Stitch Fix (SFIX) 5 Dec 232024 Q1 Earnings call transcript

Good afternoon, and thank you for standing by. Welcome to the First Quarter Fiscal Year 2024 Stitch Fix Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Hayden Blair .

Today, the Stitch Fix First Quarter Fiscal 2024 Earnings Call. call Chief Baer, Financial the and Executive on Aufderhaar, David Officer. me are Chief Matt Officer; With

We have section posted of on in investors.stitchfix.com. a report our complete our link particular, today's our first quarter release expect year with filings of filed A our would filed and also the XXXX press conference Actual week. like on site. as future Please could call previously forward-looking quarterly be an the filed release on . We results well for those which to involve call, of statements results that can today, and on website, press of our on Factors webcast later financial found Risk to as to SEC remind quarter In this for should from results everyone Reported indication materially that and statements. we results uncertainties. not the with will XX-Q the contemplated as differ XX-K by and be making report forward-looking review full section our considered annual which our factors this we a could of discussion XXXX results quarter our quarterly risks XXXX, issued cause Form SEC performance. Form the the differ. be fourth the first for the to be

us available except update the law. that of to as to information note forward-looking date. Also as by on We call statements required this statements, any based today's on forward-looking any obligation disclaim are

in intended a non-GAAP GAAP Relations to certain financial measures. measures on our These comparable Investor the substitute GAAP directly we are the call, discuss release will Reconciliations this financial results. our be not press During measures for to are provided website. most non-GAAP

discontinued our fiscal today's met operations. we metrics Accordingly, business our report U.K. of requirements as continuing first on call the the represent to operation. quarter a all In XXXX, discussed

website webcast being turn website call its of let entirety will a call replay call this on And Baer. is this over CEO, and the Relations me our Finally, Matt in shortly. on now Investor our available to the be

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expect to right the have we serve time efficiencies, right in the right our margin grow operational location product improve clients. it best We and the to at ensure

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broader advance of we generated a set initiatives. continue technology, In AI to

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all the aligned our workforce our organization. to will opportunities to We capabilities ensure objectives. our assess to across of that is advance and teams structure evaluating carefully strategic

talent teams nicely up in objectives new new to our been have strong in We and and new company stepping response have the leadership, expectations.

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call the QX With to that, will future results who speak financial David, our I'll to over outlook. and turn

Thanks, the successfully end for Matt. and ceased foundation our while throughout cash on doing QX. organization. we the up on Bethlehem, work by the set do same Pennsylvania in track of QX, profitability our to warehouse ourselves strengthen and to of sustainable continued flow profitable Dallas to operations and also are our growth. We In focus near-term

strategy transition. build fulfillment We cash us the have -- have inventory to flow new in complete, the it X and assortments will more We and immediate Once be neutral for savings warehouses throughout stylists fewer will cost center to make expect reduced for allow clients. this warehouse footprint easier personalized

also efficiencies we benefit of We as scale. realize to expect the inventory

and the of Matt Bethlehem, teams team, leadership for to their down On wind Dallas operations these first the hard I of behalf completed during our business U.K. in in U.K. transitions. the professionalism thank quarter. want in we work the the and and the Additionally,

to done order margin have cost enviable and we economics. to continue the Because variable our teams of work have gross and improve unit leverage,

contribution the profit range. of high end at XX% Our remains to historical its XX%

further identify fixed to increase improve continue will to opportunities over in costs margin time. leverage fixed both and We cost contribution order and to variable

active quarter-over-quarter year-over-year X Now and was declined high per let the client million ended end the sequential Net $XXX. higher-than-expected clients. QX at down sequentially by clients the stronger flat active driven quarter get me and to range, results. into million, our into AOV approximately net $XXX the season. QX of X% revenue fall/winter at guidance Revenue X% heading volume

down driven quarter lower inventory last leverage. but seen the fixed XX% few Gross year-over-year, was basis buying and expected, but have quarter-over-quarter ahead see to for improved the $XXX fall/winter XX% increased by -- year-over-year, AOV million. quarters. the as inventory Net improvement in was year-over-year of XX.X%, and to continued the margin we XXX to up points transportation health season, continue due frequencies in we

balances align remainder and to and our of private brands. the increase QX assortment composition 'XX of at remain FY for as position inventory the lower We inventory we expect in successful demand levels our with decrease

