Stitch Fix on Tuesday reported that fourth quarter net revenue rose 36% year over year to $432.1 million, as its number of active clients reached 3.2 million, an increase of 494,000 or 18% from the year-ago quarter.
Net revenue per active client rose 9%, the fifth consecutive quarter of growth, a performance that benefited from an extra week, CFO Paul Yee said on a call with analysts Tuesday. Net income in the quarter fell to $7.2 million from $18.3 million in the year-ago quarter.
For the full year, net revenue rose 29% to $1.58 billion, the company also said. Adjusted EBITDA of $39.6 million was the company's fifth straight year of positive results in that measure. Net income for the year fell to $36.9 million from $44.9 million the previous year.
Stitch Fix shares tumbled late Tuesday after executives said they expect the first quarter to be "softer" because the company spent less on marketing in the fourth quarter.
Guidance for the full year has the company gaining steam, however, with EBITDA returning to positive in the second quarter and newer initiatives like its U.K. operations taking hold, according to comments from Yee to analysts.
CEO Katrina Lake said the company is testing an algorithm-led sub-service dubbed "Shop Your Looks," which allows customers to choose items that would go well with pieces they already own. In an eight-week beta test, more than a third of those who bought something using the new option engaged with the company multiple times, and some 60% bought two or more items, she said, according to a transcript from Motley Fool.
Investors may have been extra-spooked by the company's light guidance for the start of its fiscal year in part because of growing wariness on Wall Street about profit-shy, tech-forward companies. Plus, Amazon this summer added styling services to its Prime Wardrobe offer, making its Stitch Fix-like subscription even more like Stitch Fix. But Lake brushed off the notion that it represents much of a threat, saying the competition is really found at brick-and-mortar apparel retailers and suggesting that Amazon isn't as desirable a brand partner.
"We have $400 billion of market opportunity here, and 80% of that market opportunity is still in stores," she said, adding later, "And brands love working with us. And, you know, we're a channel that really helps them to preserve their brand integrity, that helps them to be introduced to clients in a really authentic way. And I think that's another huge point of differentiation in our model."