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Coronavirus Rampage Continues: Stitch Fix Calls Off Guidance

Zacks Equity Research

The ill impacts of the novel coronavirus have been amplifying, ruthlessly claiming lives and roiling the economy worldwide. Unfortunately, this has also been impacting several companies in the United States at large, with the retail sector suffering the worst hit. Retailers have been taking various measures like closing stores or trimming job hours or permitting employees to work remotely as well as reinforcing financial positions to address challenges tied to the pandemic. A host of players are also pulling their earlier-issued guidance, as they are unable to ascertain COVID-19 impacts on their costs and revenues. Renowned online personal styling service retailer, Stitch Fix, Inc. SFIX, also followed the suit.

Recently, the company withdrew its third quarter and fiscal 2020 guidance, which it had issued last month. At its second-quarter conference call, management had projected net revenues of $1.81-$1.84 billion and adjusted EBITDA of $0-$10 million for fiscal 2020. Further, it anticipated adjusted EBITDA, excluding stock based compensation, of $75-$85 million, and spending between $100 million and $110 million for the current fiscal year. For third-quarter fiscal 2020, the company projected net revenues of $465-$475 million and adjusted EBITDA of a negative $10 million to a negative $4 million. Further, it anticipated adjusted EBITDA, excluding stock based compensation, of $13-$19 million.

Last month, Stitch Fix informed that it had temporarily shuttered its two distribution centers in South San Francisco, CA, and Bethlehem, PA, in compliance with local regulations. Nonetheless, management cited that it continued to ship products via distribution centers in the United States. It had earlier informed that the company’s other four distribution centers across the United States were operational to cater to its customers.

This Zacks Rank #3 (Hold) company’s shares have lost 41.5% in the past three months compared with the industry’s 46.8% plunge. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Amid the increasing coronavirus jitters, retailers are now adhering to proactive actions to stay financially resilient. L Brands LB, Macy’s M and Tilly's TLYS, to name a few, have taken such measures. Women’s apparel retailer, L Brands, suspended its quarterly dividend payout, cut down on capital expenditures and drew down $950 million from its revolving credit facility. It has also temporarily reduced base compensation by 20% for senior vice president and higher designations as well as deferred annual merit increases and furloughed majority of its store associates effective Apr 5, until further notice.

Renowned omnichannel retailer, Macy’s, has suspended its second-quarter fiscal 2020 dividend payout and lowered capital expenditures for the current fiscal. The company has also chosen to access the $1.5-billion available under its revolving credit facility. Apparel and accessories dealer, Tilly's, has borrowed roughly $23.7 million from its credit facility, shut down the distribution center in Irvine, CA, and furloughed most of its associates. It has also recognized additional cost reductions for fiscal 2020.

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Macy's, Inc. (M) : Free Stock Analysis Report
 
Tilly's, Inc. (TLYS) : Free Stock Analysis Report
 
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Stitch Fix, Inc. (SFIX) : Free Stock Analysis Report
 
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