Stitch Fix Reports $318.8M Revenue, 12.6% Decline, and Improved Operating Loss

Stitch Fix, Inc. reported a net revenue of $318.8 million for the three months ended November 2, 2024, marking a 12.6% decrease from $364.8 million in the same period last year. The company experienced a significant decline in active clients, which fell to approximately 2.43 million from 2.99 million year-over-year, representing an 18.6% drop. Despite the revenue decline, the cost of goods sold decreased by 15.4% to $174.0 million, resulting in a gross profit of $144.8 million, down 9.0% from the previous year. The operating loss improved to $9.0 million from $28.7 million, indicating a 68.7% reduction in losses.

In terms of profitability, Stitch Fix reported a net loss from continuing operations of $6.3 million, a significant improvement compared to a loss of $26.2 million in the prior year. The company attributed this positive change to a reduction in selling, general, and administrative expenses, which decreased by 18.1% to $153.8 million, largely due to lower compensation and benefits expenses, including stock-based compensation. The gross margin improved to 45.4%, up from 43.6% a year earlier, driven by better transportation rates and product margins.

Strategically, Stitch Fix has been focusing on restructuring efforts initiated in June 2022, which included workforce reductions and the closure of certain fulfillment centers. During the latest quarter, the company recorded $1.0 million in restructuring charges, with expectations of incurring minimal additional costs in the upcoming quarter. The company also ceased operations in the UK during the first quarter of fiscal 2024, classifying it as a discontinued operation, which has impacted overall financial results.

Operationally, the decline in active clients has raised concerns about client acquisition and retention, which the company aims to address through improved marketing strategies and enhanced client experiences. The average revenue per active client increased to $531, up from $506, indicating that while fewer clients are engaging with the service, those who do are spending more. As of November 2, 2024, Stitch Fix had $137.2 million in cash and cash equivalents, alongside $116.1 million in short-term investments, providing a solid liquidity position to support ongoing operations.

Looking ahead, Stitch Fix anticipates continued challenges in client acquisition and retention, which may negatively impact revenue in fiscal 2025. The company remains focused on improving its marketing strategies and enhancing the overall client experience to foster growth. With a commitment to restructuring and cost management, Stitch Fix aims to navigate the current macroeconomic environment while positioning itself for future profitability.