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Stitch Fix Plunges After Q2 Loss, Lower Full-Year Sales Outlook

Slumping margins, a delay in its direct buy platform rollout and a softer full-year sales outlook have Stitch Fix shares down nearly 25% in pre-market trading.

Stitch Fix  (SFIX)  shares plunged the most in more than two years Tuesday, potentially erasing more than $1.8 billion in market value at the start of trading, after the online fashion retailer lowered its full-year sales forecast following its swing into a second quarter loss.

Stitch Fix also said it would delay the rollout of its direct buy platform until later in the year, a decision that will impact current quarter and full year sales, which the group sees in ranges of $505 million to $515 million and $2.02 billion to $2.05 billion respectively. 

The group said its loss for the three months ending in January was pegged at 20 cents per share, down from a profit of 11 cents over the same period last year and 2 cents inside the Street consensus forecast. Group revenues, Stitch Fix said, rose 11.6% to $504.1 million. Stitch Fix reported nearly 3.9 million active clients, up 12% from a year earlier. Net revenue per active client slipped 7% to $467.00.

"We are seeing strong new client acquisition trends, healthy auto ship retention levels and increased client engagement with direct buy. That said, there are also near-term factors that may impact the back half of fiscal 2021 and are reflected in our updated full year guidance," CFO Dan Jedda told investors on a conference call late Monday, citing shipping and client delays.

"In addition, there's still a lot of uncertainty given COVID, and as a result, we're taking a more measured approach to our outlook," he added. "As such, we plan to continue testing the (direct buy) product through fiscal Q3 and into Q4 before a full-scale product launch in late fiscal Q4."

Stitch Fix shares were marked 26% lower in early trading Tuesday, the biggest decline since October 2018, to change hands at $50.56 each, a move that would still leave the stock with a 75% gain for the past six months.

"Management sounded upbeat and is excited for the future opportunity to take share with various initiatives at varying states of trial and launch," said BMO Capital Markets analyst Simeon Siegel. "However, at this point, it seems that uncertainties remain with initiatives yet to be proven, putting the burden of proof on coming execution."