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Stitch Fixes a Beat on Revenue, but Dive Shares on Falling Forecasts – WWD

One thing became clear in RepairsTuesday earnings call: For fashion ecommerce and a data-driven fashion styling service, its direct-buying feature has become a lifesaver for businesses — and maybe a bit like an albatross.

For the first fiscal quarter of 2022, ending October, Repairs revenue beat analysts’ expectations from $571 million to $581 million, up 19% year-over-year. Adjusted earnings of $38 million gave Stitch Fix a gross margin of 47%, marking an all-time high.

But that wasn’t enough to boost the stock price. When the company’s revenue forecast for the fiscal year fell short of analysts’ expectations, the stock fell 17% in after-hours trading.

Stitch Fix has been beset by many of the same issues plaguing other retailers, such as supply chain constraints and changes to iPhone privacy, making it harder to track users.

But there are other challenges specific to this business.

While the freelance direct-buying service drove more sales during this period, businesses still have a lot of work to do to explain the service to consumers. According to chief executive officer Elizabeth Spaulding, the traction on Freestyle is strongest among current “Fix” subscribers – which is problematic, as direct buying is supposed to boost business registrations and new data feed.

Meanwhile, 4.18 million active customers may be up 11% from last year, but it still doesn’t meet the 4.23 million analysts want to see, raising worries that Stitch Fix has met right a wall for growth.

Spaulding admitted: “Our sequential net customer additions were low this quarter. “We are in the early stages of this learning journey, and as a result of testing in the first quarter, we have seen a lower fixed conversion rate than we expected.”

But the company considers this a “transition period,” or the learning curve, to attract customers, and is delving into how to start a new business. So with that, Spaulding considers this problem and the complexities of the supply chain only temporary.

Freestyle marks an evolution similar to Stitch Fix 2.0, she says, and that brings significant learning and experimentation with it. In other words, it’s just growing pain.

“We may experience short-term effects of cannibalism [between Freestyle and Fix]. We will be implementing new systems and we are building new workflows,” she said.

To address that, the company set out to address the “paradox of choice” in introducing both services to shoppers.

“For some of our customers, they may have very high intentions – they just want the Fix. And you know, I think we admit during the rollout we might be distracting some of those customers with shopping and Freestyle, when in reality they just want to have the assistance of a stylist,” she added. “So that’s an area of ​​an opportunity and we’ve made some adjustments to that.”

Elsewhere, the company seems to be doing better. The Fix Preview feature, which allows subscribers to check on upcoming shipments, is now rolling out across the US and UK and driving growth in the Repair business. Sales for women and children in the UK market have practically doubled compared to the same period last year.

There’s even some good news with the much-discussed Freestyle feature, which has helped drive sales in categories that weren’t previously represented in the Fix, such as shoes, dresses, outerwear , accessories and nightwear and sunglasses, Spaulding noted.

That amounts to about $90 billion in the U.S. women’s market, she added, “demonstrating the opportunity ahead of us.”

But it’s clear that there’s still a lot to learn for the company between now and then – mainly how to attract the right consumers with the right service without confusing the message or confusing the audience. everyone. Investors, for one, hope it proves to be a quick study.

https://wwd.com/business-news/technology/stitch-fix-revenue-q1-2022-1235012095/ Stitch Fixes a Beat on Revenue, but Dive Shares on Falling Forecasts – WWD

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