Stitch Fix (SFIX) 18 Sep 232023 Q4 Earnings call transcript

Good afternoon, and thank you for standing by. Welcome to the Fourth Quarter and Full Year Fiscal 2023 Stitch Fix Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to hand the call over to Hayden Blair.

Good afternoon, and thank you for joining us today for the Stitch Fix Fourth Quarter and Full Year 2023 Earnings Call. With me on the call are: Matt Baer, Chief Executive Officer; and David Aufderhaar, Chief Financial Officer.

fourth press full Results" release our investors.stitchfix.com. complete results XXXX section posted website, a in on have quarter year and financial of We the "Quarterly also webcast to like everyone and this that making conference A call, site.We be remind of will statements to on our the call link uncertainties. can forward-looking be we which found would risks today's on involve materially statements. differ could from results by forward-looking those Actual our contemplated of results should considered be performance. Reported as an future indication not the SEC that with a discussion results Please differ. factors filings review for of the could to our the cause In Form which well with for filed particular, our for XX-K expect press our our release sections we XX-Q issued year filed be to previously on and quarter the week. filed our fiscal SEC, as later today, Risk quarterly as this third Form and the report the XXXX, on of report Factors annual us available Also today's date. forward-looking on note that the information on this based as of are call to statements as forward-looking We disclaim financial any except certain discuss we measures. obligation law.During any non-GAAP to statements, call, will this required update by in most Reconciliations provided measures are our press website. release GAAP on financial the directly Investor comparable Relations to the These non-GAAP substitute our a to measures intended results. are be GAAP for not

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cost approximately great pivotal thinking business our actions a year-over-year. questions the million, a expertise $XXX future. with restructuring decline, X.X great footprint billion, through XX% the free cost of to moving retail, our of Despite a ended million year into and hold, year, profitability leading achieved in is ones. improved made those fresh the our $X.XX million but we're asking the operational was active time inventory the net the on which the realized Matt's for and setting focus initiatives these and the really Stitch consolidating like returning clients, the to near-term prior begin progress we of our changing versus easy, around savings of a on effectively more product 'XX the strategies $XX exit adjusted restructuring approximately million U.K. we and making flow.FY FY year right have allow focused course to adjusted with positive of decision with the XX% decrease we and believe We and This This meant annualized believe ended marketing us of for market. leverage this context that's positive to we challenging decision our flow. with of were To experience, position, meant We fix the EBITDA Decisions are warehouse and potential lot unlocked than some inventory, strategies. forward. the has $XX improvement organization, Matt. EBITDA time me our perspective and a year. goal fortunate He's someone a digital 'XX. over an take never revenue Thanks, cash year-over-year. way.Let for of decline Fix, Throughout core we our to made revenue savings We and cash and

generated than have we gross work to and cost better also margin expected our right-size the nearly done free performance our million cash and improve $XX of structure. flow.For was We QX, we reflects

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realize fewer we Additionally, assortments make to as and it completed and savings believe locations to relevant immediate X consolidation in from efficiencies clients, for be track U.S. warehouse build consolidate the for to this easier the have will fiscal is to year. scale. warehouses plan X more We on stylists we will having will cost inventory inventory

approximately in and bank investments in with the outlook. the margin the our focused attracting I our year-over-year marketing, private cash million our revenues QX driving methodologies. million, revenue the expanded QX leverage closure composition and million of annualized million. ended experience, our and higher revenue equivalents debt.Turning year-over-year $XXX mentioned and to right-sized structure quarter-over-quarter per savings combined increase and last volume. and down continue XXX teams margin million, net to adjusted range QX, year-over-year $XX.X of X% to to the positive related down We effectiveness gross warehouse cash, in $XXX based increasing QX operating thanks million but declined our net was net cost cash our points on QX continue the of the to EBITDA free our $XXX $XX to year-over-year align more over better-than-expected was free efforts U.S. remain end assortment the generated down consolidation in above cost inventory due our operation as flow no of flow. with order clients, be and hard client the we guidance client really $XXX quarter expect the gross of earlier. year. our U.K. was XXX basis merchandising active to the We we over above in and high X% XX.X%, inventory of the to to to prior payback did improve and the $XX retaining successful work specific year-over-year, down Revenue basis We due XX% points to cash ended improving with slightly composition inventory XX% marketing QX and to as our XX% position maximizing than on our and down million.QX spend brands.Advertising of QX demand leverage We

