Why Stitch Fix Inc (NASDAQ: SFIX) stock is going gangbusters today

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Stitch Fix Inc (NASDAQ: SFIX) stock rose over 9.1% on 10th December, 2019 (As of 11:17 am GMT-5; Source: Google finance) after the company posted better than expected results for the first quarter of FY 20. Stitch Fix has reported a loss of $178,000, compared to net income of $10.7 million, in the year-ago period. SFIX grew the active clients to 3.4 million, which is an increase of 17% year over year. On the back of data science, the company grew the revenue per active client by 10% year over year, which is the sixth consecutive quarter of growth. In Q1’20, the capital expenditures had totaled $7.5 million, or 1.7% of net revenue, and the company had generated free cash flow of $20 million.

SFIX in the first quarter of FY 20 has reported the adjusted earnings per share of 0 cents, beating the analysts’ estimates for the adjusted loss per share of 6 cents, according to Analysts surveyed by FactSet. The company had reported the adjusted revenue growth of 21 percent to $444.8 million in the first quarter of FY 20, beating the analysts’ estimates for revenue of $441.1 million. The company has also delivered adjusted EBITDA of $5.1 million and adjusted EBITDA ex. SBC of $17.3 million. Q1’20 gross margin has increased by 20 basis points 45.3%, compared to 45.1% in Q1’19. This was due to the improvements in merchandise costs and operational efficiencies, which was partially offset by an increase in inventory reserves.

On the other hand, SFIX announced that Elizabeth Spaulding is joining the company as President starting in January. Spaulding is Global Head and founder of Bain & Company’s Digital practice, which is a partner at the global consulting firm and serves on its board of directors. At Stitch Fix, Spaulding will lead initiatives and innovations that focus on driving the next phase of Stitch Fix’s growth, including direct-buy capabilities and the company’s international expansion efforts. Meanwhile, CFO Paul Yee has decided to leave the company to pursue other career opportunities. Mike Smith will step in to lead the finance team as the company searches for replacement.

Additionally, in Q2’19, the company had announced the implementation of an inventory optimization algorithm that helps allocate inventory more effectively across the U.S. Women’s clients. As of the end of Q1’20, the inventory optimization algorithm contributed to an increase in average items purchased per Fix, bolstering the gross margins.

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