Stitch Fix Inc (NASDAQ:SFIX) stock plunges 19.36% (As on March 5, 11:16:11 AM UTC-4, Source: Google Finance) after the company misses topline expectations for the second quarter of FY 24. Net Active clients ended the quarter down 6% compared to last quarter at approximately 2.8 million clients. Revenue per active client ended the quarter at $515, down 3% year-over-year, but up 2% quarter-over-quarter. Gross margin for the quarter was 43.4%, down 20 basis points quarter-over-quarter and up 250 basis points year-over-year, driven by strong product margins, improvement in inventory health, and transportation leverage. Net inventory decreased 22% quarter-over-quarter as expected due to the front-loading of our inventory at the beginning of this fiscal year. The company continues to expect inventory balances to these lower levels for the remainder of fiscal 2024. Advertising was 7% of revenue in the quarter down 19% quarter-over-quarter due to the typical lower seasonal spending around the holidays. Q2 adjusted EBITDA came in at $4.4 million. The free cash flow was negative, $26.1 million in the quarter due to the timing of receipts related to the inventory purchases in Q1. The company still expects to be free cash flow positive for the full year and ended the quarter with $230 million in cash, cash equivalents, and investments and no bank debt.

SFIX in the second quarter of FY 24 has reported the adjusted loss per share of 21 cents, which matches the analysts’ estimates for the adjusted loss per share of 21 cents. The company had reported 18 percent decline in the adjusted revenue to $330.4 million in the second quarter of FY 24, missing the analysts’ estimates for revenue of $331.7 million.

For the current quarter ending in April, Stitch Fix said it expects revenue in the range of $300 million to $310 million. The company expect Q3 adjusted EBITDA will be between negative $5 million and breakeven. In the back half of the year, the company expects gross margin to increase to between 44% and 45% as a result of the ongoing efforts to drive improvement in the inventory position and efficiencies in our transportation costs. The company Q3 advertising to be between 8% and 9% of revenue.

The company expects full-year revenue in the range of $1.29 billion to $1.32 billion. The company expects adjusted EBITDA to be between $10 million and $20 million.