Kidpik (NASDAQ:PIK), a subscription-based e-commerce company that sells apparel for kids, footwear, and accessories has reported its fourth-quarter and full-year 2021 report a few days ago, at the end of March. Shares of Kidpik have losses of nearly 39% year-to-date so the question to ask now: is PIK stock a buy following earnings? The answer is no, the earnings make PIK stock a sell, here is why.
Earnings are a key catalyst for forming short-term and long-term stock moves. It is suggested to read below the top headlines like “29% Increase in Net Revenue for Full Year 2021.”
Starting with the good news first, Kidpik for Q4 2021 reported a gross margin of 58.7%, a year-over-year. increase of 120 basis points, and an average shipment keep rate of 70.8%, compared to 64.8% in the fourth quarter of 2020. That’s all the good news for the quarter.
Unfortunately, the bad news was more. For start, revenue declined year-over-year 10% to $5.3 million, shipped items declined to 477,000 compared to 589,000 shipped items a year ago and the net loss was $1.9 million or $0.28 loss per share. Back in the fourth quarter of 2020, Kidpik had reported a net loss of $1.29 million and earnings per share (EPS) basic and diluted of -$0.17.
Turning to full-year 2021 financial results, revenue increased to $21.8 million, a year over year increase of 28.9% representing the second consecutive year of sales growth, after the 25.28% growth in 2020. Gross margin expanded to 59.5% versus 58.4% in 2020 and Kidpik seems to have momentum as shipped items increased to 2.2 million items, compared to 1.7 million shipped items in 2020. Furthermore, the average shipment keep rate increased to 69% compared to 66.1% last year. This is very positive but what makes PIK stock a sell now are the following reasons.
It is a money-losing business reporting a net loss of $5.9 million, or $1.05 loss per share. This is a widening loss compared to a net loss of $ 4.6 million and $4.19 million in 2019 and 2020 respectively.
Total expenses grew 37.7% in 2021 and “Loss from operations increased to $5,663,286 for the year ended January 1, 2022, compared to $3,665,811 for the year ended January 2, 2021.”
Another very worrisome factor is that Simply Wall Street states that Kidpik has a severe cash burn problem with less than a year of cash runway based on its current free cash flow.
Kidpik has a cute website and business too but not a cure stock. Avoid the PIK stock as it struggles to turn profitable and is burning cash. There are many other penny stocks to pick now that offer greater and stronger fundamentals and more attractive valuation.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.