callouts are into guidance. our we numbers, key the Before get there X in

remind I XX-week 'XX everyone First, want fiscal to that year. FY is a

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full million million, U.S. initiatives. will reflecting be assumes we total $XX be to cost also and improved adjusted an $X on This free gross working timing see primarily quarters inventory QX. year, may the though to margin savings requirements expect cash our flow guidance some of capital positive between to for related to variability we and ongoing due the EBITDA We between purchases.Moving

total $X $X million, U.S. EBITDA expect will million $XXX We we to between revenue adjusted between $XXX be expect QX and million million. U.S. and be and

expect approximately $X in contribute U.K., also QX. in from as operations We revenues additional which anticipate reported will to an the we million QX be discontinued

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timing approximately advertising be receipts cost right inventory X% progresses. We rebuilding, the an to investment.We FY turns Fall-Winter, return but we'll to but to to as 'XX. FY in to expect our eye revenue, if of to leveraging work We improve continue also we with QX savings balances to X% expect of the ahead expect year of 'XX do the accomplished already opportunistic due the be began rise inventory on in our see

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acquisition and let foundation today this maintain future solid leverage expect back along provide call lifetime and with of Matt. We to engagement a us clients help the on value strategy.Now, profitability the our me turn high for profitability, continued focus will and growth

David. Thanks,

Fix. about conviction company the was on just As just CEO, the insight relevant my bright reaffirmed XX today. are call, future first of and powerful top founded said the as vision this at Stitch as of and my have The I which as days

of and every model. and aspect assessing are brand, We our our our evaluating business operating

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opportunity our I have that. ability we our I deserve clients from lot hard work determined to confident long-term While profitable do, Stitch and a potential to the company. realize for you our deliver for drive growth.Thank best of interest operator, Fix us, to now, us first the take unlock and to And in question. of full am every your in the am we'll

comes Thank of the go Squali ahead, Instructions] you. [Operator from Truist. line first of question Our Youssef Please Youssef.

me? Can you hear

hear Yes, we can you.

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key Dave, throughout of kind then, or in that active you maybe et you you a of about progressing of the job you've for on how kind internally, of of So client lot the us externally, just those talked you Maybe X are for just the learnings?And chance now a and days, some the of had can the learnings people based on first, Matt, had count assumptions What guide, a period? kind talk year? been cetera. this making X you're little you've for top how of during the to challenges key talk can for summarize pricing you you to mind are see XX bit fiscal that 'XX about terms

Thank the you, questions. All Youssef. right. Appreciate

proportions me, to considerable their well.And our to also the time for I truly to clients transcript what of spent creates the close rare you're understand a is business see onboarding, last In everything down e-commerce rare talking into learned in of as one come just the really business such So us future. have our those as our of and private engage us the might as an in things how testament that that brand It time the and shared quarter, we organic of to I or retail and can yes, advisors was us of clients possibly how to to as we external and get business as to all drive XX% the it's is learning in speaks that stakeholders really in any of is we think well we is of trying as business. learning with shared kind to weeks any from engagement challenges see back despite macro quite as a that our this, to that definitely get from in your preceding something what spend to continue our we standpoint I in to an our to and after so business able how clients. pretty amount our to I have loyal time internal business environment.Another to manner have that, be can, important of XX to tremendous high our our a down the service. strength opportunity clients bond nearly continue the strong addition earnings growth marketing most they And able where XX%, is levels

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listen sharing see lock together look find of to forward we profitability, continue further, need improve to and going business and improve long-range our experience, at to our to strategy to bottom line -- thar date. learnings we'll to efficiencies onboard pulling and we need operational of our savings And our our as clients, further where I we where further to a those forward. tweak continue to plan As future all to I all continue model,

guide, on callouts. of the then 'XX a And couple Youssef, FY

First, on active clients.

