Stitch Fix Inc.'s third-quarter earnings report had investors upbeat about the prospects for a comeback in styling services.
Stitch Fix shares rose 22.8 percent to $3.28 in after-hours trading as the company showed signs of recovery despite continuing to report declining sales and a bottom line loss.
Net loss was $21.3 million, slightly better than a loss of $21.8 million a year ago, but the company said adjusted earnings before interest, taxes, depreciation and amortization was $6.7 million, reflecting “continued cost management discipline.”
For the three months ended April 27, the styling platform's net revenue reached $322.7 million, down 16% from $383.4 million last year but beating analysts' expectations of $306.1 million, according to Yahoo Finance.
Stitch Fix's active customers fell 6% to 2.633 million, a drop of 172,000 customers, but profit per customer increased 2% to $525.
As a result, the company raised its full-year revenue forecast to $1.33 billion to $1.34 billion, instead of the previous forecast of $1.29 billion to $1.32 billion.
“Third-quarter revenue and adjusted EBITDA exceeded expectations, which we believe is a sign that our transformation efforts are starting to pay off,” Chief Executive Matt Baer said in a statement. “While we are still in the early stages, we are confident that our strategy focused on strengthening our fundamentals and reimagining the customer experience puts us on the right path to deliver sustainable, profitable growth in the future.”
The company has embarked on an effort to stabilize its operations over the past year, making a number of changes, including Baer and Tony Bakos, formerly of Amazon Fashion, who joined the company last year to run product and technology, and Loretta Choi stepping down from her top merchandising and customer service role in May.
The company has also withdrawn from the UK market, with the effects felt in the second quarter, while stylists are working under increasing pressure following multiple rounds of layoffs in March that capped full-time work.
The company said some of these measures were due to cost-cutting measures, while others were implemented in an effort to run a leaner, more efficient operation.
Whether this works in the long term remains to be seen.
Stitch Fix's transformation is still a work in progress, but investors see the platform's growth potential starting to come to fruition.