What happened
Stitch Fix (SFIX 2.36%) shareholders lost ground to the market early Tuesday. The struggling apparel retailer's stock fell 8% by 11:15 a.m. ET, compared with a 1.1% drop in the S&P 500. That decline added to significant short-term losses for investors as shares are down over 80% so far in 2022.
The drop was powered by worries about what Stitch Fix will say about its operating trends in an earnings report slated for Tuesday afternoon .
So what
Investors have low expectations for the fiscal first-quarter earnings report that will be published after the market closes on Tuesday. The company reported a 16% sales decline in the previous quarter, after all, and management forecast worse results ahead. In fact, most Wall Street pros are looking for Stitch Fix's sales to fall by roughly 20% to $460 million .
Stitch Fix has been struggling as demand shifted back toward physical apparel retailers in recent months. That transition added to other pressures on the business that stemmed from an attempted move into a more traditional e-commerce sales model. Stitch Fix confused many new clients with that move, which is a departure from its prior focus on subscription-based, curated apparel offerings.
Now what
The big question for Tuesday's report is whether executives see an end to the current slump arriving in the short term. Stitch Fix has seen profitability tumble thanks to its shrinking sales footprint. Losses will need to moderate significantly for the company to have a hope at getting back into investors' good graces. The first step in that direction would be an outlook by the management team that reflects stabilizing trends in key metrics like customer additions, revenue, and gross profit margin.
These growth metrics will likely worsen before they improve, though, and that is the main reason why the stock remains under such pressure today.
