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As Stitch Fix surges 45%, 5 things the apparel industry can learn from its blowout earnings report

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Source: Stitch Fix

In a tumultuous year for the apparel industry, Stitch Fix is showing that consumers still have an appetite to buy clothing — if they have a little help along the way.

The online styling service on Monday reported a surprise quarterly profit and year-over-year sales growth of 10% as new and existing customers flocked to its site to order new outfits and accessories during the Covid pandemic. The shares were up 40% on Tuesday afternoon.

Building on the momentum, it said it expects revenue to grow by 20% to 25% in fiscal 2021, amounting to $2.05 billion to $2.14 billion, topping Street estimates for $2.01 billion.

The stellar results and upbeat outlook come as dozens of apparel retailers — including J.Crew, Brooks Brothers, Lucky Brand, J.C. Penney and Francesca's — have filed for bankruptcy protection this year. While many were already struggling before the pandemic, the industry has been hurt especially hard by the effects of the health crisis. Fewer people are getting dressed up to leave the house. Thousands of clothing stores in malls are closing, as one result of the hardships.

Stitch Fix, which doesn't own stores, sees an opportunity to steal market share, as more and more of consumers' dollars are being spent online. Post-pandemic, it believes people will be eager to get dressed up again. Its latest results show the company is in a bit of a sweet spot, and on the right track to achieving that goal. The report also tells more about the state of the apparel industry heading into 2021.

Here are 5 things we learned from Stitch Fix's latest earnings results.

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