes the recurring, non-cash expenses of depreciation and amortization of property and equipment and, although these are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future;
  • adjusted EBITDA and adjusted EBITDA ex. SBC does not reflect our tax provision, which reduces cash available to us;
  • adjusted EBITDA and adjusted EBITDA ex. SBC excludes interest (income) expense and other (income) expense, net, as these items are not components of our core business; and
  • free cash flow does not represent the total residual cash flow available for discretionary purposes and does not reflect our future contractual commitments.

Adjusted EBITDA and Adjusted EBITDA ex. SBC

We define adjusted EBITDA as net income (loss) excluding interest (income) expense, provision (benefit) for income taxes, other (income) expense, net, and depreciation and amortization. We define adjusted EBITDA ex. SBC as adjusted EBITDA excluding stock-based compensation expense. The following table presents a reconciliation of net income (loss), the most comparable GAAP financial measure, to adjusted EBITDA and adjusted EBITDA ex. SBC for each of the periods presented:

  For the Three Months Ended For the Nine Months Ended
(in thousands) May 2, 2020 April 27, 2019 May 2, 2020 April 27, 2019
Adjusted EBITDA ex. SBC reconciliation:        
Net income (loss) $(33,903) $7,048  $(22,650) $29,702 
Add (deduct):        
Interest (income) expense (1,372) (1,463) (4,502) (4,032)
Provision (benefit) for income taxes (11,349) (9,761) (11,676) (2,965)
Other (income) expense, net 569  (391) 1,431  (964)
Depreciation and amortization 5,788  4,257  16,558  11,441 
Adjusted EBITDA (40,267) (310) (20,839) 33,182 
Add (deduct):        
Stock-based compensation expense 19,594  9,069  47,475  23,816 
Adjusted EBITDA ex. SBC $(20,673) $8,759   $26,636   $56,998  
                 

Free Cash Flow

We define free cash flow as cash flows provided by (used in) operating activities reduced by purchases of property and equipment that are included in cash flows used in investing activities. The following table presents a reconciliation of cash flows provided by (used in) operating activities, the most comparable GAAP financial measure, to free cash flow for each of the periods presented:

  For the Nine Months Ended
(in thousands) May 2, 2020 April 27, 2019
Free cash flow reconciliation:    
Cash flows provided by (used in) operating activities $(20,488) $75,208 
Deduct:        
Purchases of property and equipment (18,651) (24,517)
Free cash flow $(39,139) $50,691  
Cash flows used in investing activities $(52,177) $(233,754)
Cash flows provided by (used in) financing activities $(1,648) $4,934 

Operating Metrics

  May 2, 2020 February 1, 2020 November 2, 2019 August 3, 2019 April 27, 2019
Active clients (in thousands) 3,418  3,465  3,416  3,236  3,133 
Net revenue per active client(1) $498  $501  $485  $488  $467 
                     

(1) Fiscal year 2019 was a 53-week year, with the extra week occurring in the quarter ended August 3, 2019. Net revenue per active client calculations including the fourth quarter of fiscal year 2019 include 53 weeks of revenue. The 53rd week of fiscal 2019 contributed approximately 2.0% of the increase to net revenue per active client as of May 2, 2020.

Active Clients

We define an active client as a client who checked out a Fix or was shipped an item using our direct-buy functionality in the preceding 52 weeks, measured as of the last day of that period. A client checks out a Fix when she indicates what items she is keeping through our mobile application or on our website. We consider each Men’s, Women’s, or Kids account as a client, even if they share the same household.

Net Revenue per Active Client

We calculate net revenue per active client based on net revenue over the preceding four fiscal quarters divided by the number of active clients, measured as of the last day of the period.

IR Contact:PR Contact:
  
David Pearce
ir@stitchfix.com
Suzy Sammons
media@stitchfix.com

SFIX Logo.png

Source: Stitch Fix, Inc.