Stitch Fix Announces Third Quarter of Fiscal Year 2024 Financial Results
June 4, 2024
“At Stitch Fix, we are on a mission to help people discover the styles they will love that fit perfectly so they always look and feel their best, and this commitment is at the heart of our transformation,” said
During the first quarter of fiscal 2024, we ceased operations of our
Third Quarter Fiscal 2024 Key Metrics and Financial Highlights
- Net revenue of
$322.7 million , a decrease of 16% year-over-year. - Active clients of 2,633,000, a decrease of 172,000, or 6%, quarter-over-quarter; and a decrease of 655,000, or 20%, year-over-year.
- Net revenue per active client (“RPAC”) of
$525 , an increase of 2% year-over-year. - Gross margin of 45.5%, an increase of 280 basis points year-over-year, which reflects improved product margins and transportation leverage.
- Net loss from continuing operations of
$22.0 million and diluted loss per share from continuing operations of$0.18 . - Adjusted EBITDA of
$6.7 million , which reflects continued cost management discipline. - Free cash flow was
$18.9 million in the third fiscal quarter. - We ended the quarter with
$244.5 million of cash, cash equivalents, and investments; and no debt.
Financial Outlook
Our financial outlook for our continuing operations for the fourth quarter of fiscal 2024 ending
| Q4 2024 | ||
| Net Revenue |
(14)% – (12)% YoY | |
| (21)% – (19)% YoY adjusted to a 13-week period (1) |
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| Adjusted EBITDA | 1.6% – 3.1% margin | |
(1) Fourth quarter of fiscal 2024 net revenue from continuing operations has been adjusted to remove the impact of the extra week for year-over-year comparative purposes. |
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Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to
Our financial outlook for our continuing operations for fiscal year 2024, which includes the 53rd week, is as follows:
| Fiscal Year 2024 | ||
| Net Revenue |
(16)% – (16)% YoY | |
| (18)% – (17)% YoY adjusted to a 52-week period(1) |
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| Adjusted EBITDA | 1.9% – 2.2% margin | |
(1) Full fiscal year 2024 net revenue from continuing operations has been adjusted to remove the impact of the 53rd week for year-over-year comparative purposes. |
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In the fourth quarter of fiscal 2024, we reviewed our right-of-use lease asset associated with our
Conference Call and Webcast Information
To access the call by phone, please register at the following link:
Dial-In Registration: https://register.vevent.com/register/BIe26aa9bd7a9640ad99317def4d55bb0b
Upon registration, telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the webcast will also be available for a limited time at https://investors.stitchfix.com.
About
Forward-Looking Statements
This press release, the related conference call, and webcast contain forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact could be deemed forward looking, including but not limited to statements regarding our expectations for future financial performance, including our profitability and long-term targets; guidance on financial results and metrics for the fourth quarter and full fiscal year of 2024; that the execution of our strategy and priorities will enable us to achieve long-term, sustainable, and profitable growth and positive free cash flow; that our foundational efforts will continue to increase wallet share and improve profitability; that our healthy balance sheet combined with our enviable order economics will enable us to invest in the areas of the business that will drive sustainable, profitable growth in the future; our ability to achieve the expected annualized contribution margin impact from our pricing architecture work; that our AI inventory tool will increase the productivity of our inventory while delivering clients the styles they will love; that optimization of our marketing and the re-imagination of our client experience will help us acquire, retain, and reactivate highly engaged clients over time; the timing of our experience updates; that the work we are doing across merchandising, pricing, client analytics, transportation, and operations will provide opportunities to invest in areas that will drive sustainable, profitable growth in the future; our expectations regarding Average Order Value (AOV), Keep Rate and Average Unit Retail (AUR) for the remainder of the fiscal year; our expectations regarding warehouse costs, transportation costs, gross margin, inventory levels, and advertising spend. These statements involve substantial risks and uncertainties, including risks and uncertainties related to the current macroeconomic environment; our ability to generate sufficient net revenue to offset our costs; consumer behavior; our ability to acquire, engage, and retain clients; our ability to provide offerings and services that achieve market acceptance; our data science and technology, stylists, operations, marketing initiatives, and other key strategic areas; risks related to our inventory levels and management; risks related to our supply chain, sourcing of materials and shipping of merchandise; risks related to international operations; our ability to forecast our future operating results; and other risks described in the filings we make with the
Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except per share amounts) |
||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 196,507 | $ | 239,437 | ||||
| Short-term investments | 47,998 | 18,161 | ||||||
| Inventory, net | 114,467 | 130,548 | ||||||
| Prepaid expenses and other current assets | 25,446 | 27,692 | ||||||
| Current assets, discontinued operations | 864 | 9,623 | ||||||
| Total current assets | 385,282 | 425,461 | ||||||
| Property and equipment, net | 57,636 | 79,757 | ||||||
| Operating lease right-of-use assets | 89,099 | 104,533 | ||||||
| Other long-term assets | 4,653 | 2,681 | ||||||
| Long-term assets, discontinued operations | 294 | 2,046 | ||||||
| Total assets | $ | 536,964 | $ | 614,478 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 99,242 | $ | 96,730 | ||||
| Operating lease liabilities | 26,791 | 28,210 | ||||||
| Accrued liabilities | 65,009 | 69,893 | ||||||
| Gift card liability | 10,013 | 10,328 | ||||||
| Deferred revenue | 10,328 | 11,366 | ||||||
| Other current liabilities | 8,328 | 8,802 | ||||||
| Current liabilities, discontinued operations | 138 | 12,782 | ||||||
| Total current liabilities | 219,849 | 238,111 | ||||||
| Operating lease liabilities, net of current portion | 105,115 | 125,418 | ||||||
| Other long-term liabilities | 3,111 | 3,639 | ||||||
| Total liabilities | 328,075 | 367,168 | ||||||
| Stockholders’ equity: | ||||||||
| Class A common stock, |
1 | 1 | ||||||
| Class B common stock, |
1 | 1 | ||||||
| Additional paid-in capital | 670,182 | 615,236 | ||||||
| Accumulated other comprehensive income (loss) | (498 | ) | 527 | |||||
| Accumulated deficit | (430,755 | ) | (338,413 | ) | ||||
| (30,042 | ) | (30,042 | ) | |||||
| Total stockholders’ equity | 208,889 | 247,310 | ||||||
| Total liabilities and stockholders’ equity | $ | 536,964 | $ | 614,478 | ||||
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (In thousands, except share and per share amounts) |
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| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| Revenue, net | $ | 322,731 | $ | 383,419 | $ | 1,017,918 | $ | 1,227,782 | ||||||||
| Cost of goods sold | 175,753 | 219,744 | 568,357 | 713,041 | ||||||||||||
| Gross profit | 146,978 | 163,675 | 449,561 | 514,741 | ||||||||||||
| Gross margin | 45.5 | % | 42.7 | % | 44.2 | % | 41.9 | % | ||||||||
| Selling, general, and administrative expenses | 171,818 | 184,195 | 541,100 | 647,079 | ||||||||||||
| Operating loss | (24,840 | ) | (20,520 | ) | (91,539 | ) | (132,338 | ) | ||||||||
| Interest income | 3,002 | 2,434 | 7,923 | 3,814 | ||||||||||||
| Other income (expense), net | (9 | ) | (203 | ) | 980 | (1,043 | ) | |||||||||
| Loss before income taxes | (21,847 | ) | (18,289 | ) | (82,636 | ) | (129,567 | ) | ||||||||
| Provision for income taxes | 170 | 132 | 508 | 450 | ||||||||||||
| Net loss from continuing operations | (22,017 | ) | (18,421 | ) | (83,144 | ) | (130,017 | ) | ||||||||
| Net income (loss) from discontinued operations, net of income taxes | 689 | (3,404 | ) | (9,198 | ) | (13,297 | ) | |||||||||
| Net loss | $ | (21,328 | ) | $ | (21,825 | ) | $ | (92,342 | ) | $ | (143,314 | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in unrealized loss on available-for-sale securities, net of tax | (66 | ) | 732 | 104 | 1,487 | |||||||||||
| Foreign currency translation | — | 519 | (1,129 | ) | 1,408 | |||||||||||
| Total other comprehensive income (loss), net of tax | (66 | ) | 1,251 | (1,025 | ) | 2,895 | ||||||||||
| Comprehensive loss | $ | (21,394 | ) | $ | (20,574 | ) | $ | (93,367 | ) | $ | (140,419 | ) | ||||
| Loss per share from continuing operations, attributable to common stockholders: | ||||||||||||||||
| Basic | $ | (0.18 | ) | $ | (0.16 | ) | $ | (0.70 | ) | $ | (1.14 | ) | ||||
| Diluted | $ | (0.18 | ) | $ | (0.16 | ) | $ | (0.70 | ) | $ | (1.14 | ) | ||||
| Income (loss) per share from discontinued operations, attributable to common stockholders: | ||||||||||||||||
| Basic | $ | 0.01 | $ | (0.03 | ) | $ | (0.08 | ) | $ | (0.12 | ) | |||||
| Diluted | $ | 0.01 | $ | (0.03 | ) | $ | (0.08 | ) | $ | (0.12 | ) | |||||
| Loss per share attributable to common stockholders: | ||||||||||||||||
| Basic | $ | (0.18 | ) | $ | (0.19 | ) | $ | (0.78 | ) | $ | (1.26 | ) | ||||
| Diluted | $ | (0.18 | ) | $ | (0.19 | ) | $ | (0.78 | ) | $ | (1.26 | ) | ||||
| Weighted-average shares used to compute loss per share attributable to common stockholders: | ||||||||||||||||
| Basic | 121,268,047 | 115,445,285 | 118,986,077 | 113,911,089 | ||||||||||||