We end as of reactivation and $XX our million. in $XX cash, million brand year-over-year, X% XX% debt. revenue $X.X cost the down cash the result guidance in and came of an million quarter equivalents investment of million our and high the flow range $XX and over the EBITDA no adjusted up year-over-year million the bank continued quarter, Advertising $XXX or a was ended quarter successful to in in exceeding of due initiatives. of fall campaign controls. QX up at and investments scaling sequentially in but with generated cash

outlook. our to Turning

within what on focus is to continue our We control.

is means improving highlighted, retaining experience, our our embed retail on flow. driving to cash continuing business throughout clients, the cost in best attracting our the the organization. maximizing and effectiveness free increasing to of foundation of positive practices strengthen and leverage priority and Matt marketing, first structure our As focus client This the

to expect million. $XXX we QX, between total be revenue For net $XXX and million

million. between will adjusted and be million We $X EBITDA expect QX $X

drive to improvement with We expect our both in approximately be brands margin QX ongoing private inventory and full to position in of gross continue percentage and to costs. as year higher XX% transportation XX% a efficiencies our we

revenue. X% both expect and on to the of be be may year QX and full and between but return increase that opportunistic will if we we We right investment. advertising our see X%

between year, be For $X.XX expectations for we the $X.X our are to billion net and full revenue reaffirming billion.

to full expect year, though $XX now expecting are million free to working We negative related timing the we'll assumes This positive be requirements still be inventory EBITDA we be million. capital purchases. do and to between the cash guidance QX flow due $XX to of adjusted for

a the stay and our high provide clients. with focused along acquisition ability value foundation, and on to our strengthen in today for we lifetime profitability, solid leverage maintain confident of and future. profitability I'm foundation engagement As

Now let to call . me Matt. the turn back

Thanks, important David. an company. for is our time This

all has what that and is been to focused are we on by accomplished encouraged come. are We still

the are on work organizing, and around and galvanizing . foundation transformational of orienting business. our operations We

decisions taking and making back, better after are assumptions. progress a performing holistic prior marked We a and assessment step challenging

best by Our confident teams what early the we with I'm are energized us. working are we of working and which of motivated our ahead can and of pace them. accelerate days new are we indicators will to achieve. by ways that reach

more and Stitch shop over clients call years, Fix more served way said more for a at of the this past that millions XX the I of convenient innovative, has accessories. to apparel and with personalized beginning

and that. XXX That every for who and our milestone a quantify shipped it to over everyone take incredible is skills celebrated me recently the and Stitch it joining Fix. this internally We opportunity at the Fix all call, this your We a Thank take day. an and I I'll to idea to their questions. accomplishment. this both want now testament credit knowledge, publicly you for so to recognize and we people extraordinary Let bring determination is great to achievement millionth a operator turn can today's

Instructions] line first from of comes Truist. our And [Operator Youssef question Squali from the

quick So me. just -- X questions for

you a can decline? maybe the at we step talk drivers you you kind positive the that, possible and X should happen? growth, initiatives about we as or look that do reach next help you little And point? it inflection of active that of kind the bit future that X believe First, XX the when believe back -- you could XX, When key client months? it in happens of Is do reverse

out the step guys guide, then that particular, further that revenue are top can Maybe QX in of And versus to the macro are starting implies in doing can us back maybe before that kind you guide you growth. grow that the help on line you help parse just deterioration maybe things -- -- -- again? company-specific

question. Youssef. I the appreciate

terms the first of to David as the any add well drivers of speak I'll question additional future your around context let in of as your we'll QX implications growth. question here. the guide Matt to for and got year. the answer balance that the You've positive of part

a our of positive to service terms the we're best-in-class ensure at emphasis In is we important and business. that operations seamless that moment a just inventory, that well-planned offer our experience. we that our for just ensure This putting think a and future customer scalable have efficient reinforce It includes and clients. healthy to includes where is on includes healthy includes foundation it -- It compelling the that assortment. foundation client that drivers remains to growth, focus I reframe the of

advancements company also continued our making includes ecosystem. that Fix the and in that's rooted embedded and deeply throughout we're the this within Stitch technology It

clients. a part rationalizes that to a investment our dollar committed marketing through value As high requires of to healthy and also that, we We strategy remain do building every lifetime judicious that's client spent. ensure franchise, that

to calls, reduce clients. committed building our We're also, clients effort on to an as dormancy prior in current we on equally lapsed. future successes our discussed as those engaging that have may well any to as reengage

as positive And to this doing A there foundation best results the lot already we're of operation that that couple of focus I retail things a have building on for mentioned on call, the proven that ways our efforts practices. we're is us.

