Stitch Fix Falls Deeper Into Penny-Stock Territory

Stitch Fix app available for download on smartphone sitting on top of brightly colored clothing

(Image credit: Tiffany Hagler-Geard/Bloomberg via Getty Images)

Stitch Fix (SFIX) stock is spiraling Wednesday after the online personal styling company reported mixed results for its fiscal fourth quarter and provided disappointing guidance.

In the three months ended August 3, Stitch Fix's revenue decreased 12.4% year-over-year to $319.6 million, as its active clients fell 19.6% to 2.51 million. Still, its net revenue per active client increased 4.5% to $533.

The company also said its net loss widened to 29 cents per share from 17 cents per share in the year-ago period.

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

"We are executing our transformation strategy with discipline and, during the fourth quarter, we delivered results at the high end of our guidance on both the top and bottom line," said Stitch Fix CEO Matt Baer in a statement.

The results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $318 million and a net loss of 21 cents per share, according to MarketWatch.

Stitch Fix also provided its outlook for its fiscal first quarter and full year. For the first quarter, it anticipates revenue in the range of $303 million to $310 million, representing a year-over-year decline of 15% to 17%. For the full fiscal year, Stitch Fix sees revenue between $1.11 billion to $1.16 billion, representing a year-over-year decline of 13% to 17%. Both of these forecasts came up short of analysts' forecasts for Q1 revenue of $319 million and full-year revenue of $1.3 billion.

"While there is a lot of work still to do, I am confident we are on the right path to continue to improve the trajectory of our business which includes returning to revenue growth by the end of fiscal 2026," Baer said.

Is Stitch Fix stock a buy, sell or hold?

Today's technical troubles are nothing new for the penny stock, which is down more than 50% since mid-July. And Wall Street remains on the sidelines when it comes to SFIX.

According to S&P Global Market Intelligence, the consensus recommendation among the seven analysts covering the consumer discretionary stock is Hold. And while the average analyst target price for Stitch Fix is $3.40, representing implied upside of about 36% to current levels, though price-target cuts could come down the pike after today's slide.

Financial services firm Truist Securities is one of those with a Hold rating on the consumer discretionary stock.

"With revenue and active clients not likely to show year-over-year growth until the end of fiscal 2026, we remain on the sidelines believing the stock is range-bound near to medium term," says Truist Securities analyst Youssef Squali.

"Management's ongoing turnaround strategy of strengthening its operational and financial foundations while improving the client experience is showing green shoots but this progress is being more than offset by ongoing client losses."

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.