Why Stitch Fix Stock Dropped 25% in September

Clothing stocks online Stitch Fix (SFIX -0.74%) lost 25% of their remaining value in September, according to data provided by S&P Global Market Intelligence, continuing the downward trend in share prices – and businesses. It reported another disappointing round of quarterly financial results, and investors aren’t seeing much hope.

A business that did not take off

Investors were excited when Stitch Fix first appeared on the scene. It offers a new approach to personal shopping, an online service where customers receive a monthly clothing “fix” based on a style survey, machine learning algorithms and a personal shopping service.

However, the hype didn’t last long. Customers can return anything they want from the repair, and customers haven’t bought into the “someone else-picks-my-clothes” phenomenon. The company has rolled out a bunch of new projects to change that, such as fixes at chosen intervals instead of monthly and the option for customers to select their own items. But business has not recovered, and sales continue to decline.

It was a pretty awful fiscal fourth quarter (ended August 3rd). Revenue fell 12.4% to $319.6 million, or 18.3% adjusted for an extra week in the quarter. Net loss was $35.7 million and loss per share was $0.29. That was well below Wall Street expectations of $0.19. Ended the quarter with $247 million in cash and equivalents and no debt.

CEO Matt Baer, ​​who has been on the job for just over a year, is trying to turn the company around. He says he hasn’t adapted his service and assortment to meet changing consumer needs. Now they’re focused on righting that wrong with revamped branding, better personalization, a stronger stylist-client relationship, and increased flexibility.

Can Stitch Fix be repaired?

The odds of Stitch Fix making a comeback aren’t looking so good right now. Management is targeting revenue of about $1.13 billion in fiscal 2025, down from $1.34 in 2024.

However, there are glimmers of hope. The number of active customers continues to decline, but the revenue per active customer is increasing. It still has over 2.5 million active customers, so there is a market for its business.

It should also benefit from lower interest rates and a boost to the economy. It collapsed when many retailers were in a slump, and increased spending across the board could give it the oxygen it needs to start on the path to renewed growth.