Stitch Fix Earnings Call: Cautious Optimism Amid Growth

Stitch Fix ((SFIX)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call of Stitch Fix reflected a cautious optimism as the company reported a return to revenue growth and improvements in key client metrics. Despite these positive developments, challenges such as a decline in active clients, pressures on gross margins, and potential impacts from tariffs were also highlighted, painting a mixed picture of the company’s current standing.

Return to Year-over-Year Revenue Growth

Stitch Fix’s Q3 revenue reached $325 million, marking a return to year-over-year growth with a modest 0.7% increase. The company also reported an adjusted EBITDA of $11 million, signaling a positive financial trajectory despite the challenges faced.

Growth in Women’s and Men’s Business Segments

Both the women’s business and the overall Fix channel experienced a return to revenue growth, while the men’s business and Freestyle channel continued their upward trend for the second consecutive quarter. This growth across key segments underscores Stitch Fix’s ability to adapt and expand its offerings.

Improvement in Average Order Value

The average order value (AOV) saw a 10% year-over-year increase, marking the seventh consecutive quarter of growth. This improvement was driven by larger fixes and a refined assortment strategy, highlighting the company’s focus on enhancing customer value.

Increased Client Engagement and New Client Growth

For the second consecutive quarter, Stitch Fix experienced year-over-year new client growth, with the number of active clients on recurring shipments increasing for three straight quarters. This indicates a strengthening client base and growing customer loyalty.

Strong Performance in Athleisure and Footwear

Athleisure and footwear categories showed robust growth, with athleisure up over 30% and sneakers seeing a 35% increase year-over-year. These categories significantly contributed to higher Fix AOVs and growth in the Freestyle channel.

Decline in Active Clients

Despite positive revenue growth, the net active clients ended the quarter at 2.4 million, reflecting a 10.6% year-over-year decline and a 0.8% quarter-over-quarter decrease. This decline poses a challenge for maintaining momentum in client engagement.

Challenges with Gross Margin

The gross margin for Q3 was reported at 44.2%, down 130 basis points year-over-year. This decline was influenced by lower product margins and a shift in product mix, presenting a challenge for the company’s profitability.

Potential Tariff Impact on Future Costs

Stitch Fix acknowledged the potential impact of current tariff rates on future costs, particularly in FY ’26. The company is exploring strategic sourcing and supplier negotiations to mitigate these potential challenges.

Forward-Looking Guidance

Looking ahead, Stitch Fix expects Q4 revenue to range between $298 million and $303 million, with adjusted EBITDA projected between $3 million and $7 million. For the full year FY ’25, the company anticipates revenue between $1.254 billion and $1.259 billion, reflecting a cautious yet optimistic outlook.

In summary, Stitch Fix’s earnings call conveyed a sense of cautious optimism, with notable achievements in revenue growth and client engagement. However, challenges such as declining active clients and gross margin pressures remain. The company’s forward-looking guidance suggests a steady path forward, with strategic initiatives aimed at overcoming potential hurdles.