Clothing discounts are weighing on Stitch Fix sales, as it shakes up its executive team

Stitch Fix Inc. shares fell on Tuesday afternoon after the online clothing-selection service and styling company offered lower sales forecasts. This was in an attempt to boost profits and deal aggressively with retailers that are trying to appeal to inflation-weary customers.

Stitch Fix SFIX +4.19% announced that Dan Jedda, chief financial officer, will be leaving the company to 'take up another opportunity'. David Aufderhaar will replace him, the current senior vice president for finance, on April 3.

The executives forecast sales of $385 million to $395 million for the third quarter, as opposed to FactSet's $394 million forecast. They forecast full-year sales of $1.625 billion - a little less than the $1.6 billion to $1.645 trillion forecasted late last year. Wall Street had expected $1.647 billion.

Stitch Fix reported a net loss in its second quarter of $65.6 million (58 cents per share), compared to $30.9 million (28 cents per share) in the same quarter a year ago. Revenue decreased to $412.1million, compared to $516.7 million for the previous-year quarter.

FactSet polled analysts and found that they expected Stitch Fix would report a loss per share of 34 cents on revenues of $413 millions. After hours, shares fell 4.2%

Jedda attributed Stitch Fix's sales results to the 'lower netactive clients' and the higher promotion activity during the quarter. He also stated that the company's analysis continues to show that all client groups are spending less than they did in previous years.

Katrina Lake, interim chief executive, stated during the call that Stitch Fix was generally immune to large markdowns by other clothing retailers. She said that the lower demand which led to this year's push could make it harder to attract customers.

She stated that she believes it will impact conversion more. She said that shoppers are evaluating where they can reduce their personal spending so'refreshing your closet might not be as important as it was 10 months ago.

Active clients, or users who have checked out or purchased clothes in the last 52 weeks, fell 11% to 3.57million. FactSet predicted active clients at 3.6 million.

After announcing in January it would reduce salaried positions by 20%, and close its Salt Lake City distribution centre, the company reported. Stitch Fix announced that Elizabeth Spaulding, the company's chief executive, was leaving. Katrina Lake, the founder of the company and former chief executive, will temporarily replace Spaulding.

These layoffs were due to cuts in the last year as Stitch Fix attempts to return to profitability. It has had to deal with subscribers losses, a steady fall in its stock price and waning ecommerce demand. Consumer concerns about a recession, higher gas prices, and higher grocery bills are all factors that have affected the company.

During Stitch Fix’s December quarterly earnings call, Spaulding also stated that retailers were cutting their prices in order to remove unwanted clothing from shelves. This was to help consumers cover essentials. This led to lower spending by Stitch Fix users and increased engagement.

Stitch Fix's stylists send customers clothes that they can keep and return. The company is also trying to expand its 'Freestyle" business. This allows users to shop online directly at Stitch Fix based on their personal recommendations. Spaulding noted that the Freestyle segment had more softness than expected during the December call.

SPX, -1.53%, has fallen 5% in that time.