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Here's How Stitch Fix (SFIX) Looks Just Ahead of Q1 Earnings

Stitch Fix, Inc. SFIX is scheduled to report first-quarter fiscal 2021 numbers on Dec 7, after market close. The Zacks Consensus Estimate for fiscal first quarter is pegged at a loss of 17 cents, which got narrowed from a loss of 18 cents over the past 30 days. We note that the company recorded break-even earnings in the year-ago quarter. However, the consensus estimate shows improvement from loss per share of 44 cents reported in the preceding quarter.

Moreover, the consensus mark for quarterly revenues stands at $481.2 million, suggesting increase of about 8.2% from the year-ago quarter’s tally.

We note that this online personal-styling service company has delivered a negative earnings surprise of 11.1% in the past four quarters, on average.

Key Factors at Play

Stitch Fix is experiencing immense strength in the direct buy facility, which allows clients to shop and select products directly from the company’s website or mobile app with highly personalized recommendations. It is also benefiting from expedite client adoption, increased purchase rates per client and higher levels of engagement. This has been adding up to active client growth. Moreover, the company has been making investments toward business operations, technology and infrastructure to boost clients’ experience. Quarterly performance is also likely to have benefited from demand in the activewear category.

Management, at its fourth-quarter earnings call, had guided revenue improvement in mid-to-high-single digit on solid demand trends for fiscal first quarter.

However, Stitch Fix has been grappling with higher SG&A expenses for a while. Any deleverage in the same might have shown on the company’s margin. In addition, impacts of the coronavirus-related expenses cannot be ruled out.

What Does the Zacks Model Say?

Our proven model does not conclusively predict a beat for Stitch Fix this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Stitch Fix has an Earnings ESP of +42.03%, its Zacks Rank #4 (Sell) is making surprise prediction difficult.

Stocks With a Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases.

Kroger KR currently has an Earnings ESP of +0.38% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ollie’s Bargain Outlet OLLI currently has an Earnings ESP of +0.58% and a Zacks Rank #3.

Casey’s CASY currently has an Earnings ESP of +1.49% and a Zacks Rank #3.

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