Stitch Fix, Inc. reported a decline in net revenue in its fiscal second quarter ended Jan. 27, 2024. Results fell within expectations, CEO Matt Baer told investors and analysts on March 4. Stitch Fix is on track to become profitable in the near term, he said.
“The original Stitch Fix vision, to create an easier and more enjoyable way for people to shop for clothing and accessories, remains both relevant and compelling,” Baer said in a press release. “Our transformation efforts are grounded in fully realizing that vision and include both strengthening the foundation of our company and reimagining our client experience. I am encouraged by the progress we continue to make and am confident we have the right strategic priorities in place to set us up to drive sustainable, profitable growth.”
Stitch Fix is No. 42 in the Top 1000, Digital Commerce 360’s database of the largest online retailers in North America. Digital Commerce 360 categorizes Stitch Fix as an Apparel & Accessories retailer.
Stitch Fix revenue in Q2
Stitch Fix revenue declined 18% year over year to $330.4 million, the company reported. Active customers fell 17% to 2.8 million year over year, and 6% over Q1. Meanwhile, net revenue per active client declined just 3% to $515.
Net loss for the quarter was $35.0 million. That’s nearly half the net loss of $65.6 million in Q2 2022. The retailer is actively working on cutting costs, and since Q3 of fiscal 2022 has found $370 million in savings from selling, general and administrative expenses (SG&A), chief financial officer David Aufderhaar said.
Stitch Fix focuses on customer acquisition and retention
New customer conversion was “below expectations” in the quarter, Aufderhaar said. Both new customers and returning customers reactivating their memberships were lower than expected. However, he noted that Q2 is typically the softest quarter of the year for active customer counts.
In response to those trends, Stitch Fix has plans to improve overall customer experience. It is introducing a new customer onboarding system this year.
“We want to create a more fun and visual experience that better engages clients [how Stitch Fix refers to customers] beginning at their sign-up and creates ongoing confidence that we will deliver for them on both fit and style,” Baer said.
The main objectives of the update, Baer said, will be to:
- Get all the information needed to best serve the customer’s style needs
- Give customers confidence that Stitch Fix understands their preferences
- Be engaging and fun to use
A more interactive onboarding experience with new customers will allow Stitch Fix to be more attuned to changing preferences, and retain those customers going forward, Baer added. He declined to share further specifics or exactly when it will launch.
Stitch Fix and AI
Artificial intelligence (AI) will continue to be important to Stitch Fix’s business going forward.
“And also critical is that for us, at Stitch Fix, personalization algorithms, artificial intelligence, machine learning, and data science, those are fundamental elements of our model,” Baer said. “They’ve been part of our DNA since our inception. It’s something that we’re going to continue to build upon going forward.”
Stitch Fix has started using AI to make apparel recommendations to customers. However, the retailer’s goal is to use the technology to enhance customer relationships with stylists, not replace them. Human stylists ultimately still use their judgment to guide the recommendations, Stitch Fix maintains.
The retailer also uses AI in making purchasing decisions for the clothing it makes available to customers. Stitch Fix can make purchases based on all the data it collected from customers in the onboarding process and the preferences they show while remaining members, Baer said.
Stitch Fix earnings
For its fiscal second quarter ended Jan. 27, 2024, Stitch Fix reported:
- Total revenue declined 18% year over year to $330.4 million
- Active customers fell 17% to 2.8 million.
- Net loss was $35.0 million.
For the six months ended Jan. 27, 2024, Stitch Fix reported:
- Revenue declined 18% to $695.2 million.
- Net loss was $71.0 million, from $121.5 million in the year-ago period.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.
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