Stitch Fix (NASDAQ:SFIX) Delivers Impressive Q1, Full-Year Sales Guidance is Optimistic

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a day ago

Personalized clothing company Stitch Fix (NASDAQ:SFIX) reported Q1 CY2025 results beating Wall Street's revenue expectations , but sales were flat year on year at $325 million. On top of that, next quarter's revenue guidance ($300.5 million at the midpoint) was surprisingly good and 4.3% above what analysts were expecting. Its GAAP loss of $0.06 per share was 45% above analysts' consensus estimates.
Is now the time to buy Stitch Fix? Find out in our full research report.
Revenue: $325 million vs analyst estimates of $314.6 million (flat year on year, 3.3% beat)
EPS (GAAP): -$0.06 vs analyst estimates of -$0.11 (45% beat)
Adjusted EBITDA: $11.01 million vs analyst estimates of $9 million (3.4% margin, 22.4% beat)
Revenue Guidance for Q2 CY2025 is $300.5 million at the midpoint, above analyst estimates of $288 million
EBITDA guidance for the full year is $45 million at the midpoint, above analyst estimates of $43.93 million
Operating Margin: -3%, up from -7.7% in the same quarter last year
Free Cash Flow Margin: 4.9%, similar to the same quarter last year
Active Clients: 2.35 million, down 280,000 year on year
Market Capitalization: $609.2 million
'Stitch Fix delivered strong third quarter results, marked by our overall return to year-over-year revenue growth,' said Matt Baer, CEO, Stitch Fix.
One of the original subscription box companies, Stitch Fix (NASDAQ:SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.
Reviewing a company's long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Stitch Fix struggled to consistently generate demand over the last five years as its sales dropped at a 5.6% annual rate. This wasn't a great result and is a sign of poor business quality.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Stitch Fix's recent performance shows its demand remained suppressed as its revenue has declined by 13.6% annually over the last two years.
We can better understand the company's revenue dynamics by analyzing its number of active clients, which reached 2.35 million in the latest quarter. Over the last two years, Stitch Fix's active clients averaged 16.7% year-on-year declines. Because this number is lower than its revenue growth during the same period, we can see the company's monetization has risen.
This quarter, Stitch Fix's $325 million of revenue was flat year on year but beat Wall Street's estimates by 3.3%. Company management is currently guiding for a 6% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.
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Stitch Fix's operating margin has been trending up over the last 12 months, but it still averaged negative 6.9% over the last two years. This is due to its large expense base and inefficient cost structure.
In Q1, Stitch Fix generated a negative 3% operating margin. The company's consistent lack of profits raise a flag.
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth is profitable.
Stitch Fix's earnings losses deepened over the last five years as its EPS dropped 24.5% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. Consumer Discretionary companies are particularly exposed to this, and if the tide turns unexpectedly, Stitch Fix's low margin of safety could leave its stock price susceptible to large downswings.
In Q1, Stitch Fix reported EPS at negative $0.06, up from negative $0.18 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Stitch Fix's full-year EPS of negative $0.46 will reach break even.
We were impressed by how significantly Stitch Fix blew past analysts' revenue, EPS, and EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance outperformed Wall Street's estimates. Zooming out, we think this was a solid print. The market seemed to be hoping for more, and the stock traded down 4.6% to $4.59 immediately after reporting.
Big picture, is Stitch Fix a buy here and now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.