| Diluted | 121,268,047 | 115,445,285 | 118,986,077 | 113,911,089 | ||||||||||||
Condensed Consolidated Statements of Cash Flow (Unaudited) (In thousands) |
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| For the Nine Months Ended | ||||||||
| Cash Flows from Operating Activities from Continuing Operations | ||||||||
| Net loss from continuing operations | $ | (83,144 | ) | $ | (130,017 | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities from continuing operations: | ||||||||
| Change in inventory reserves | (12,929 | ) | (12,194 | ) | ||||
| Stock-based compensation expense | 59,911 | 78,423 | ||||||
| Depreciation, amortization, and accretion | 36,462 | 31,328 | ||||||
| Asset impairment | — | 16,874 | ||||||
| Other | (675 | ) | 1,517 | |||||
| Change in operating assets and liabilities: | ||||||||
| Inventory | 29,010 | 58,486 | ||||||
| Prepaid expenses and other assets | 249 | 8,163 | ||||||
| Income tax receivables | — | 26,640 | ||||||
| Operating lease right-of-use assets and liabilities | (6,288 | ) | (1,102 | ) | ||||
| Accounts payable | 2,450 | (17,053 | ) | |||||
| Accrued liabilities | (2,684 | ) | (12,640 | ) | ||||
| Deferred revenue | (1,038 | ) | (848 | ) | ||||
| Gift card liability | (315 | ) | 342 | |||||
| Other liabilities | (1,002 | ) | 2,761 | |||||
| Net cash provided by operating activities from continuing operations | 20,007 | 50,680 | ||||||
| Cash Flows from Investing Activities from Continuing Operations | ||||||||
| Proceeds from sale of property and equipment | 308 | 842 | ||||||
| Purchases of property and equipment | (10,259 | ) | (14,864 | ) | ||||
| Purchases of securities available-for-sale | (47,893 | ) | (258 | ) | ||||
| Sales of securities available-for-sale | — | 6,524 | ||||||
| Maturities of securities available-for-sale | 18,295 | 44,056 | ||||||
| Net cash provided by (used in) investing activities from continuing operations | (39,549 | ) | 36,300 | |||||
| Cash Flows from Financing Activities from Continuing Operations | ||||||||
| Proceeds from the exercise of stock options, net | — | 155 | ||||||
| Payments for tax withholdings related to vesting of restricted stock units | (11,393 | ) | (10,421 | ) | ||||
| Other | (424 | ) | (117 | ) | ||||
| Net cash used in financing activities from continuing operations | (11,817 | ) | (10,383 | ) | ||||
| Net increase (decrease) in cash and cash equivalents from continuing operations | (31,359 | ) | 76,597 | |||||
| Cash Flows from Discontinued Operations | ||||||||
| Net cash used in operating activities from discontinued operations | (10,453 | ) | (13,938 | ) | ||||
| Net cash used in investing activities from discontinued operations | — | (760 | ) | |||||
| Net cash used in financing activities from discontinued operations | (171 | ) | (296 | ) | ||||
| Net decrease in cash and cash equivalents from discontinued operations | (10,624 | ) | (14,994 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (947 | ) | 1,037 | |||||
| Net increase (decrease) in cash and cash equivalents | (42,930 | ) | 62,640 | |||||
| Cash and cash equivalents at beginning of period | 239,437 | 130,935 | ||||||
| Cash and cash equivalents at end of period | $ | 196,507 | $ | 193,575 | ||||
| Supplemental Disclosure | ||||||||
| Cash paid for income taxes | $ | 1,236 | $ | 787 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 1,236 | $ | 1,577 | ||||
| Capitalized stock-based compensation | $ | 3,687 | $ | 4,774 | ||||
Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting principles in
Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. There are several limitations related to the use of our non-GAAP financial measures as compared to the closest comparable GAAP measures. Some of these limitations include:
- Adjusted EBITDA excludes interest income and net other (income) expense as these items are not components of our core business;
- Adjusted EBITDA does not reflect our provision for income taxes, which may increase or decrease cash available to us;
- Adjusted EBITDA excludes the recurring, non-cash expenses of depreciation and amortization of property and equipment and, although these are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future;
- Adjusted EBITDA excludes the non-cash expense of stock-based compensation, which has been, and will continue to be for the foreseeable future, an important part of how we attract and retain our employees and a significant recurring expense in our business;
- Adjusted EBITDA excludes costs incurred related to discrete restructuring plans and other one-time costs attributable to our continuing operations that are fundamentally different in strategic nature and frequency from ongoing initiatives. We believe exclusion of these items facilitates a more consistent comparison of operating performance over time, however these costs do include cash outflows; and
- Free Cash Flow does not represent the total residual cash flow available for discretionary purposes and does not reflect our future contractual commitments.
