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Why Is Stitch Fix Stock Plunging?

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Online personal shopping website Stitch Fix  (SFIX) - Get Stitch Fix, Inc. Class A Report saw a steep drop in share price early on Wednesday after it cut its financial outlook. The company reported a better than expected fiscal first-quarter report.  

Stitch Fix posted a fiscal third-quarter loss of 2 cents a share, lower than the 14-cent loss estimated by analysts. Although revenue rose to $581 million, up 19% from last year and active users grew 11% to 4.18 million from a year ago, Stitch Fix anticipates revenue increasing at a high single-digit rate, down from its prior outlook of 15% or more growth.

While the relatively new Stitch Fix Freestyle allows customers to instantly buy items that have been curated for them, it can draw customers away from the company's other core services. 

CEO Elizabeth Spaulding addressed the issue on the recent investor call, “We anticipate generating more traffic to site through both through product detail pages and new channels,” she said. “In the short-term, people are making a tradeoff between, ‘do I want to try Fix, do I want to try Freestyle?’, and so that’s the learning phase we’re in right now and we see an opportunity to get better.”

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