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Stitch Fix Announces First Quarter Fiscal Year 2022 Financial Results

SAN FRANCISCO, Dec. 07, 2021 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal shopping and styling service, has released its financial results for the first quarter of fiscal year 2022 ended October 30, 2021.

Stitch Fix CEO Elizabeth Spaulding said, “In Q1 we delivered $581 million in net revenue, reflecting 19% year-over-year growth. Our revenue per active client topped $500 for the second quarter in a row, reaching a record $524 across our nearly 4.2 million clients. These quarterly results reflect a strong performance in our business from both Fix and Freestyle. With the launch of Stitch Fix Freestyle we are expanding and broadening our offering, and we are excited to continue to enhance the experience for clients through the introduction of new product features and expanded merchandise selections, increasing the number of purchase occasions we serve. Overall, we are pleased with the important progress we are making towards our vision of becoming the global destination for personal shopping.”

First Quarter Key Metrics and Financial Highlights

  • Net revenue of $581.2 million, an increase of 19% year over year

  • Active clients of 4,180,000, an increase of 417,000 or 11% year over year

  • Net revenue per active client of $524, an increase of 12% year over year

  • Net loss of $1.8 million and diluted loss per share of $0.02

  • Adjusted EBITDA of $38.2 million

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Business Highlights

  • Delivered strong top line revenue growth with continued momentum in Women's as well as in Kids, and in the U.K., where we nearly doubled revenue when compared to the first quarter of last year

  • Q1 saw the expansion of Freestyle to new clients, representing an evolution in our business. With Freestyle, we are expanding and broadening our personalized shopping offering

  • Added over 20 new brands, including Adidas, DKNY, Vans and Rag & Bone Footwear, as well as launched new product lines such as our Elevate Black-owned brand grantees and Mohnton Made, our new sustainable and US-built basics line

  • Gross margins were at an all-time high driven by improved product margins and shipping cost optimizations

  • Delivered strong adjusted EBITDA, reflecting sustained revenue growth, with strong gross margins, and lower marketing spend

Financial Outlook

Our financial outlook for the second quarter of fiscal 2022, which ends on January 29, 2022, is as follows:

Q2’22

Net Revenue

$505 million - $520 million

0% - 3% YoY growth

Adjusted EBITDA

$(5) million - $5 million

(1)% - 1% margin

For the full fiscal year 2022, which ends on July 30, 2022, we expect year-over-year net revenue growth at a high single-digit rate and adjusted EBITDA margin to be between 1% and 2%.

Conference Call and Webcast Information

Elizabeth Spaulding, Chief Executive Officer of Stitch Fix, and Dan Jedda, Chief Financial Officer of Stitch Fix, will host a conference call at 1:30 p.m. Pacific Time today to discuss the Company’s financial results and outlook. A live webcast will be accessible on Stitch Fix’s investor relations website at investors.stitchfix.com. Interested parties can also access the call by dialing 888-204-4368 in the U.S. or 720-543-0214 internationally, and entering conference code 6712573.

A telephonic replay will be available through Tuesday, December 14, 2021, at 888-203-1112 or 719-457-0820, passcode 6712573. An archive of the webcast conference call will be available shortly after the call ends at https://investors.stitchfix.com.

About Stitch Fix, Inc.

Stitch Fix is the world's leading online personalized shopping experience. Our unique business model combines the human touch of expert stylists with the precision of advanced data science. Since our founding in 2011, we’ve served as a trusted style partner to millions of people, helping adults and kids get dressed every day feeling like their best selves. The Stitch Fix team is building a transformative and inclusive ecommerce model, an ecosystem of shopping experiences based on convenience and guided discovery that makes it radically simple and delightful for customers to discover and buy what they love. For more, visit https://www.stitchfix.com.

