October 2, 2018 / 6:43 PM / 2 months ago

Stitch Fix loses third of value after mixed quarterly report

SAN FRANCISCO (Reuters) - Shares of Stitch Fix (SFIX.O) tumbled 34 percent on Tuesday and were heading for their worst session since their Wall Street debut after the personal online clothing service showed mixed quarterly results.

With a market capitalization of just $3 billion, the San Francisco company was the fourth most traded stock on the Nasdaq.

Stitch Fix late on Monday reported a 23-percent jump in quarterly revenue to $318 million, but that was not enough to satisfy investors who have watched its shares as much as triple since their initial public offer last November.

(For graphic on Stitch Fix share moves, click reut.rs/2QklLsM)

Stitch Fix, which mails customers apparel based on their preferences, grew its active clients by 25 percent to 2.7 million in the fiscal fourth quarter, which ended in July, and it announced plans to expand into the United Kingdom.

For fiscal 2019, Stitch Fix said it expects net revenue between $1.47 and $1.53 billion, more than analysts expected, and adjusted EBITDA between $20 million and $40 million, the midpoint of which is below the average analyst estimate of $38 million, according to Refinitiv data.

Based on the high end of Stitch Fit’s 2019 outlook, its stock is now trading at a relatively expensive 1.9 times expected revenue. That compares to a price/sales ratio of 0.7 for apparel retailer GAP Inc (GPS.N) and 0.4 for meal delivery service Blue Apron Holdings Inc (APRN.N), which has struggled to meet high expectations since debuting on Wall Street in June 2017.

Amazon.com (AMZN.O) recently traded at 3.6 times expected revenue, according to Refinitiv data.

Stitch Fix reported quarterly diluted net income of $18.2 million, or 18 cents a share.

Following its report late on Monday, at least two analysts reduced their price targets for Stitch Fix’s stock, while four raised their targets. Analysts, on average, now expect the shares to reach $37.22, compared to Tuesday’s level below $30.

Reporting by Noel Randewich; Editing by Nick Zieminski

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