Adjusted EBITDA
We define Adjusted EBITDA as net loss from continuing operations excluding interest income, net other (income) expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, and restructuring and other one-time costs related to our continuing operations. The following table presents a reconciliation of net loss from continuing operations, the most comparable GAAP financial measure, to Adjusted EBITDA for each of the periods presented:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| (in thousands) | ||||||||||||||||
| Net loss from continuing operations | $ | (22,017 | ) | $ | (18,421 | ) | $ | (83,144 | ) | $ | (130,017 | ) | ||||
| Add (deduct): | ||||||||||||||||
| Interest income | (3,002 | ) | (2,434 | ) | (7,923 | ) | (3,814 | ) | ||||||||
| Other (income) expense, net | 9 | 203 | (980 | ) | 1,043 | |||||||||||
| Provision for income taxes | 170 | 132 | 508 | 450 | ||||||||||||
| Depreciation and amortization (1) | 8,443 | 9,654 | 27,283 | 28,742 | ||||||||||||
| Stock-based compensation expense | 18,944 | 22,032 | 59,911 | 78,423 | ||||||||||||
| Restructuring and other one-time costs (2) | 4,134 | 2,080 | 24,103 | 42,977 | ||||||||||||
| Adjusted EBITDA | $ | 6,681 | $ | 13,246 | $ | 19,758 | $ | 17,804 | ||||||||
(1) For the three and nine months ended (2) Restructuring charges for the three and nine months ended |
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Free Cash Flow
We define Free Cash Flow as net cash flows provided by (used in) operating activities from continuing operations, reduced by purchases of property and equipment that are included in cash flows from investing activities from continuing operations. The following table presents a reconciliation of net cash flows provided by (used in) operating activities from continuing operations, the most comparable GAAP financial measure, to Free Cash Flow for each of the periods presented:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| (in thousands) | ||||||||||||||||
| Free Cash Flow reconciliation: | ||||||||||||||||
| Net cash provided by operating activities from continuing operations | $ | 21,743 | $ | 29,897 | $ | 20,007 | $ | 50,680 | ||||||||
| Deduct: | ||||||||||||||||
| Purchases of property and equipment from continuing operations | (2,832 | ) | (3,466 | ) | (10,259 | ) | (14,864 | ) | ||||||||
| Free Cash Flow | $ | 18,911 | $ | 26,431 | $ | 9,748 | $ | 35,816 | ||||||||
| Net cash provided by (used in) investing activities from continuing operations | $ | (48,113 | ) | $ | 32,601 | $ | (39,549 | ) | $ | 36,300 | ||||||
| Net cash used in financing activities from continuing operations | $ | (3,087 | ) | $ | (3,626 | ) | $ | (11,817 | ) | $ | (10,383 | ) | ||||
Operating Metrics
| (in thousands) | |||||||||||||||
| Active clients | 2,633 | 2,805 | 2,989 | 3,121 | 3,288 | ||||||||||
Active Clients
We define an active client as a client who checked out a Fix or was shipped an item via Freestyle in the preceding 52 weeks, measured as of the last day of that period. A client checks out a Fix when she indicates what items she is keeping through our mobile application or on our website. We consider each Women’s, Men’s, or Kids account as a client, even if they share the same household.
Net Revenue per Active Client
We calculate net revenue per active client based on net revenue over the preceding four fiscal quarters divided by the number of active clients, measured as of the last day of the period. Net revenue per active client was
| IR Contact: ir@stitchfix.com |
PR Contact: media@stitchfix.com |
Source: Stitch Fix, Inc.