Dive Brief:
-
After four years operating in the U.K., Stitch Fix is exploring whether to leave the market in its next fiscal year. This year from the U.K. the company will see $50 million in revenue, about negative $15 million in EBITDA, and about $35 million in SG&A expense, CFO David Aufderhaar told analysts Tuesday.
-
The apparel box e-retailer also said it will close two distribution centers. The company won’t renew its lease in Bethlehem, Pennsylvania, when it comes up this year, and next year will close its Dallas center. That will garner annual savings of $10 million to $15 million, Aufderhaar said.
-
The strategic shifts come as sales continue to fall. Stitch Fix said Q3 net revenue fell 20% year over year to $395 million, as its number of active clients fell 11% to 3.48 million. Net revenue per active client fell 9% to $502. Net loss narrowed to $21.8 million from last year’s $78 million net loss.
Dive Insight:
Stitch Fix did better than many analysts expected, especially when it comes to its bottom line.
So far this fiscal year, the company has achieved $135 million of cost savings, Aufderhaar noted. That’s in part thanks to layoffs and the closure of yet another distribution center earlier this year. The further closures plus exiting the U.K. would drive another $50 million in annualized expense savings, he said.
Shutting down two distribution centers could also help sales and customer retention by providing stylists with more inventory to choose from, interim CEO and founder Katrina Lake told analysts. Because five items are sent to subscription customers in a single box, all must come from the same warehouse.
“This consolidated network will allow us to deliver a better client experience with access to more inventory for a given Fix, while at the same time allowing us to operate with lower, more cash-efficient inventory levels,” Lake told analysts.
Analysts hailed the progress made on profitability, but many also wondered when the e-retailer can improve its sales performance and woo more customers.
“While the company has aggressively adjusted the cost structure in light of the current challenges in the business, the big declines on the top line remain a tough pill to swallow,” Wedbush analysts Tom Nikic and Austin Borina said in emailed comments.
Stitch Fix is still working on shifting back to its core subscription box business, after its more conventional Freestyle direct-buy e-commerce option, unveiled in 2021, confused customers and failed to drive sales. The company’s number of active customers has declined for six straight quarters and is down 17% compared to its prior peaks, Roth MKM analyst David Bellinger said in a Wednesday client note, adding the “customer exodus drags on.”
The company didn’t provide an update to its search for a chief executive. Lake stepped back into the role in January, and said she would serve for about six months.
