Stitch Fix, Inc. Q4 FY2024 earnings call

• Matt Baer highlighted progress in transformation strategy with phases: rationalization (exiting U.K., closing fulfillment centers, rightsizing headcount, saving over $100M in SG&A), build (reimagining client experience with StyleFile, stylist profiles, expanded Fix model, new private brands, refreshed brand identity, targeted marketing).
• David Aufderhaar discussed FY 2024 results (net revenue down, but gross margin up, adjusted EBITDA positive, strong balance sheet) and Q4 results (revenue per active client up, gross margin down QOQ due to promotions, adjusted EBITDA down QOQ but variable cost leverage).

In FY 2024, net revenue was $1.34 billion, down 16% year-over-year. Q4 net revenue was $319.6 million, down 12% year-over-year (52-week basis) and down 1% quarter-over-quarter. Revenue per active client was $533, up 5% year-over-year and 2% quarter-over-quarter. FY 2024 gross margins were 44.3%, up 190 basis points year-over-year. Q4 gross margin was 44.6%, up 50 basis points year-over-year but down 90 basis points quarter-over-quarter. FY 2024 adjusted EBITDA was $29.3 million (2.2% margin), and Q4 adjusted EBITDA was $9.5 million (3% margin). Net inventory ended Q4 at $97.9 million, down 25% year-over-year and 14% quarter-over-quarter.

• For FY 2025, expect total revenue $1.11B-$1.16B, total adjusted EBITDA $14M-$28M, free cash flow positive. Q1 FY 2025 revenue $303M-$310M, adjusted EBITDA $5M-$9M, gross margin ~44%-45%, advertising 8%-9% of revenue. Expect inventory to rise in Q1 but turns improve in Q2, returning to revenue growth by end of FY 2026.

Q: Returning to revenue growth by end of fiscal 2026, what are the biggest gating factors?

A: Transformations take time, methodical approach, considering macro environment but focusing on controllables.

Q: What's the private brand mix?

A: Private brands make up roughly 50% of product mix, new brands like Montgomery Post and The Commons launched.

Q: Gross margin guide, what drives the range?

A: 44%-45% guide, influenced by promotional activity.

Q: Talk about client base and promotions?

A: Focus on clients valuing guidance, promotions used judiciously to drive profitable engagement.

Q: How does cost base compare to past?

A: Balancing cost savings and growth, leveraging P&L for sustainable growth.

Q: Advertising spend outlook?

A: Targeted, segmented, 8%-9% of revenue, opportunistic.

Q: August-September trends and macro downturn adjustments?

A: Trending within guide, able to adjust costs if needed based on proven cost-saving track record