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Jacob: Why Stitch Fix is it still positioned for success? Stock is down more than 8% on Wednesday. The earnings were very, very rough. Revenue came in, in line with Wall Street estimates 432 million for the quarter. It was up 36% a year of a year, but the EPS was 7 cents beating 4 cents, but the EBITDA missed higher inventory. Costs were a big part of that. Now the real problem there was the revenue and EBITDA guidance was below estimates much because of lower average order values and also the lower marketing spend. So capturing less of their total available market. So the guidance was really doing this doc in stock down 8%, but an analyst from RBC capital markets talking about why there are some things that could get priced into the stock when management becomes more clear on these things. These are very expansionary activities that I'm talking about here. One, direct buy, initiative for management. You can choose your outfit rather than being matched with it. It's at much lower cost to the cost to the customer for that. The RBC capital markets analyst Mark Mahaney saying that quote, that could be a game changer, but also very importantly men's segment, the kids segment and the UK expansion opportunity. These are still in the very early phases. So should these things work out, you would see the stock do very well for now, stock down 8% on a rough quarter, but look out for those things on a longer term trend for Stitch Fix.

It's simple. 

Real Money Stock of the Day Stitch Fix (SFIX - Get Report) has several avenues for new revenue channels that could make the company much larger than it is now. 

For now, investors are focused on the dimmer-than-expected outlook for the company's existing operations. Stitch Fix beat earnings estimates, but missed on the key EBITDA (earnings-before-interest-tax-depreciation-amoritization) metric and revenue and EBITDA guidance for 2020 was poor. The stock fell 14.56% to $17.14 a share Wednesday. 

Earnings & Guidance

Revenue came in at $432 million, in line with Wall Street estimates and rising 36% year-over-year. Earnings per share was 7 cents, beating estimates of 4 cents. That doesn't mean EBITDA was better than expected, as that result came in at $6.4 million, missing Wall Street estimates of $8.5 million. Higher than expected inventory reserves and research and development spend were two culprits causing the miss. 

Management guided for full year 2020 revenue of between $1.9 billion and $1.93 billion, representing over 20% growth. The company expects 2020 EBITDA between $10 million and $30 million. Analysts are looking for $21 million. The lower guidance comes as the company is expecting a lower average order value and to spend less on marketing, which would restrict its ability to reach the totality of its potential market for 2020. 

4 Growth-Driving Positives

While the current U.S. business, much focused on women, is seeing a slight step back in expectations, there are several initiatives the company is undertaking that could make a bog difference down the line. 

First off, the company's Direct-Buy initiative is a "game-changer," wrote RBC Capital Markets analyst Mark Mahaney in a Wednesday morning note. This initiative allows customers to locate products outside of the fix universe but directly from the website, as Stich Fix uses customer data and history to suggest the perfect clothing match. 

Secondly, Stich Fix is expanding its men's category, a theme seen in emerging retail businesses of late. Lulu Lemon (LULU - Get Report)  , more known for its women's selection, disclosed on its latest earnings report it's growing its men's category quite purposefully and rapidly. 

Stitch also wants to expand its children's offering, which is still in its early stages. 

Also in its early stages is Stitch's United Kingdom business, which accounts for almost no revenue for the company presently. 

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