but We year clients active on it be aren't remains to team We drive to do clients, towards full QX the definitely sharing focus primary negative. active growth. a any expect for specifics

for we're than slightly saw FY the loss of revenue FY be to that a better the loss the expect 'XX You QX about quarter-over-quarter.On revenue we definitely callouts, QX are down client just and 'XX. a contributor 'XX, to and big quarter-over-quarter, in active X% side, QX couple I described the headwind in FY

recently We still remain the also to cautious to that few remain the headwind quarters. frequency we Pricing, expect what in we've clients order seen in past the we've existing 'XX, on stable in.You client FY macro we're it seen expect in that to with continue with being touched in pricing. environment

question. for our next Please standby

BMO comes of line Our next question Siegel Capital Markets. the of from Simeon

Welcome, Matt.

about And So margins. full maybe you you're moving out did more, on bit week how just there? revs guys gross pieces XXrd you and just nice QX for thinking are year the there's Could progress guide into say and EBITDA? you the what gave?And given maybe a the then moving little nuance expecting represent the those quantify pieces to you

regarding has answer It's gross margin they've strong in to we the the with a to Yes. inventory Appreciate the year inventory into and continued Thanks, just X% inventory well a high more put shared It's XXrd And that better. Matt mix not as better, the perspective healthy And week. evidenced question the but organization that of that higher-margin have of your merchants our I work by previously that's as it's level. speak A to some what allows can XX% to there lot to within David also down our That share that, brands. over taken here. I'll inventory is us and many a investment XX% heart color additional higher others hard private for merchant composition. products.As better IMU truly year-over-year. last the and our is to just shared, as our overall. is all Simeon. of part at within recognition mind we reinforcement that about question. ensure organization our the

that still we that can we success believe overall work to improve our do I really the having additional signs encouraged already. health, of So, have we early -- in that inventory still order by while we're

Simeon, then, little to around a and on gross margin And more just you bit color that. give

are between what closures annualized 'XX cost well. release would then have we point a efficiencies showing as XXX of Matt sort had 'XX, improving And further well. we callouts describing as FY the the to initiatives also portion XXX health an transportation in is other of as realize focus ties on that point and warehouse the as you and just week, then in million continue And savings impact in our XXrd the back basis improvement, to that basis FY of well there we the good of the the really with that inventory couple drive.A specifics we that also we was that of $XX P&L. 'XX. a down For FY go on annualized as There's savings do press the and U.K.

can impact X the the about it's of there X.X as points. well but the U.K., to see you as So, impact point

the with year ahead. luck of Best Great.

you. Thank

Young Our next question of Barclays. from comes the line of Trevor

Great.

discounting Just of back on retail? of revenue customers any repayments but then on models so U.K. directional in any we terms starting the on being appreciate macro out, can the color well? pressure of like kind of core kind in, what are that guide those I peers for commentary revs at able your macro to color was student loan one. higher back levels at contemplate kind Just U.S. the full of just baking and to is?And of you outlook back broader more housekeeping competitive of year for terms continued kind our are impact environment, assumptions in a given What up underlying from of what in as that average

all your David I can questions. the thinking we're on to environment. high is how to and that the as of to factors of our terms levels focused view you control. of pressure. we're the also macro speak our They the question in the reason in are for Matt. recent U.S. outside environment, the continued Interest Student think ample are answer macro on there's well share that at and cautious payments rising. the around what at that. that those all a know appreciate are factors U.K.So are around the I'll as and discounting. about myself resume our competitive under Energy Trevor, I drawdown This a next of control.So level consumer. loan there's consumer perspective additional and highest try positioning are take savings, a years. And team, remain of prices in month, already rates within

in we do are intelligently, Is also headwind I our we And acquiring a service, we brand macro a clients? target our of the with clients? right relationships have the we fostering are high value resonating our with potential with the assortment, deep, customers' So are market? is lifetime delivered And we priced enduring have homes both the tailwind. that being and think privilege when environment

wallet loyal our single focus focus winning remains owning experience.Our on relationship we're that clients that of is direct when is So our delivered that the spend reducing to constrained resisting trips discretionary upfront. a or And still opening when have client. on to during or is we on advantage every shopping app times, that their addictive phone, homes, tough and a with also mall share awesome being customer

