Stitch Fix Announces Second Quarter of Fiscal Year 2024 Financial Results
March 4, 2024
“The original
During the first quarter of fiscal 2024, we ceased operations of our
Second Quarter Fiscal 2024 Key Metrics and Financial Highlights
- Net revenue from continuing operations of
$330.4 million , a decrease of 18% year-over-year. - Active clients from continuing operations of 2,805,000, a decrease of 184,000, or 6%, quarter-over-quarter; and a decrease of 572,000, or 17%, year-over-year.
- Net revenue per active client (“RPAC”) from continuing operations of
$515 , a decrease of 3% year-over-year. - Gross margin of 43.4%, an increase of 250 basis points year-over-year, which reflects improved inventory health and transportation leverage.
- Net loss from continuing operations of
$35.0 million and diluted loss per share from continuing operations of$0.29 . - Adjusted EBITDA from continuing operations of
$4.4 million , which reflects continued cost management discipline. - Free cash flow from continuing operations was negative
$26.1 million in the second fiscal quarter, as expected, due to the timing of receipts related to our inventory purchases in the first fiscal quarter. - We ended the quarter with
$229.8 million of cash, cash equivalents, and investments attributable to continuing operations; and no bank debt.
Financial Outlook
Our financial outlook for our continuing operations for the third quarter of fiscal 2024 ending
| Q3 2024 | ||
| Net Revenue from Continuing Operations | (22)% - (19)% YoY | |
| Adjusted EBITDA from Continuing Operations | (2)% - 0% margin | |
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 from Continuing Operations |
(19)% - (17)% YoY | |
| (20)% - (18)% YoY adjusted to a 52-week period (1) |
||
| Adjusted EBITDA from Continuing Operations | 1% - 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.
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/BI1f5c9a29143e4a63b5771ac3029eab2d
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 third 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; our ability to strengthen the foundation of our business across all disciplines and embed retail best practices across the enterprise; that the re-imagining the client experience will help us attract and engage the right customers, drive higher lifetime value, and will lead to long-term growth; that our initiatives to strengthen the foundation of our business will provide the opportunity for us to realize additional efficiencies in our operations; our ability to further strengthen our private brand portfolio by making enhancements to our existing brands and introducing new ones; our ability to introduce a new onboarding experience that will be a more dynamic and interactive way for clients to begin their relationship with us; our ability to deepen engagement by developing new ways to inspire and empower clients and by enabling more direct ways to connect with our stylists; our ability to achieve our plans to significantly evolve the
Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except per share amounts) |
||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 227,503 | $ | 239,437 | ||||
| Short-term investments | 2,321 | 18,161 | ||||||
| Inventory, net | 126,033 | 130,548 | ||||||
| Prepaid expenses and other current assets | 21,161 | 27,692 | ||||||
| Current assets, discontinued operations | 953 | 9,623 | ||||||
| Total current assets | 377,971 | 425,461 | ||||||
| Property and equipment, net | 63,522 | 79,757 | ||||||
| Operating lease right-of-use assets | 93,616 | 104,533 | ||||||
| Other long-term assets | 2,909 | 2,681 | ||||||
| Long-term assets, discontinued operations | 298 | 2,046 | ||||||
| Total assets | $ | 538,316 | $ | 614,478 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 74,303 | $ | 96,730 | ||||
| Operating lease liabilities | 27,086 | 28,210 | ||||||
| Accrued liabilities | 75,694 | 69,893 | ||||||
