Stitch Fix Reveals Significant Logistics Disruption, Withdraws Guidance

Stitch Fix also revealed that it has experienced considerable disruption in its logistics function as warehouses have closed for various periods and operated at lower capacity resulting in delays. For instance, SFIX has had to close three of its five facilities at various points due to local directives, though all five facilities are currently open.

“While we anticipated our business would be impacted, we did not have visibility into the extent to which it would disrupt our distribution centers,” said CEO Katrina Lake in a statement.

From a demand standpoint, the most loyal clients have been resilient, and the company has seen a relative low number of auto-ship cancellations. However, conversion in new and infrequent clients has been more challenging over the last couple of weeks.

According to Stifel Nicolaus analyst Scott Devitt, Stitch Fix is well positioned to manage through the temporary disruption given its strong balance sheet, $397mm in cash and investments, no long-term debt, and positive free cash flow.

Although Stitch Fix did not provide any specific quarter-to-date numbers as part of its update, Devitt reduced his price target to $24 from $26. “We are reducing our F3Q:20 revenue growth estimate from 15% to 2% and reducing our FQ4:20 growth estimate from 7% to -5%. We are reducing our FY:21 revenue estimate by 5%” he explained.

However the analyst concluded on a positive note: “We do expect Stitch Fix to emerge from this unfortunate period in a favorable position relative to competing apparel platforms/retailers. The company has the platform strength and flexibility to effectively manage through the current period.”

Overall, analysts have a Moderate Buy consensus on the stock, according to TipRanks. That comes with a $20 average analyst price target (46% upside potential). (See Stitch Fix’s stock analysis on TipRanks)

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