Why Stitch Fix Shares Dropped 36% on Wednesday

“Try Before You Buy” Clothing Mail Order Campaigns Stitch repair (AMENDMENT -38.13%) crashed today, down 36.2% by noon ET after posting a massive missed earnings sell-off.

Before the results began, analysts were already pessimistic, predicting that Stitch Fix would lose $0.19 per share on $318.5 million in quarterly sales. But while the company managed a small sales win, reporting $319.6 million, its earnings were just awful — a loss of $0.30 per share.

Stitch Fix Q4 profits (or losses)

Stitch Fix’s Q4 sales fell 12.4% year over year, while losses rose 25% — and that’s good news.

The bad news is that Stitch Fix’s losses from interrupted operations amounted to just $0.01 per share (less than the loss from the previous year). While the loss from continuing operations, which is the more important number, was $0.29 per share, up more than 70% from a year ago. If this trend continues much longer, Stitch Fix will have no money left lose.

Despite these dire numbers, CEO Matt Baer boasted that Stitch Fix hit “the high end of our guidance, both in terms of revenue and earnings,” which sounds like good news (but investors clearly aren’t buying it).

Are Stitch Fix shares worth selling?

Management’s forecast for the coming year didn’t help. Stitch Fix, in its fiscal first-quarter 2025 earnings forecast, said sales would be between $303 million and $310 million, down 15% to 17% year over year, even worse than the 12% decline in the fourth quarter. For the full fiscal 2025, management is predicting sales will likely decline by 13% to 17%.

And profits? Stitch Fix has not raised any hopes that it will soon become profitable, forecasting only a positive “adjusted EBITDA (earnings before interest, taxes, depreciation and amortization)” (a Very (non-GAAP figure). It also explained that it could not provide guidance on earnings calculated in accordance with generally accepted accounting principles (GAAP) because it “cannot reasonably predict (its) restructuring and other non-recurring costs, other net income (expenses), provisions for income taxes and stock-based compensation expense.”

Investors clearly don’t share this enthusiasm and I can’t blame them.