Stitch Fix reports exceeding expectations in Q2 2025 earnings call, focusing on growth and client satisfaction.
From Nasdaq.: 2025-03-12 00:45:11
Stitch Fix (NASDAQ: SFIX) held its Q2 2025 Earnings Call on March 11, 2025. CEO Matt Baer and CFO David Aufderhaar shared that the company exceeded expectations with revenue of $312.1 million and adjusted EBITDA of $15.9 million. They reported a 710-basis-point sequential improvement in year-over-year revenue comps, with a contribution margin of 33%. Stitch Fix is focusing on enhancing the client experience by offering newer, trendier styles, expanding Fix flexibility, and strengthening client-stylist relationships. The company saw success in increasing average order value and keep rates for new inventory.
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Q2 results show progress in transformation strategy for Stitch Fix, with revenue comps improving each quarter. Men’s and Freestyle categories returning to growth, indicating success of investments and team efforts. Net revenue for Q2 at $312.1 million, above guidance range due to strong AOV. Company confident in return to overall revenue growth during FY ’26. Encouraged by momentum and impact of transformation strategy across the P&L. Expert stylists, curated assortment, AI algorithms, and customer data positioning Stitch Fix as superior alternative to traditional shopping. Stitch Fix had a positive January, seeing growth in average order value (AOV) due to higher keep rate, average unit retail (AUR), and items per Fix. Active clients declined 16% year over year, but revenue per active client increased 4%. Gross margin was up to 44.5%, while adjusted EBITDA was $15.9 million. The company raised its annual revenue and EBITDA guidance for FY ’25, expecting revenue to be between $1.225 billion and $1.240 billion. Despite challenges in the market, Stitch Fix remains focused on sustainable growth and client satisfaction. Stitch Fix is meeting the demand for convenient, stress-free shopping experiences. With only 10% of U.S. consumers satisfied with in-store apparel shopping, Stitch Fix’s personalized service resonates strongly. By using AI-driven insights and human stylists, they provide a solution to the struggles of traditional shopping methods. Freestyle, a feature allowing clients to shop in between Fixes, helps increase customer loyalty and market penetration. Recent strong business performance has led to raised full-year guidance, demonstrating the company’s ability to succeed in a challenging consumer environment. In response to the impact of tariffs, the Chief Executive Officer discusses a tariff task force in place to protect the profitability of private brands amidst the volatility of tariffs. The company benefits from a matrix of national and market brands to strategically mitigate any potential impact. They are not currently anticipating any margin impact or increase in costs for clients. The company’s focus on client demand will determine the balance between private and national brands. They have recently launched successful private brands and invested in new national brands to enhance their assortment matrix.
The company’s strategy includes investing in new categories like sneakers and accessories while maintaining market share in tops and bottoms. Consumer adoption of the flexibility within the Fix experience, allowing them to choose more items, has exceeded expectations. They continue to focus on deepening market share within each category and growing wallet share. The company’s successful merchant team has responded well to challenges by capturing their fair share in all categories, driving success in keep rate, AOV, and items per Fix. Stitch Fix reports strong order economics and category expansion driving growth, maintaining solid margins. Gross margin outlook for 3Q remains steady at 44% to 45%. March trends show momentum and exceeding expectations, with revenue growth in men’s and Freestyle channels. 9% year-over-year increase in Fix AOV contributes to outperformance. Company optimistic about continued growth and raised guidance for the fiscal year. Stitch Fix reports higher-than-expected adoption of Flex Fix offering, with a nearly 40% increase in total Fixes from Q1 to Q2. Keep rate also surpassed expectations due to team efforts. AOV was up 16% year over year in January. Active clients are expected to decline in Q3 but improve from last quarter. AOV, along with active client decline, may present challenges for growth in FY ’26. However, there is opportunity for growth in both areas, with existing client engagement showing strength. Stitch Fix CEO is encouraged by recent results, exceeding revenue and EBITDA expectations and raising full-year outlook. Team efforts and progress toward active client growth are driving momentum and positioning Stitch Fix for profitable growth in the future. Stitch Fix held an investor conference call with participants including the Head of Investor Relations, CEO, and CFO. Analysts from AllianceBernstein, UBS, and others were also present. The call lasted for 0 minutes. This transcript was produced by The Motley Fool, with a disclaimer about potential errors. The Motley Fool recommends Stitch Fix.
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