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 for the second quarter and full year of 2022; the momentum of our business; the rate of client migration to our offering; the forecasted continued and lasting shift to online shopping and our ability to capture market share; that the learning and experimenting we are engaging in can be optimized and will help build a great customer experience; our expected conversion and retention of new and existing clients; the success of and opportunity related to our Freestyle offering, including that Freestyle provides new client potential and enables access to a greater share of shopping occasions; that we will be able to create the optimal client experience and conversion paths for new clients; that the testing of new onboarding approaches that balance personalization with speed of access into the experience will be impactful work and will reduce friction for new clients accessing Freestyle; our ability to invest in brands and expand product categories; our ability to build greater brand equity of our exclusive brands; that Freestyle will expand our ecosystem and fuel client acquisition by unlocking the full addressable apparel market; our ability to leverage our engineering and data science capabilities to drive efficiencies in our business and enhance our ability to personalize our service and offerings; our ability to invest in our technology and evolve our technology platform and that this evolution will help us achieve our goals; that investments in our technology will pay-off over the long term; our advertising and marketing plans, including opening up new marketing channels, and whether our marketing investments will pay off in future quarters; that we will have growth in active clients in the third quarter of 2022; that evolving our onboarding process and marketing channels will lead to new client additions who will engage with us over the long term; and that the investments we are making now will allow us to unlock a long-term opportunity presented by Freestyle. These statements involve substantial risks and uncertainties, including risks and uncertainties related to the ongoing COVID-19 pandemic, our responses to the pandemic, the responses of our clients, competitors, suppliers, governmental authorities, and public health officials; our ability to generate sufficient net revenue to offset our costs; the growth of our market and 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; risks related to our supply chain, sourcing of materials and shipping of merchandise; risks related to international operations; and other risks described in the filings we make with the SEC. Further information on these and other factors that could cause our financial results, performance, and achievements to differ materially from any results, performance, or achievements anticipated, expressed, or implied by these forward-looking statements is included in filings we make with the SEC from time to time, including in the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended July 31, 2021. These documents are available on the SEC Filings section of the Investor Relations section of our website at: https://investors.stitchfix.com. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties, and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefs and assumptions only as of the date such statements are made.


Stitch Fix, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share amounts)

October 30, 2021

July 31, 2021

Assets

Current assets:

Cash and cash equivalents

$

249,677

$

129,785

Short-term investments

62,438

101,546

Inventory, net

184,129

212,294

Prepaid expenses and other current assets

48,902

50,512

Income tax receivable

27,624

27,667

Total current assets

572,770

521,804

Long-term investments

88,420

59,035

Income tax receivable, net of current portion

27,054

27,054

Property and equipment, net

98,975

86,959

Operating lease right-of-use assets

136,849

118,565

Other long-term assets

5,354

5,732

Total assets

$

929,422

$

819,149

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

129,229

$

73,499

Operating lease liabilities

25,881

25,702

Accrued liabilities

115,281

99,028

Gift card liability

9,461

9,903

Deferred revenue

16,617

18,154

Other current liabilities

1,764

2,027

Total current liabilities

298,233

228,313

Operating lease liabilities, net of current portion

144,014

121,623

Other long-term liabilities

8,580

8,364

Total liabilities

450,827

358,300

Stockholders’ equity:

Class A common stock, $0.00002 par value

1

1

Class B common stock, $0.00002 par value

1

1

Additional paid-in capital

437,246

416,755

Accumulated other comprehensive income (loss)

2,493

3,411

Retained earnings

38,854

40,681

Total stockholders’ equity

478,595

460,849

Total liabilities and stockholders’ equity

$

929,422

$

819,149


Stitch Fix, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(In thousands, except share and per share amounts)

For the Three Months Ended

October 30, 2021

October 31, 2020

Revenue, net

$

581,244

$

490,423

Cost of goods sold

308,327

270,972

Gross profit

272,917

219,451

Selling, general, and administrative expenses

274,767

238,984

Operating income (loss)

(1,850

)

(19,533

)

Interest income

334

1,161

Other expense, net

(109

)

(205

)

Income (loss) before income taxes

(1,625

)

(18,577

)

Provision (benefit) for income taxes

202

(28,118

)

Net income (loss)

$

(1,827

)

$

9,541

Other comprehensive income (loss):

Change in unrealized gain (loss) on available-for-sale securities, net of tax

(315

)

(663

)

Foreign currency translation

(603

)

(338

)

Total other comprehensive income (loss), net of tax

(918

)

(1,001

)

Comprehensive income (loss)

$

(2,745

)

$

8,540

Net income (loss) attributable to common stockholders:

Basic

$

(1,827

)

$

9,541

Diluted

$

(1,827

)

$

9,541

Earnings (loss) per share attributable to common stockholders:

Basic

$

(0.02

)

$

0.09

Diluted

$

(0.02

)

$

0.09

Weighted-average shares used to compute earnings (loss) per share attributable to common stockholders:

Basic

108,375,911

104,134,850

Diluted

108,375,911

109,477,354


Stitch Fix, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)

