Shares of apparel e-commerce company Stitch Fix (SFIX -7.41%) fell sharply on Wednesday, down 10% as of 2 p.m. ET. On one hand, the market is down as well. But the drop seems too big to be 100% related to market weakness today. And there is a filing with the Securities and Exchange Commission (SEC) that could possibly be making investors fearful.
BlackRock is one of the world’s largest asset management firms and in recent years has taken an interest in Stitch Fix stock. By the end of 2020, the firm had purchased nearly 4.4 million shares of Stitch Fix, good for 6.9% of total shares. By the end of 2021, BlackRock’s stake had jumped to 6.3 million shares or 7.6% of the company.
Yesterday’s SEC filing revealed that BlackRock now has almost 8.2 million shares, which equates to 9.6% of Stitch Fix.
BlackRock owns more shares of Stitch Fix now than last year, which initially might seem bullish. But consider that the stock traded around $60 per share at the end of 2020 and around $20 per share at the end of 2021.
Stitch Fix is trading at just $4.11 per share as of this writing, so BlackRock has invested a relatively minuscule dollar amount in Stitch Fix stock over the past year, which could mean it’s losing confidence in the company. And it’s possible that’s what the market was reacting to today.
At the end of the day, investors shouldn’t read anything into SEC filings from BlackRock. But investors are easily discouraged with Stitch Fix these days because the business hasn’t been executing well. For the upcoming second quarter of its fiscal 2023 (which runs from Oct. 30 to Jan. 28), management expects a whopping 19% to 21% year-over-year drop in revenue, which obviously isn’t good.
The main issue for Stitch Fix is gaining and retaining active clients, something management is prioritizing in the coming year. But reinvigorating growth will be easier said than done as discretionary income comes under pressure due to the slowing of the economy.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Stitch Fix. The Motley Fool has a disclosure policy.
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