Stitch Fix on Monday said that first quarter revenue rose 10% year over year to $490 million, beating most analyst expectations, with 10% year-over-year growth in its active client base, to nearly 3.8 million. Net revenue per active client fell 4% to $467.
The apparel and accessories e-retailer swung into the black in the period, reaching net income of $9.5 million from a $178,000 loss a year ago, according to a company press release.
The company also announced that 15-year Amazon veteran Dan Jedda, who had been VP and CFO for Digital Video, Digital Music, and the Advertising and Corporate Development organization at the e-commerce giant, has been appointed CFO, effective Wednesday. Chief Operating Officer Mike Smith has served in that role in the interim since Paul Yee stepped down late last year.
Investors sent Stitch Fix shares soaring on Monday after the company's report.
The online apparel retailer "could prove to be one of the biggest beneficiaries of COVID over time, with tailwinds like the accelerated transition to online, continued physical store closures, hyper-personalized discovery processes, as well as the potential [total addressable market] expansion with Direct Buy, all driving elevated growth in the near-to-mid term," according to a note from Deutsche Bank analysts.
In a letter to shareholders regarding the quarter, CEO Katrina Lake noted that the 241,000 increase in number of active clients from last quarter reflected "our highest sequential net client additions in history."
But some analysts saw a different story in the company's gains in that metric, during a time when consumers have flocked to the internet to shop.
"While we were pleased to see the 10.2% growth in active clients, it represents an only slight acceleration vs. the 9% [year-over-year] growth in the prior two quarters, with the decline in revenue per active client surprising in light of direct buy initiatives to date, which we'd think would be additive to revenue/client," MKM Partners Managing Director Roxanne Meyer said in emailed comments.
Moreover, in her letter Lake noted that some first quarter sales were shifted into the following quarter due to depleted inventory, which leaves the company's guidance for 12% to 14% sales growth in the second quarter wanting, Meyer said.
And the company's performance didn't measure up well against other apparel retailers, some of which made a comeback in a similar period. "[A]lthough expectations continue to be beaten, sales and profits were hardly peer-leading ... despite having no stores to close," BMO Managing Director Simeon Siegel said in emailed comments.
Stitch Fix has complicated its operations by departing somewhat from its original model, (entailing personalized monthly styling guidance, based on both human expertise and algorithms, which are used to fill regularly curated shipments of clothes to subscribers) to include more opportunities to browse and buy directly from the site. The company says that direct buying is another avenue for growth.
But MKM's Meyer said it also brings up questions, including about advertising expense and inventory management.
Unsurprisingly, Stitch Fix added more athleisure and cozy leisure items to its offer and downplayed its workwear offer as people gravitate to more casual clothing while working from home during the pandemic. Lake also said that the recent struggles of plus-size players have increased its opportunity in that segment.
On a conference call with analysts, she also said the company has expanded its assortment of more affordably priced items, which have sold well during an economy weakened by the pandemic. That prompted MKM's Meyer to wonder the extent of that shift, and what it says about Stitch Fix's target customer demographic more broadly.