| Gift card liability | 11,357 | 10,328 | ||||||
| Deferred revenue | 9,765 | 11,366 | ||||||
| Other current liabilities | 9,154 | 8,802 | ||||||
| Current liabilities, discontinued operations | 2,062 | 12,782 | ||||||
| Total current liabilities | 209,421 | 238,111 | ||||||
| Operating lease liabilities, net of current portion | 111,936 | 125,418 | ||||||
| Other long-term liabilities | 3,688 | 3,639 | ||||||
| Total liabilities | 325,045 | 367,168 | ||||||
| Stockholders’ equity: | ||||||||
| Class A common stock, |
1 | 1 | ||||||
| Class B common stock, |
1 | 1 | ||||||
| Additional paid-in capital | 653,170 | 615,236 | ||||||
| Accumulated other comprehensive income (loss) | (432 | ) | 527 | |||||
| Accumulated deficit | (409,427 | ) | (338,413 | ) | ||||
| (30,042 | ) | (30,042 | ) | |||||
| Total stockholders’ equity | 213,271 | 247,310 | ||||||
| Total liabilities and stockholders’ equity | $ | 538,316 | $ | 614,478 | ||||
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (In thousands, except share and per share amounts) |
||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| Revenue, net | $ | 330,402 | $ | 400,622 | $ | 695,187 | $ | 844,363 | ||||||||
| Cost of goods sold | 186,922 | 236,866 | 392,604 | 493,297 | ||||||||||||
| Gross profit | 143,480 | 163,756 | 302,583 | 351,066 | ||||||||||||
| Gross margin | 43.4 | % | 40.9 | % | 43.5 | % | 41.6 | % | ||||||||
| Selling, general, and administrative expenses | 181,518 | 227,038 | 369,282 | 462,884 | ||||||||||||
| Operating loss | (38,038 | ) | (63,282 | ) | (66,699 | ) | (111,818 | ) | ||||||||
| Interest income | 2,673 | 632 | 4,921 | 1,380 | ||||||||||||
| Other income (expense), net | 578 | (663 | ) | 989 | (840 | ) | ||||||||||
| Loss before income taxes | (34,787 | ) | (63,313 | ) | (60,789 | ) | (111,278 | ) | ||||||||
| Provision for income taxes | 169 | 131 | 338 | 318 | ||||||||||||
| Net loss from continuing operations | (34,956 | ) | (63,444 | ) | (61,127 | ) | (111,596 | ) | ||||||||
| Net loss from discontinued operations, net of income taxes | (568 | ) | (2,127 | ) | (9,887 | ) | (9,893 | ) | ||||||||
| Net loss | $ | (35,524 | ) | $ | (65,571 | ) | $ | (71,014 | ) | $ | (121,489 | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in unrealized loss on available-for-sale securities, net of tax | 49 | 941 | 170 | 755 | ||||||||||||
| Foreign currency translation | — | 2,501 | (1,129 | ) | 889 | |||||||||||
| Total other comprehensive income (loss), net of tax | 49 | 3,442 | (959 | ) | 1,644 | |||||||||||
| Comprehensive loss | $ | (35,475 | ) | $ | (62,129 | ) | $ | (71,973 | ) | $ | (119,845 | ) | ||||
| Loss per share from continuing operations, attributable to common stockholders: | ||||||||||||||||
| Basic | $ | (0.29 | ) | $ | (0.56 | ) | $ | (0.52 | ) | $ | (0.99 | ) | ||||
| Diluted | $ | (0.29 | ) | $ | (0.56 | ) | $ | (0.52 | ) | $ | (0.99 | ) | ||||
| Loss per share from discontinued operations, attributable to common stockholders: | ||||||||||||||||
| Basic | $ | 0.00 | $ | (0.02 | ) | $ | (0.08 | ) | $ | (0.09 | ) | |||||
| Diluted | $ | 0.00 | $ | (0.02 | ) | $ | (0.08 | ) | $ | (0.09 | ) | |||||
| Loss per share attributable to common stockholders: | ||||||||||||||||
| Basic | $ | (0.30 | ) | $ | (0.58 | ) | $ | (0.60 | ) | $ | (1.07 | ) | ||||
| Diluted | $ | (0.30 | ) | $ | (0.58 | ) | $ | (0.60 | ) | $ | (1.07 | ) | ||||
| Weighted-average shares used to compute loss per share attributable to common stockholders: | ||||||||||||||||
| Basic | 119,045,026 | 113,928,081 | 117,845,093 | 113,143,991 | ||||||||||||
| Diluted | 119,045,026 | 113,928,081 | 117,845,093 | 113,143,991 | ||||||||||||
Condensed Consolidated Statements of Cash Flow (Unaudited) (In thousands) |
||||||||
| For the Six Months Ended | ||||||||
| Cash Flows from Operating Activities from Continuing Operations | ||||||||
| Net loss from continuing operations | $ | (61,127 | ) | $ | (111,596 | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities from continuing operations: | ||||||||
