Stitch Fix stock rallies as results beat, and company takes further steps to pare back

By Bill Peters

Company to close Dallas distribution center and 'explore exiting' the U.K.

Shares of Stitch Fix Inc. rose after hours on Tuesday after the online clothing-selection and styling service reported better-than-expected third-quarter results and announced plans to scale back operations as it tries to refocus on its styling business in the U.S.

In the latest effort to shake up operations, executives said they would close the company's Dallas distribution center next year and let the lease on another distribution center expire this year. They also said they would "explore exiting" the U.K., which Stitch Fix (SFIX) entered four years ago.

The company reported a third-quarter net loss of $21.8 million, or 19 cents a share, compared with $78 million, or 72 cents a share, in the same quarter last year. Stitch Fix's revenue fell 20% to $394.9 million, compared with $492.9 million in the prior-year quarter.

Active clients, or customers who checked out or bought clothes over the past 52 weeks, fell 11% to 3.48 million.

Analysts polled by FactSet expected a loss of 31 cents a share, on sales of $389 million. Those analysts expected active clients of around 3.45 million.

Stitch Fix said it expected fourth-quarter sales of between $365 million and $375 million, below FactSet forecasts for $379 million.

Shares were up 4.4% in after-hours trade.

Stitch Fix shares have fallen 57% over the past 12 months, as the company deals with a more cautious consumer who is less willing to shell out money for clothes. Prices for clothing, in turn, has fallen, as retailers try harder to entice consumers -- putting pressure on profits.

The backdrop has weighed on Stitch Fix's subscribers and sales. Management in March said that company analysis "continues to show that all client cohorts are spending less than in prior years."

Founder and Interim Chief Executive Katrina Lake, during Stitch Fix's earnings call in March, said "refreshing your wardrobe might not be as high priority as it might have been 10 months ago" as rising costs for basics force customers to reconsider other purchases. The company also said Dan Jedda would step down as chief financial officer.

In January, the company announced a big round of layoffs and said it would close a distribution center in Salt Lake City. The company also said then that Elizabeth Spaulding was stepping down as chief executive, to be temporarily replaced by Lake.

-Bill Peters

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06-06-23 1634ET

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