Stitch Fix, the popular personal styling service, has experienced a decline in net revenue during the third quarter as a result of fulfillment delays caused by the ongoing Covid-19 pandemic. Despite being a digital platform, the company suffered a 9% drop in net revenue compared to the same period last year. Stitch Fix is based in San Francisco and remains optimistic about the future, aiming to clear its order backlog by the end of June.

During the third quarter, Stitch Fix reported a net revenue of $371.7 million, down from $408.9 million in the previous year. The company faced difficulties in processing orders after losing 70% of its warehouse capacity in March due to closures related to the coronavirus. However, Stitch Fix is determined to overcome this backlog and aims to eliminate it by the end of June.

In this quarter, the platform’s active client base expanded by 9% and reached 3.4 million, with net revenue per active client increasing by 6% to $498. Despite this, the company reported a net loss of $33.9 million, or $0.33 per diluted share, compared to an income of $7.0 million, or $0.07 per diluted share, in the same period last year. This disappointing result was not in line with analyst predictions, who had estimated a loss of $0.15 per share on revenue of $418.2 million.

Despite these challenges, Katrina Lake, the founder and CEO of Stitch Fix, remains positive about the company’s performance. She emphasizes the company’s unique business model and strong balance sheet, which she believes will enable continued success in the evolving retail industry. Stitch Fix aims to achieve positive growth in the fourth quarter, following a period in which the broader apparel and accessories market experienced an 80% decline in sales.

Stitch Fix has achieved a net revenue total of $1.27 billion year to date, an 11% increase compared to the same period last year. However, the company also reported a net loss of $22.7 million, or $0.22 per diluted share, contrasting with an income of $29.7 million, or $0.29 per diluted share, in the previous year.

To cut costs, Stitch Fix recently announced a layoff of around 1,400 employees in California. The company plans to invest in lower-cost locations such as Dallas, Minneapolis, and Austin, where they anticipate hiring approximately 2,000 new stylists. Stitch Fix has not provided financial guidance for the fourth quarter or the full fiscal year of 2020.

Despite the setbacks caused by the Covid-19 pandemic, Stitch Fix remains hopeful about the future. The company believes its unique position and business model will enable it to excel in the retail industry in the coming months. With a plan to clear its order backlog, increase its active client base, and adapt to lower-cost locations, Stitch Fix is poised to recover and grow in the upcoming quarters.

Useful links:
Stitch Fix Official Website
Stitch Fix Layoff News