Online apparel store Stitch Fix Inc. (SFIX) shares have increased more than 175 percent in the last year. Despite such strong progress, as it is at the beginning of its path, investors can still purchase the company’s shares.
Based on the customer’s interests and features, Stitch Fix sells clothing. As a custom, the business sends a package of clothes of the chosen type instantly. For a certain frequency, some consumers may set up a subscription to purchase goods. Stitch Fix has no immediate rivals because of its unique market model.
Stitch Fix’s sales plummeted during the pandemic for factors outside the influence of the company: factory closures and decreased demand. The market was adversely influenced by social life restrictions, as much of the company’s clothes are meant for public occasions, jobs, and special events. The market for Stitch Fix clothing will rise again, however, when the restrictions are lifted.
The previous success of Stitch Fix indicates that the firm will make profit: The firm made a GAAP profit of $36.9 million in fiscal 2019 and $44.4 million a year ago in the two fiscal years leading up to the pandemic. Stitch Fix is not, however, focused on making profit, but rather on expanding the customer base. Its targeted market is around $400 billion, according to the management of the firm. Stitch Fix is also targeting 20-25 percent long-term sales growth, which means that its earnings can rise over time.
The gross margin of Stitch Fix was usually about 45 percent, which is higher than traditional stores of clothing such as Nordstrom or Gap. This provides the business with more cash to spend in fixed costs that fuel long-term growth. The company is showing good growth as it recovers from the pandemic, attracting 241,000 new customers in the last quarter and taking its number to 3.8 million.
In the long-term, via the direct sales division, Stitch Fix aims to improve the business. Since much of the earnings already come from so-called repairs, that would greatly increase the targeted market. The business would be able to ensure revenue increases if direct transactions align with clients.
Stitch Fix, Inc. (SFIX) was down -4.56% n Monday to settle at $56.04.