Stitch Fix Inc (SFIX) Q3 2025 Earnings Call Highlights: Revenue Growth Amid Client Challenges
Adjusted EBITDA: $11 million, approximately 3.4% margin, up 130 basis points year over year.
Net Active Clients: 2.4 million, down 10.6% year over year and 0.8% quarter over quarter.
Revenue per Active Client: $542, up 3.2% year over year and 1% quarter over quarter.
Gross Margin: 44.2%, down 130 basis points year over year.
Advertising Expense: 10.2% of revenue, up 130 basis points year over year.
Net Inventory: $114.4 million, flat year over year, up 4.4% quarter over quarter.
Free Cash Flow: $16 million generated in Q3.
Cash and Investments: $242 million, with no debt.
Q4 Revenue Guidance: Between $298 million and $303 million.
Q4 Adjusted EBITDA Guidance: Between $3 million and $7 million.
FY25 Revenue Guidance: Between $1.254 billion and $1.259 billion.
FY25 Adjusted EBITDA Guidance: Between $43 million and $47 million.
Warning! GuruFocus has detected 4 Warning Signs with SFIX.
Release Date: June 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Stitch Fix Inc (NASDAQ:SFIX) achieved a return to year-over-year revenue growth, with Q3 revenue reaching $325 million.
The company reported a 10% increase in Average Order Value (AOV), marking the seventh consecutive quarter of AOV growth.
Stitch Fix Inc (NASDAQ:SFIX) saw growth in both its women's business and overall fixed channel, as well as continued growth in its men's business and Freestyle channel.
The company has successfully implemented a more flexible client experience, including larger fixes and themed fixes, which have contributed to increased client engagement.
Stitch Fix Inc (NASDAQ:SFIX) has strengthened its assortment with on-trend styles and expanded into adjacent categories like footwear and accessories, driving higher fixed AOVs and Freestyle channel growth.
Net active clients decreased by 10.6% year over year and 0.8% quarter over quarter, indicating challenges in maintaining client growth.
Gross margin declined to 44.2%, down 130 basis points year over year, primarily due to lower product margins.
Advertising expenses increased to 10.2% of revenue, up 130 basis points year over year, reflecting higher costs in client acquisition.
The company anticipates potential cost increases in FY26 due to current tariff rates, which could impact financial results.
Stitch Fix Inc (NASDAQ:SFIX) expects continued sequential declines in active clients for Q4, despite overall revenue growth.
Q: What did you observe in terms of consumer behavior and product category acceptance in the recent quarter, and how does this impact your guidance for the fourth quarter? A: Matt Baer, CEO, noted that the return to year-over-year growth was driven by the resonance of Stitch Fix's core value proposition and disciplined execution of their transformation strategy. The introduction of greater flexibility in their fixed options, particularly larger fixes with up to eight items, has resonated with clients, driving engagement and business results. Additionally, the infusion of newness into their assortment and expansion into non-apparel categories have led to better keep rates and higher average unit retail (AUR). The company has also achieved two consecutive quarters of year-over-year growth in new clients, who are spending more and opting into recurring shipments at a higher rate. David Aufderhaar, CFO, added that gross margin was slightly down due to mix shifts, but contribution margin remained strong, providing flexibility in assortment strategy.
Q: Could the current macroeconomic environment be a potential share gain opportunity for Stitch Fix, and how are you communicating your value proposition to consumers? A: Matt Baer, CEO, believes the challenging macroeconomic environment presents an opportunity for Stitch Fix to gain market share. The company's service can be tailored to individual client needs, allowing for adaptive pricing and product offerings. The strong relationships between clients and stylists give Stitch Fix an advantage over competitors. The company has adapted its messaging to emphasize the value it offers, such as saving time and adding convenience, which resonates with clients during challenging times. Baer also mentioned that they do not anticipate taking price increases in the near term, focusing instead on mitigating potential cost increases.
Q: Can you provide insights into the sustainability of the average order value (AOV) increases, and what are the main drivers? A: David Aufderhaar, CFO, explained that the increase in AOV, up 10% in the quarter, is largely driven by the introduction of larger fixes, which have resonated with clients. The penetration of larger fixes has more than doubled from Q1 to Q3. The company sees continued momentum in gaining wallet share from existing clients, although they anticipate tougher comparisons in FY26 due to the strong performance this year. The focus remains on driving value through client engagement and maximizing wallet share.
Q: Is it becoming more expensive to maintain your customer base, and what is needed to drive new customer growth? A: David Aufderhaar, CFO, stated that they do not need to increase ad spend to achieve active client growth. The company has seen positive trends in new client acquisition, client reengagement, and dormancy rates. They focus on quality over quantity in client acquisition, ensuring high lifetime value. While ad spend may fluctuate seasonally, the company remains confident in its ability to achieve client growth with current marketing investments.
Q: What is your outlook on tariffs and their potential impact on Stitch Fix's business? A: Matt Baer, CEO, emphasized a proactive approach to mitigating tariff-related risks. The company is closely monitoring trade policy changes and is prepared to adjust its brand mix and leverage its private brand portfolio to minimize impacts. Baer expressed confidence in the company's ability to navigate potential cost increases and maintain its market position, supported by strong client relationships and advanced AI capabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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