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heavily feel to do about that more compete ability retailers be as as might So a in overall compete our tough to environment are. we good against ability really macro discounting well than I our

active And U.K. around an line as on as clients. in give U.K., of then, client the help XXX,XXX approximately to press top back you the and the to well gross there's a yes, those as the your profit well sort the represented of question definitely SG&A out you models.From about standpoint, numbers reconciliation Trevor, specific release

into that models. that out And back of so you be pack with the to able can to our back

Please you. next standby for Thank question. our

next question Jefferies. line of from of Anderson Blake comes Our the

any QX. I just through had if the wanted of on, QX you around to breakeven trajectory ask like color it's on the year more could and provide first of seems like margins? two. seems terms QX It EBITDA I in sales after

first So quarter?And kind rates, if last your question, customers those are second could year return takes I how the of how all -- you puts they then keeping? at of if and on half share Wondering just the [ KPIs ] many keeping kind color was business many any you items about the How trending? on could boxes? your are of are fix back curious versus the profitability for wondering X just of on quarters talk the

And Yes, for question, throughout the for guide year. guide And the of full QX and your Blake, $X then was year about on million. $X the EBITDA you're first million talking part the I the million between think and $X between was million. $XX

back year profitability focus And to profitable like well. been do work actually there. in calls, the so been and of what have about proud certainly we've going in as of seen to really you into, talked be prior something can -- our we've that see we're has we that we back Because that's digging from that, the on expect half the

to be year. for the we so, EBITDA expect And positive

the cash also for year expect well. flow positive as We be free to

On that in place we're AUR, strategy rate, terms improve as question, and feel And stable we over then in relatively can to jump processes David, second track going keep and the there from put But of key AOV working be free I board. metrics and we'll the those in seeing metrics in time. place overall, metrics well. across to forward, the

Thank you.

comes next the line question Securities. Tom from of of Nikic Our Wedbush

Matt, welcome had you year. to want just a so obviously, last revenue aboard. decline ask, I big

decline another year. revenue calling You're this for double-digit

a I of couple wallet, resetting in line conceptually, of -- Is of aggregate, of you it's think that hopefully growth? it? guess from of how like pretty then a sort years decline ago.Just were the opportunities of think you So kind find do of significant sustainable how kind base revenue again, like where like positive kind the to a and grow there? of kind versus of Is is sort to from it you negative base the about guess, when kind kind inflect idea of we to, kind do I healthy, how of that? to it inflecting top customer share And about you're

then add, appreciate Hey, free. please answer question. David, I'll anything question Matt. there's Tom, the and if to like feel that It's, you'd I

that experience for in And delivered time, aligns focused your do market service an healthy see foundation believe service to to driving business actually really and we our healthy best to hard going focused with our business deliver on business.And a that that and a value where orientation, the provide ultimately to a be and also terms where ensure have ensure in our that untapped have working we able a we for marketing and high experiences matches with over acquiring to and going one also it's you will that we resonate forward rationalize as that an competitively. able be I tell incredibly future expand that the as value have strong we ultimately business, which, inventory our we is do wide financial business that markets, experience, client spend, that The will audience your rare time, that clients of style growth. that foundations experience and our business. have preferences, and And on in I we improve home So that our that healthy a healthy continue our invest that P&L future, we we'll continue judiciously product perspective deliver we get and confidently have to profitable in excel focus position remains, for for we now, that be have we to the job to your healthy is we're a lead really growth revenue fits basis.What also a our and our we can growth, lifetime exceptional target surprisingly audiences Right for with long-term that over customers profitable resonates on franchise ability and a phenomenal future able, that we'll both is to we're to we're that, better the one. and be as the a

Thank you.

comes question Carden next Blair. Our of the of Dylan line from William

maybe the And of just driving of curious, and even the customer by between that you sort stable ratio of that is up keeping last driven follow How now Or new answer. that it Is the to strategy and what's marketing the as year. kind about retention thinking relates sales sales to outlook? engagement? outlook? relatively I'm are kind next the sales? relationship You're

