Online apparel retailer Stitch Fix, Inc. (SFIX) operates as a seller of apparel, shoes, and accessories for men, women, and kids in the United States and the United Kingdom. Analysts are downgrading the company’s topline estimates. The consensus from 16 analysts is $1.80 billion for 2023, which reflects a 12% decline in sales from the past-year performance.

On September 27, ClaimsFiler, a shareholder information service, reminded investors of the securities class action lawsuit against SFIX. The company and certain of its executives are charged with failing to disclose material information, thereby violating federal securities laws.

The stock has declined 90.6% over the past year and 78.7% year-to-date to close its last trading session at $4.04. It has declined 27.1% over the past month. It is trading just 2.5% above its 52-week low of $3.94.

Here are the factors that could affect SFIX’s performance in the near term:

Bleak Financials

For the fiscal fourth quarter that ended July 30, SFIX’s net revenue decreased 15.6% year-over-year to $481.90 million. Net income attributable to common stockholders declined 443.9% from the prior-year quarter to a negative $96.34 million. Earnings per share attributable to common stockholders came in at a negative $0.89, down 568.4% from the same period the prior year.

Negative Profit Margins

SFIX’s trailing-12-month EBIT margin and net income margin of a negative 8.77% and 9.99% are significantly lower than their respective industry averages of 8.17% and 5.86%. Its trailing-12-month ROE, ROTC, and ROA of a negative 52.87%, 20.64%, and 27.09% compare to their respective industry averages of 14.98%, 6.91%, and 5.09%.

Analysts Expect Top and Bottom Line Declines

The consensus EPS estimates of a negative $0.47 and a negative $0.44 for the quarters ending October 2022 and January 2023 indicate 2,250% and 57.1% year-over-year decreases. Street EPS estimate for the fiscal year 2023 of a negative $1.72 reflects a decline of 3.6% from the prior year.

The consensus revenue estimate for fiscal 2023 of $1.81 billion indicates a 12.8% decrease from the prior-year period.

POWR Ratings Reflect Bleak Prospects

SFIX’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

SFIX has a Growth and Sentiment grade of F in sync with its poor financial growth and bleak analyst expectations.

The stock has a Stability grade of D, consistent with its five-year monthly beta of 1.96.

In the 30-stock Internet – Services industry, it is ranked #22. The industry is rated F.

Click here to see the additional POWR Ratings for SFIX (Value, Momentum, and Quality).

View all the top stocks in the Internet – Services industry here.

Bottom Line

SFIX seems to be in a turbulent position, given its declining financials and bearish analyst estimates. Moreover, its negative ROE is concerning. With its stock trading below its 50-day and 200-day Moving Averages of $5.84 and $10.05, indicating a downtrend, SFIX might be best avoided now.

How Does Stitch Fix, Inc. (SFIX) Stack Up Against its Peers?

While SFIX has an overall POWR Rating of D, one might consider looking at its industry peers, Perion Network Ltd. (PERI) and Liquidity Services, Inc. (LQDT), which have an overall B (Buy) rating.

SFIX shares were trading at $4.15 per share on Wednesday morning, up $0.11 (+2.72%). Year-to-date, SFIX has declined -78.07%, versus a -21.55% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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