Stitch Fix (SFIX) Stock Plummets 15% After Announcing Layoffs

  • Stitch Fix (SFIX) stock is sharply lower today on news that the company plans to layoff 15% of its workforce.
  • News of the job cuts comes as Stitch Fix issues disappointing earnings for its fiscal third quarter.
  • SFIX stock is now down more than 90% this year and nearing penny stock territory.
SFIX stock - Stitch Fix (SFIX) Stock Plummets 15% After Announcing Layoffs

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Stitch Fix (NASDAQ:SFIX) stock is down nearly 15% today after the data science company reported poor financial results and announced that it will lay off 4% of its workforce.

The San Francisco-based company that uses algorithms and data science to personalize clothing items for consumers based on their size, budget and personal style issued earnings for its fiscal third quarter that missed analyst expectations by a wide margin, including a widening net loss. However, it is news that Stitch Fix plans to layoff 15% of its salaried staff, equivalent to about 330 positions and 4% of the company’s total workforce, that appears to be generating headlines and pushing SFIX stock lower today.

What Happened

Stitch Fix said the eliminated jobs will be concentrated in corporate roles and leadership positions, and that the headcount reduction is being undertaken to trim expenses amid persistent inflation and waning consumer demand for its products and services. The company said the job cuts will save it $40 million to $60 million this year. It also anticipates incurring restructuring charges of roughly $15 million to $20 million, which will be reported in its next quarterly results.

The job losses were announced along with Stitch Fix’s latest earnings, which showed the company had a net loss for its fiscal third quarter of $78 million, or 72 cents a share, compared with a loss of $18.8 million, or 18 cents a share, in the year earlier. The company’s revenue fell 8% to $492.9 million in the quarter from $535.6 million a year earlier. Stitch Fix also provided a disappointing forecast for the current quarter. The forecast calls for a revenue of $485 million to $495 million, which would represent a 15% decline from a year earlier.

Why It Matters

Stitch Fix, whose business is entirely online, is another technology company that exceled during the pandemic only to see its fortunes reverse this year as investors seek refuge in profitable, blue-chip stocks. The company benefitted during the Covid-19 crisis as consumers shifted their spending online. SFIX stock rose more than 600% between March 2020 and January 2021, hitting an all-time high of $96.92 a share. But since then, the share price has fallen 93% to now trades at $6.40. The company’s market capitalization now sits below $1 billion.

Stitch Fix’s launch of a direct-buy option known as “Freestyle” didn’t go over well with consumers. A growing numbers of shoppers are shifting back to spending their money in-store as pandemic restrictions are lifted for good. In addition to shifting consumer habits, Stitch Fix has also been struggling with higher expenses on everything from its supply chain and marketing to labor. News of the layoffs at the company come three months after Stitch Fix slashed its revenue guidance for the year and withdrew its earnings forecast.

What’s Next for SFIX Stock

SFIX stock looks to be another casualty as investors move their capital out of fast growing but unprofitable technology companies and into more stable blue-chip and cyclical securities. The mounting losses and staff cuts are further shaking confidence in Stitch Fix and pushing its share price to new lows. Already down more than 90% this year, the stock looks likely to enter penny stock territory in the near future. Investors should proceed with caution regarding SFIX stock.

On the date of publication, Joel Baglole 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.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


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