| Change in inventory reserves | (5,137 | ) | (6,170 | ) | ||||
| Stock-based compensation expense | 40,967 | 56,391 | ||||||
| Depreciation and amortization | 26,593 | 21,464 | ||||||
| Asset impairment | — | 16,874 | ||||||
| Other | (1,353 | ) | 1,067 | |||||
| Change in operating assets and liabilities: | ||||||||
| Inventory | 9,652 | 44,912 | ||||||
| Prepaid expenses and other assets | 6,678 | 7,279 | ||||||
| Income tax receivables | — | 26,640 | ||||||
| Operating lease right-of-use assets and liabilities | (3,689 | ) | 39 | |||||
| Accounts payable | (22,463 | ) | (36,328 | ) | ||||
| Accrued liabilities | 8,315 | (3,306 | ) | |||||
| Deferred revenue | (1,601 | ) | (999 | ) | ||||
| Gift card liability | 1,028 | 1,934 | ||||||
| Other liabilities | 401 | 2,582 | ||||||
| Net cash provided by (used in) operating activities from continuing operations | (1,736 | ) | 20,783 | |||||
| Cash Flows from Investing Activities from Continuing Operations | ||||||||
| Proceeds from sale of property and equipment | 21 | — | ||||||
| Purchases of property and equipment | (7,427 | ) | (11,398 | ) | ||||
| Purchases of securities available-for-sale | — | (258 | ) | |||||
| Sales of securities available-for-sale | — | 4,145 | ||||||
| Maturities of securities available-for-sale | 15,970 | 11,210 | ||||||
| Net cash provided by investing activities from continuing operations | 8,564 | 3,699 | ||||||
| Cash Flows from Financing Activities from Continuing Operations | ||||||||
| Proceeds from the exercise of stock options, net | — | 154 | ||||||
| Payments for tax withholdings related to vesting of restricted stock units | (8,342 | ) | (6,794 | ) | ||||
| Other | (388 | ) | (117 | ) | ||||
| Net cash used in financing activities from continuing operations | (8,730 | ) | (6,757 | ) | ||||
| Net increase (decrease) in cash and cash equivalents from continuing operations | (1,902 | ) | 17,725 | |||||
| Cash Flows from Discontinued Operations | ||||||||
| Net cash used in operating activities from discontinued operations | (9,311 | ) | (9,723 | ) | ||||
| Net cash used in investing activities from discontinued operations | — | (489 | ) | |||||
| Net cash used in financing activities from discontinued operations | (171 | ) | (175 | ) | ||||
| Net decrease in cash and cash equivalents from discontinued operations | (9,482 | ) | (10,387 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (550 | ) | 706 | |||||
| Net increase (decrease) in cash and cash equivalents | (11,934 | ) | 8,044 | |||||
| Cash and cash equivalents at beginning of period | 239,437 | 130,935 | ||||||
| Cash and cash equivalents at end of period | $ | 227,503 | $ | 138,979 | ||||
| Supplemental Disclosure | ||||||||
| Cash paid for income taxes | $ | 1,233 | $ | 178 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 897 | $ | 1,430 | ||||
| Capitalized stock-based compensation | $ | 2,568 | $ | 3,409 | ||||
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 Six Months Ended | |||||||||||||||
| (in thousands) | ||||||||||||||||
| Net loss from continuing operations | $ | (34,956 | ) | $ | (63,444 | ) | $ | (61,127 | ) | $ | (111,596 | ) | ||||
| Add (deduct): | ||||||||||||||||
| Interest income | (2,673 | ) | (632 | ) | (4,921 | ) | (1,380 | ) | ||||||||
| Other (income) expense, net | (578 | ) | 663 | (989 | ) | 840 | ||||||||||
| Provision for income taxes | 169 | 131 | 338 | 318 | ||||||||||||
| Depreciation and amortization (1) | 9,401 | 9,559 | 18,840 | 19,088 | ||||||||||||
| Stock-based compensation expense | 21,065 | 25,262 | 40,967 | 56,391 | ||||||||||||
| Restructuring and other one-time costs (2) | 12,019 | 34,742 | 19,969 | 40,897 | ||||||||||||
| Adjusted EBITDA | $ | 4,447 | $ | 6,281 | $ | 13,077 | $ | 4,558 | ||||||||
(1) For the three and six months ended
(2) For the three and six months ended
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 Six Months Ended | |||||||||||||||
