Stitch Fix Set to Open at Highest Since October | News & Analysis

SAN FRANCISCO, United States —  Stitch Fix shares jumped the most ever after the e-retailer reported a beat-and-raise quarter fuelled by customer gains and improved inventory management.

The results made the bulls more bullish and those on the sidelines more constructive as existing clients returned and spent more. Analysts see more room to grow as Stitch Fix is set to roll out initiatives in the UK and the kids segment.

“Stitch Fix is one of the most compelling stories in e-commerce,” KeyBanc analyst Edward Yruma wrote.

Here’s what Wall Street is saying:

SunTrust, Youssef Squali

The strength in the quarter primarily came from existing customers as retention — which boasted an 88 percent repeat rate — and engagement are improving. The introduction of Style Shuffle, Style Pass and Extras have all helped drive growth in overall client satisfaction, especially with existing, higher value customers. Plus, an updated guidance shows the “momentum is sustainable.”

Buy, raises PT to $43 from $40

Barclays, Ross Sandler

Inventory management has long been the key constraint to the business, but it appears the company has reached a new level of efficiency that outweighs any negative mix shift to the men’s and kids’ segments.

As the company is lapping gross-margin improvements realised in 2018, it will likely be harder to significantly outperform the bottom line at the current levels. Still, Sandler said he is upbeat on the fundamentals as few e-retailers have combined Stitch Fix’s data prowess, strong free cash flow generation and unique value proposition.

Equal weight, raises PT to $32 from $26

RBC, Mark Mahaney

Mahaney is “increasingly impressed” by the consistency of the company’s results as this marks the eighth-straight quarter of year-over-year revenue growth in the mid-20s. Plus, Stitch Fix is on the verge of other growth initiatives, like its U.K. launch, brand marketing campaign, and kids segment.

“For long-term investors, we see substantial growth opportunities for a company that continues to offer a differentiated product and has successfully scaled its business,” he said.

Outperform, raises PT to $52 from $39

William Blair, Ralph Schackart

The results should “bolster” investor confidence in the company’s ability to increase active accounts, but until management can achieve Street estimates for the metric more consistently, Schackart said he’s taking a “wait and see” approach.”

Market Perform

By Natasha Rausch; editors: Catherine Larkin and Will Daley.


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