Why Stitch Fix Stock Fell 11% in July

This article originally appears on The Motley Fool, written by Demitri Kalogeropoulos.

What happened

Stitch Fix (NASDAQ:SFIX) shareholders trailed a booming market last month as the stock dropped 11% compared to a 5.5% rally in the S&P 500 in July, according to data provided by S&P Global Market Intelligence.

The decline put the online apparel seller back in negative territory for the year, down 12% so far in 2020. It had previously been lower by nearly 60%, though.

So what

Without any official updates from Stitch Fix or its competitors during the month, investors likely continued punishing the stock for its weak earnings report from mid-June. That announcement showed that Stitch Fix, in contrast to online selling rivals like Amazon (NASDAQ: AMZN) and Walmart (NYSE: WMT), struggled with major fulfillment challenges during the COVID-19 shutdowns. These issues reverberated through the entire business in the third quarter, including by pressuring sales growth, limiting inventory availability, and hurting profits.

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Now what

CEO Katrina Lake and her team said Stitch Fix returned to sales growth in May, but investors appear to be in “show-me” mode and are waiting for confirmation that the subscription clothing service has put its Q3 struggles behind it. That evidence might show up in Stitch Fix’s fourth-quarter report in early October.

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