Stitch Fix, Inc. Q2 FY2025 earnings call

• Matt Baer noted the team delivered a strong quarter, exceeding expectations with revenue of $312.1 million and adjusted EBITDA of $15.9 million. They achieved a 710 basis point sequential improvement in year-over-year revenue comps and a 33% contribution margin, fourth consecutive quarter above 30%.
• Men's business and Freestyle channel returned to year-over-year revenue growth.
• Progress attributed to improvements in client experience like increasing on-trend styles, expanding fixed flexibility, and strengthening client stylist relationships.
• Investing in Freestyle, a personalized direct e-commerce platform.
• Enhancements resonating with clients, with AOV up 9% year-over-year driven by keep rate, AUR, and items per Fix.
• Launched enhancements to models for better stylist recommendations, with percentage of clients requesting same stylists for next fix hitting highest level in nearly five years.

In Q2, Stitch Fix had revenue of $312.1 million and adjusted EBITDA of $15.9 million. The team achieved a 710 basis point sequential improvement in year-over-year revenue comps and a contribution margin of 33%, its fourth consecutive quarter above 30%. Men's business and Freestyle channel returned to year-over-year revenue growth. Women's category saw growth in dresses and denim, with workwear addresses in dresses up over 60% year-over-year. Men's category had standouts like Cashmere and performance workwear up over 400% and nearly 150% respectively. Non-apparel categories like sneakers, jewelry, and accessories delivered positive revenue comps.

• Raising annual guidance for the current year. For full year FY '25, expect total revenue between $1.225 billion and $1.240 billion and total adjusted EBITDA between $40 million and $47 million.
• Q3 expected total revenue between $311 million and $316 million, adjusted EBITDA between $7 million and $10 million.
• Full year gross margin expected to be approximately 44% to 45%, and full year advertising to be at the high end of the 8% to 9% range.

• Mentioned uncertainty in macroeconomic environment and impact of tariffs, but currently do not expect tariffs to impact client prices or margins in the second half.

Q: Could you remind us about customer demographics in terms of household income and other relevant demographics, and also about the role of Freestyle in expanding TAM?

A: Matt Baer said clients span all household income levels, with Stitch Fix's value proposition resonating due to helping with shopping challenges. Freestyle plays a critical role, serving complementary to fixed experience, helping capture greater wallet share, with same personalization technologies, and allowing clients to shop in between fixes and build outfits around items they kept.

Q: How are you thinking about the impact of tariffs on pricing and own brand versus national brands, and what categories are performing?

A: Matt Baer said a tariff task force is in place to mitigate impact, private brands have optionality with multiple production countries. They're client-led, continuing to invest in private brands and national brands that add value. Categories like tops and bottoms are strong, with non-apparel categories like sneakers and accessories performing well.

Q: On gross margins, drivers of Q2 expansion and outlook for 3Q?

A: David Aufderhaar said Q2 gross margin expansion was due to typical seasonality and promotions, expecting full year gross margin to be 44% to 45% in back half.

Q: AOV going forward might present headwind to growth, can you unpack?

A: David Aufderhaar said AOV has been up six quarters in a row, harder comps ahead, and active clients expected to continue declining into FY '26, so taking these into account for FY '26.