Stitch Fix Inc (NASDAQ: SFIX) stock rose over 11.85% on June 8th, 2018 pre-market session (Source: Google finance) though the company posted better than expected results for the third quarter 2018.The company has added more subscribers to its personalized online clothing service. SFIX has posted a profit of $9.5 million, in the three months ended April 28th from a loss of $9.6 million, a year earlier.
SFIX in the third quarter of FY 18 has reported the adjusted earnings per share of 9 cents, beating the analysts’ estimates for the adjusted earnings per share of 3 cents according to Thomson Reuters. The company had reported the adjusted revenue growth of 29 percent to $316.7 billion in the third quarter of FY 18, beating the analysts’ estimates for revenue of $306.4 million. In the third quarter, gross margin was 43.6% representing a 60 basis points rise from 43.0% in Q3 of last year. This improvement was largely due to a lower inventory reserve expense, as a result of improvements to the inventory management. This is partially offset by a year-over-year increase in shipping and freight expenses and to a lesser extent
Moreover, as of April 28, 2018, SFIX grew the active client account to 2.7 million, which is an increase of 614,000 and 30% year-over-year. The company drove strong growth across the women’s and men’s categories and looking to feature growth opportunities. The company also said that it would launch Stitch Fix Kids, which is a personalized platform to shop for children’s apparel.
Additionally, SFIX have leveraged SG&A. Advertising expense in the third quarter was $25.2 million or 8.0% of net revenue. This represent a dollar increase from last year’s Q3 spend of $21.3 million but a 70 basis point improvement on a percent of revenue basis year-over-year. The company’s cost of acquisition in Q3 remained stable compared to prior quarters. Other SG&A excluding advertising was 32.6% of net revenue, which is a 10 basis point improvement versus 32.7% in Q3 ’17. This leverage was driven by continued efficiencies in the warehouse and styling teams, and helped to offset the investments in hiring more engineers and data scientists. These results also include $5 million in stock-based compensation.
For its fourth quarter of fiscal 2018, SFIX projects revenue in the range of $310 million to $320 million (midpoint guidance of $315 million), ahead of analysts’ expectations of $314 million.