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know first they're market also fend funnel a tactics.And prospective retention brand, they're is they retention job and acquire. very really acquisition to uniqueness speaking go of the but not and that good the job off to higher telling marketing who indicate client. have reactivation place. really is a few be their marketing a business to value of to we improve balancing good is a So focused work.The also And and gives we in that terms lot to what's that to then awareness of how reactivation that then we've They the had our funnel in they're what a the in clear we between our is and doing our a customers? proposition what's Two, and first brand dialed going lifetime they're to team that a value? story, customers encouragement forward, of all lower success are who uniqueness what there's to to likelihood display in guide point, dormancy high the And it lot Are Three, that is programmatic as campaigns. would mindful look working with that a acquiring that really team is of audience continue of things recently, we model acquiring our well. of the of signals and right focus. those here doing campaigns the of efforts, just high the me continue budget different is your harvest for terms reengagement. and And it And

things, high these right feel really our client a client we So engaging we're value health trajectory acquiring focus lifetime with for on we over total we that customers, experience get confident and time. if create right, the will better

is you about this this Do of active core follow you weeding if past mean, to spend at I I in feel So the of the answer engaged -- of a going stability but you year, less the do kind is unwinding your those now that. efficient growth, kind can mentioned some you the you're don't past think like to point some se, as sort up X-some or you're of this unwinding per on feel about customer end metrics. know if customers model? left with key of and I sort are base group? million out Or marketing still more -- you of of of kind this

that. Yes. Dylan, touch I'll on

I touches think point, to on sort of approach of areas. this Matt's holistic to couple marketing a

in think to was cycling that Freestyle the was we a think are I well. of than you're some is about of as that it's as talked clients But and of we've about we've on through well. adds, prior what dormancy we've also the the impact we're first still gross calls, in in in first but fix although that less engagement fix talked this talked side, of I an seeing some seeing And in in we're also describing elevated definitely about is past. improvements that I dormancy past, it's some that what been the the of where lot still First alluding past first

a And so focus that, for it's us. still area big of

stand by our Thank next Please you. for question.

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long churn, the for were or When just not look Matt, question. stepping last as kind guess lower you on But value a forthrightness. some if the service. of just all back maybe I and obviously, that follow-up maybe you the thanks to customers at introduce your customer or cause as go talk term? focused expect gone things or churn base that them top at have and to some X of I customers you do guess to that how what to dormant, address that look churned the X longer-term these And are dormant? or

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you. Thank

the Mark question [Operator The of comes go of next from the [Operator Madhukar next comes Kunal Instructions]We'll go UBS. Kunal line of comes Altschwager of ahead, Baird. go from the next from question of Instructions]Our Kunal. Please UBS. question. next question line Our Madhukar Please to ahead.

then one quick numbers follow-up. A a and

that you active numbers the on one, XXX So U.K. mentioned clients, XXX,XXX. had about

me, expectation that is that in as at That would would U.S. XQ, a active that -- the an So when I worse that is that you there that tells concerned, be kind negative implies be we Is XQ. since the when that and said X.X% -- add least numbers, in to suggest would which XQ the expect basis, of would take clients. improvement. far be as right? you your a Q-over-Q in which X.X% the than out negative XQ, -- that from on

Kunal. look -- saw an think is to quarter-over-quarter, you QX. another from definitely clients expect in at what loss expect don't active definitely that's we We than absolute I way No, get right, this from number better to a standpoint

QX, you XXX,XXX lost in clients. So

op? XQ if would a U.K. Now because in go clients going XXX,XXX to are system be the of out discontinued

Yes.

the And it included, down we U.S.-only so, X% was number. were quoting a that

X%. down The

Okay.

U.S.-only Yes. U.S.-only. was talking was was in decline When It -- sequential it I comp. quarter-over-quarter about the QX a

Okay.

Okay.

Okay.

then this Great. and I And think Okay. been -- asked before. has

think bit it apologize, a understand me with takes active where end of versus per about with active will I kind you'll up XX% revenue negative where to year, you of terms revenue how kind XX% stuff. So end for clients it negative up But should the we guide client? the of probably LTM in full to

a pretty we Yes, pricing specifics as year touched from on Kunal, year active we the guidance And earlier we clients this that giving that -- standpoint. I the think, aren't given around throughout full stable guide well. we've assumes

The stable pricing.

Okay.

Yeah.

today's queue, does Thank conference conclude this in further for no you. Thank participating. there you call. questions And as are

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