Stitch Fix (SFIX 3.01%), known for its personalized online styling service, reported its Q4 2024 earnings on Sept. 24, 2024.
This quarter's results showed $319.6 million in net revenue, slightly above the midpoint of management's guidance range of $312 million to $322 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter were $9.5 million, within the expected range of $5 million to $10 million.
Despite these positive signs in cost management, the company continued to face significant challenges in revenue growth and client retention. Overall, the quarter was a mixed bag for Stitch Fix, highlighting strong cost control but struggling with fewer active clients.
| Metric | Q4 2024 | Q4 2023 | Change YoY | Management's Guidance Q4 2024 | Estimate/Expectations |
|---|---|---|---|---|---|
| Net Revenue | $319.6 million | $364.7 million | (12.4%) | $312 million - $322 million | Near upper end |
| Gross Margin | 44.6% | 44.1% | 0.5 ppt | N/A | N/A |
| Net Loss From Continuing Operations | ($35.7 million) | ($20.3 million) | N/A | N/A | N/A |
| Adjusted EBITDA | $9.5 million | $13.1 million | (27.6%) | $5 million - $10 million | Near upper end |
| Active Clients | 2.51 million | 3.12 million | (19.7%) | N/A | N/A |
Source: SEC filings. Expectations based on management's guidance, as provided in 2024-06-04 earnings report. PPT = percentage points.
Understanding Stitch Fix
Stitch Fix operates a personalized fashion delivery service that leverages data science and human stylists to provide customized clothing recommendations to its clients. The company’s business model centers around offering curated "Fixes” or clothing assortments sent directly to clients, who then keep and pay for what they like and send back the rest. Recently, the company has focused on enhancing the client experience and incorporating advanced data science into their operations.
The primary avenues for Stitch Fix's success include maintaining a highly personalized experience, leveraging data-driven insights for market trends, and building a broad catalog of brand offerings, including exclusive items. However, the notable drop in active clients and continued struggle with customer acquisition present ongoing challenges.
Quarterly Highlights
Revenue for Q4 2024 was $319.6 million, a 12.4% decrease compared to Q4 2023's $364.74 million. While net revenue showed some positive alignment with the upper range of guidance, the quarter-on-quarter decline reflects deep-rooted issues in retaining and growing its customer base.
The active client base declined by 613,000 year-over-year to 2.508 million, highlighting difficulties in both client retention and acquisition. This significant decrease reflects a 19.6% drop from prior-year levels.
Gross margin improved slightly, rising from 44.1% in Q4 2023 to 44.6% in Q4 2024, thanks to better cost management and transportation leverage. This improvement suggests some effectiveness in operational efficiency despite revenue challenges.
Stitch Fix ended the quarter with $247 million in cash, cash equivalents, and investments, and no debt. This solid liquidity position showcases the company's robust financial standing amid a turbulent period for its operations.
A notable strategy includes closing down UK operations and focusing on restructuring efforts to optimize cost efficiencies. The company also emphasizes personalization via data science, introducing new features like StyleFile to boost client engagement.
NASDAQ: SFIX
Key Data Points
Looking Ahead
For Q1 2025, Stitch Fix projects net revenue between $303 million and $310 million, indicating a further year-over-year decline of approximately 16%. Adjusted EBITDA is expected to range between $5 million and $9 million. These projections reflect ongoing efforts in cost management while dealing with shrinking revenue streams.
Looking farther ahead, the company provided full fiscal year 2025 guidance, forecasting net revenue of $1.11 billion to $1.16 billion. Adjusted EBITDA is expected to be between $14 million and $28 million. Management anticipates a return to revenue growth by the end of fiscal year 2026, primarily driven by client acquisition and enhanced engagement strategies.
Investors should closely monitor Stitch Fix's upcoming "reimagined" client experience initiatives and any trends emerging from its advanced AI and data science techniques aimed at improving client engagement and overall service. Notably, any updates on the company's active client numbers and retention rates will be crucial to assess future growth potential.
