It's too soon for the new management at Stitch Fix (SFIX 4.01%) to say "mission accomplished," but the latest quarterly results certainly suggest things are moving in the right direction.
Shares of Stitch Fix soared as much as 44.9% at the open Wednesday and remained up 24% as of 1:30 p.m. ET after the apparel company reported better-than-expected quarterly results.
Style in a box
Stitch Fix is an originator of the "wardrobe in a box" concept, sending subscribers a collection of apparel customized for their tastes. Customers pay for only the clothing they keep, and the rest is shipped back for free.
It is a concept with a lot of promise, but results have not yet lived up to expectations. Shares of Stitch Fix are down more than 95% from their all-time highs on repeated losses and questions about strategic direction.
The company hired CEO Matt Baer to lead a turnaround about a year ago, and the latest results suggest he is making progress. Stitch Fix lost $0.18 per share in its fiscal third quarter on revenue of $322.7 million, bettering Wall Street's expectations for a $0.25 per share loss on sales of $306 million.
The company also forecast fourth-quarter revenue of between $312 million and $322 million, ahead of the $307 million consensus.
In a statement, Baer said the transformation efforts are beginning to work, adding, "I am confident that our strategic focus on strengthening our foundation and reimagining the client experience will put us on the right path to deliver sustainable, profitable growth in the future."
Is Stitch Fix a buy?
The number of active clients is still falling, down 6% quarter over quarter and off 20% from a year ago. Clients who remain are doing more business with the company, helping Stitch Fix to grow net revenue per active user by 2% from last year. And gross margin, at 45.5%, was up 280 basis points from the same three months of 2023.
Stitch Fix appears to be stabilizing, but the company is still far from proving it can deliver profits and growth on a sustainable basis. Long-suffering holders of the stock finally have reason for hope, but it is far too early to say the business is finally ready to live up to all of its initial promise.
