Stitch Fix Inc.’s short run as a public company has turned into a roller coaster ride.
Shares of the company fell 11.2 percent to $22 after its first quarterly report, which showed a 25.2 percent gain in sales to $295.6 million. Stitch Fix added 549,000 active users over a year earlier, for a total customer base of 2.4 million.
However, the online styling service’s net income attributed to common stockholders declined 66.8 percent to $1.3 million, or 4 cents a diluted share, while what it described as its “net income and comprehensive income” inched up 1.9 percent to $13.5 million.
Stitch Fix’s earnings before interest, taxes, depreciation and amortization fell to $11.8 million from $28 million, which the company said was planned and tied to its decision to invest in both talent and marketing.
The tech-fashion hybrid went public at $15 a share last month and after a quick gain and sharp fall on its first day, closed modestly ahead of the offer price. Since then, the stock has regained its footing and marched higher.
But investors are fickle and many remain skeptical of the company, which has thus far been a rocket ship, having raised only $42 million in backing before its $120 million IPO.
Stitch Fix uses a mix of artificial intelligence and human stylists to send customers five looks to try on at home. That’s a business model that offers a highly personalized experience for users, but is something that many investors are not used to evaluating.
Founder and chief executive officer Katrina Lake walked analysts through the Stitch Fix model on a conference call and said the company’s customer growth last quarter showed its continuing potential.
While marketing spend effectively helped to boost the company’s customer base in the first quarter, Lake said the firm would lay off some in the current quarter, when marketing is more expensive as other merchants vie for consumer attention.
“This was a good quarter for us on the marketing side and can be a good signal for you in terms of what this team is capable of doing,” Lake said.
Stitch Fix started with women’s and has since moved into men’s, plus sizes and, this summer, contemporary.
The push in contemporary brought in brands such as Steven Alan and Paige, and Lake suggested a greater portion of the company’s opportunity could be on lower-priced goods in the $20 to $50 range.
“One of the benefits that we have at the scale that we’re at now is that we can really in a fine-tuned way understand what the price preferences of our customer are and make sure we’re matching against those,” Lake said.
For the full year, Stitch Fix is looking for revenue growth of 20 to 25 percent and adjusted EBITDA of $40 million to $60 million.