Ken Stitch Fix was up 12% this week

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what happened

share of Sew Fix (Sfix -2.28%) They jumped 12.6% this week compared to where they closed last Friday, according to data from S&P Global Market IntelligenceAfter the online clothing subscription service received a rating upgrade from Wall Street

last friday, Wells Fargo (WFC 1.01%) Analyst Ike Boruchow upgraded Stitch Fix from underweight to equal weight and set a $4 price target. That would represent a 14% gain over where the stock was trading just before the announcement. Stitch Fix shares are trading at $4.14 per share today at 11:06 am ET.

Excited man opening a box.

Image source: Getty Images.

so what

While the analyst upgraded his outlook, his outlook for the subscription-based business appeared to be a backhanded compliment at best. Barucho noted that Stitch Fix is ​​coming off its worst year since the global financial crisis and has little catalyst for growth in 2023. Maybe he was thinking that things are so bad that this year might look better in comparison and the only way to do business. The vehicle was up.

Barucho also believed the best investors could hope for was an “okay” performance for the company’s upcoming fourth-quarter results, and the first quarter wasn’t looking particularly favorable either. Makes you wonder why he didn’t keep his previous rating untouched

The problems plaguing Stitch Fix are similar to those facing the rest of the retail industry: consumers watch where they spend their money due to high inflation and high energy costs. The difficulties are expected to carry over into the new year, and Stitch Fix is ​​forecasting a revenue decline of between 20% and 22% this quarter.

what now

Last week, Stitch Fix announced it was cutting 20% ​​of its payroll jobs, the second round of layoffs in just a few months, and that the CEO was stepping down. Founder Katrina Lake returns as interim CEO.

A subscription-box service like Stitch Fix isn’t easy to manage when customers are pinched. Not only does it have to sustain interest over time, but a redundant service is one of the first things consumers budget for when choosing between food or fuel and fun extras.

All subscription services are running roughshod over it, too blue apron (APRN 1.61%)which provides meal kits and Barkbox (Bark 2.03%), which focuses on dog toys and treats. And Stitch Fix hasn’t done much to help itself by confusing customers with its new Freestyle service, which allows them to buy clothes directly from the site, thus undermining the subscription side of its business.

Shares of Stitch Fix have lost nearly 80% of their value since their high point in the past year.

Wells Fargo is an advertising partner of The Ascent, a Motley Fool company Rich Dupre has no positions in any of the stocks mentioned. The Motley Fool has verses and recommends Stitch Fix. Motley Fool has a revealing policy.


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