For the Three Months Ended

October 30, 2021

October 31, 2020

Cash Flows from Operating Activities

Net income (loss)

$

(1,827

)

$

9,541

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Change in inventory reserves

(2,763

)

(1,343

)

Stock-based compensation expense

32,323

19,925

Depreciation, amortization, and accretion

8,335

6,961

Other

(923

)

271

Change in operating assets and liabilities:

Inventory

30,806

(30,665

)

Prepaid expenses and other assets

6,035

(9,503

)

Income tax receivables

43

(18,796

)

Operating lease right-of-use assets and liabilities

101

(225

)

Accounts payable

55,352

44,609

Accrued liabilities

16,193

32,237

Deferred revenue

(1,532

)

1,906

Gift card liability

(442

)

(271

)

Other liabilities

(45

)

2,712

Net cash provided by operating activities

141,656

57,359

Cash Flows from Investing Activities

Purchases of property and equipment

(16,392

)

(5,985

)

Purchases of securities available-for-sale

(52,435

)

(41,307

)

Sales of securities available-for-sale

2,160

16,193

Maturities of securities available-for-sale

59,130

32,800

Net cash provided by (used in) investing activities

(7,537

)

1,701

Cash Flows from Financing Activities

Proceeds from the exercise of stock options, net

1,054

5,106

Payments for tax withholdings related to vesting of restricted stock units

(14,752

)

(7,002

)

Net cash used in financing activities

(13,698

)

(1,896

)

Net increase in cash and cash equivalents

120,421

57,164

Effect of exchange rate changes on cash

(529

)

(273

)

Cash and cash equivalents at beginning of period

129,785

143,455

Cash and cash equivalents at end of period

$

249,677

$

200,346

Supplemental Disclosure

Cash paid for income taxes

$

190

$

38

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

Purchases of property and equipment included in accounts payable and accrued liabilities

$

4,394

$

4,880

Capitalized stock-based compensation

$

1,866

$

981

Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”). However, management believes that certain non-GAAP financial measures provide users of our financial information with additional useful information in evaluating our performance. We believe that adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, and that this supplemental measure facilitates comparisons between companies. We believe free cash flow is an important metric because it represents a measure of how much cash from operations we have available for discretionary and non-discretionary items after the deduction of capital expenditures. These non-GAAP financial measures may be different than similarly titled measures used by other companies.

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 other expense, net, as these items are not components of our core business;

  • adjusted EBITDA does not reflect our tax provision (benefit), 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; 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 income (loss) excluding interest income, other expense, net, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense. The following table presents a reconciliation of net income (loss), the most comparable GAAP financial measure, to adjusted EBITDA for each of the periods presented:

For the Three Months Ended

(in thousands)

October 30, 2021

October 31, 2020

Net income (loss)

$

(1,827

)

$

9,541

Add (deduct):

Interest income

(334

)

(1,161

)

Other expense, net

109

205

Provision (benefit) for income taxes

202

(28,118

)

Depreciation and amortization

7,740

6,459

Stock-based compensation expense

32,323

19,925

Adjusted EBITDA

$

38,213

$

6,851

Free Cash Flow

We define free cash flow as cash flows provided by operating activities reduced by purchases of property and equipment that are included in cash flows provided by (used in) investing activities. The following table presents a reconciliation of cash flows provided by operating activities, the most comparable GAAP financial measure, to free cash flow for each of the periods presented:

For the Three Months Ended

(in thousands)

October 30, 2021

October 31, 2020

Free cash flow reconciliation:

Cash flows provided by operating activities

$

141,656

$

57,359

Deduct:

Purchases of property and equipment

(16,392

)

(5,985

)

Free cash flow

$

125,264

$

51,374

Cash flows provided by (used in) investing activities

$

(7,537

)

$

1,701

Cash flows used in financing activities

$

(13,698

)

$

(1,896

)

Operating Metrics

October 30, 2021

July 31, 2021

May 1, 2021

January 30, 2021

October 31, 2020

Active clients (in thousands)

4,180

4,165

4,107

3,873

3,763

Net revenue per active client

$

524

$

505

$

481

$

467

$

467

Active Clients

We define an active client as a client who checked out a Fix or was shipped an item using our direct-buy functionality, “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 Men’s, Women’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.

IR Contact:

Tanny Shelburne
ir@stitchfix.com

PR Contact:

Suzy Sammons
media@stitchfix.com