| (in thousands) | ||||||||||||||||
| Free Cash Flow reconciliation: | ||||||||||||||||
| Net cash provided by (used in) operating activities from continuing operations | $ | (22,295 | ) | $ | 22,357 | $ | (1,736 | ) | $ | 20,783 | ||||||
| Deduct: | ||||||||||||||||
| Purchases of property and equipment from continuing operations | (3,774 | ) | (5,510 | ) | (7,427 | ) | (11,398 | ) | ||||||||
| Free Cash Flow | $ | (26,069 | ) | $ | 16,847 | $ | (9,163 | ) | $ | 9,385 | ||||||
| Net cash provided by (used in) investing activities from continuing operations | $ | (624 | ) | $ | 5,700 | $ | 8,564 | $ | 3,699 | |||||||
| Net cash used in financing activities from continuing operations | $ | (4,622 | ) | $ | (2,976 | ) | $ | (8,730 | ) | $ | (6,757 | ) | ||||
Operating Metrics
| (in thousands) | ||||||||||
| Active clients | 2,805 | 2,989 | 3,121 | 3,288 | 3,377 |
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
Supplemental Unaudited Financial Information
During the first quarter of fiscal 2024, we ceased operations of our
Supplemental Continuing Operations Statement of Operations
| For the Three Months Ended | ||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Revenue, net | $ | 330,402 | $ | 364,785 | $ | 364,739 | $ | 383,419 | $ | 400,622 | $ | 443,741 | ||||||||||||
| Cost of goods sold | 186,922 | 205,682 | 203,867 | 219,744 | 236,866 | 256,431 | ||||||||||||||||||
| Gross profit | 143,480 | 159,103 | 160,872 | 163,675 | 163,756 | 187,310 | ||||||||||||||||||
| Selling, general, and administrative expenses | 181,518 | 187,764 | 183,815 | 184,195 | 227,038 | 235,846 | ||||||||||||||||||
| Operating loss | (38,038 | ) | (28,661 | ) | (22,943 | ) | (20,520 | ) | (63,282 | ) | (48,536 | ) | ||||||||||||
| Interest income | 2,673 | 2,248 | 2,027 | 2,434 | 632 | 748 | ||||||||||||||||||
| Other income (expense), net | 578 | 411 | 1,018 | (203 | ) | (663 | ) | (177 | ) | |||||||||||||||
| Loss before income taxes | (34,787 | ) | (26,002 | ) | (19,898 | ) | (18,289 | ) | (63,313 | ) | (47,965 | ) | ||||||||||||
| Provision for income taxes | 169 | 169 | 421 | 132 | 131 | 187 | ||||||||||||||||||
| Net loss from continuing operations | (34,956 | ) | (26,171 | ) | (20,319 | ) | (18,421 | ) | (63,444 | ) | (48,152 | ) | ||||||||||||
| Diluted loss per share from continuing operations, attributable to common stockholders: | $ | (0.29 | ) | $ | (0.22 | ) | $ | (0.17 | ) | $ | (0.16 | ) | $ | (0.56 | ) | $ | (0.43 | ) | ||||||
| Diluted weighted-average shares used to compute loss per share attributable to common stockholders: | 119,045,026 | 116,645,160 | 117,006,653 | 115,445,285 | 113,928,081 | 112,359,901 | ||||||||||||||||||
Supplemental Adjusted EBITDA
| For the Three Months Ended | ||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Net loss from continuing operations | $ | (34,956 | ) | $ | (26,171 | ) | $ | (20,319 | ) | $ | (18,421 | ) | $ | (63,444 | ) | $ | (48,152 | ) | ||||||
| Add (deduct): | ||||||||||||||||||||||||
| Interest income | (2,673 | ) | (2,248 | ) | (2,027 | ) | (2,434 | ) | (632 | ) | (748 | ) | ||||||||||||
| Other income (expense), net | (578 | ) | (411 | ) | (1,018 | ) | 203 | 663 | 177 | |||||||||||||||
| Provision for income taxes | 169 | 169 | 421 | 132 | 131 | 187 | ||||||||||||||||||
| Depreciation and amortization (1) | 9,401 | 9,439 | 9,633 | 9,654 | 9,559 | 9,529 | ||||||||||||||||||
| Stock-based compensation | 21,065 | 19,902 | 23,649 | 22,032 | 25,262 | 31,129 | ||||||||||||||||||
| Restructuring and other one-time costs | 12,019 | 7,950 | 2,765 | 2,080 | 34,742 | 6,155 | ||||||||||||||||||
| Adjusted EBITDA | $ | 4,447 | $ | 8,630 | $ | 13,104 | $ | 13,246 | $ | 6,281 | $ | (1,723 | ) | |||||||||||
(1) Depreciation and amortization excluded amounts reflected in “Restructuring and other one-time costs.”
| IR Contact: ir@stitchfix.com |
PR Contact: media@stitchfix.com |
Source: Stitch Fix, Inc.