drive investments. as funnels. shopping focus that for our through of and foundational through conversion our of order we'll as to the the team that all funnel will experience, greater of The improve first improves, is the improve, touch conversion of all across that's onboarding that all client experience well points our as also in our see media unlock to than And efficiencies

line. promotional well we on our This capabilities. Another evolve example on introduce emphasis continuing to us continued within SMS improve we is top a experience and of focus as our notification investments is the our And clients. to those, into critical outsized content an more push as that for communications. and as capitalize and within engagement the CRM and on tool have reengagement to our drive opportunities

this active direction. We've has XX-day moving to that results. seen doing AOV keep our our client, the all and work rates begun revenue early some and all show been per positive And the in team right our has

seen remain our bright Now all some conversion and our to some more our acquisition of And client we've spots going drive investments. in forward, and client opportunities also a judicious those opportunities to we'll cost. efficient balance with across continue softness

to long-term incurs, be healthy a perspective in this unlock inflection franchise. growth. up foundation have that future set continue that just And will growth we client focus when sustainable and that on profitable we continued profitable that the importantly, for will ensure very healthy point the strong and

revenue touched clients this the on that active time reminder, a negative on just prior I Youssef, then, the a we guide. some perspective, periods. last think just And from From adds

from in So saw 'XX revenue in we what to and contributor that headwinds. the FY QX, is a

frequency I also lower base. think we existing fixed talked client our about expecting within

And so revenue in guide. the that's another factor

slightly sequentially then we to encouraging saw called certainly And that did standpoint QX, the AOV similar quarter. be what an out negative that's much we are this percentage for QX. expecting pretty from clients in Matt sign. be To than higher or we And and higher for active earlier, what we a expect quarter, see to also

said provide we driving for will active clients. we guide. past, And the full we've continue healthy, engaged year in that, don't on to a But focus as

part I those this some as newer last from And quarter and active quarter. think that seeing, are healthier. Matt we he But We've of well We're higher a said. that, touched perspective, cohorts. also on what a this frequency seeing that increased of seeing the clients converting seen are we're in client RPAC just X-month and fixed near-term are

from the line Bernstein. come Aneesha Our of from will Sherman next question

same I the that clients just attracting. the discussion continue you're So client wanted topic around to

you're So reengagement. Matt, et you you're it saying it focusing like and cetera, experience, assortment, improving, like you're retention and on sounds said sounds client

you you still of from do how is out seeing now Freestyle net that continued before to adds? some these adds I to turning the that healthy? while So selection square a your continue expectation then base negative be of as there within do metrics Is why first to expect seeing you're adverse net negative follow-up clients the all well. have number start improve? And Or you're retention

well bit spending is in marketing reference happy appreciate I question what we're I back what I last of a just our to to earnings how terms call, would judicious do And in being that's would Aneesha, Yes, provide as little more and and I on this context. conversation the we're dollars. our as mentioned where

those a going high the we value. deliver or acquire -- that do clients lifetime the that So are to customers are delivering

that without that you, been losing where value the revenue and going high lifetime proposition. short-term to chasing or conviction or practices if I've clients are growth a acquisition And for really short-term becomes a doing organizations those that deliver witnessed firm you're client

are want mentioned, judicious promising in that we to of methodical clients and also be some be spend. acquired. there, continue I innings have terms that and newer of we seeing it's as we signs early David And those to just and terms in But

acquiring and As one often going retailers as clients. the traditional transactional at particular every their that's clients, acquire different business the you're also from context of I've a loyal about Stitch onboarded our this relevant you're even single from e-commerce more uniqueness into about know. the of some there I think instance, in visit level. in learned it Fix, when new it's largest out that and more is you And model. purchase And ways, traditional I've e-commerce to are in thinking most Even every single out many

For us, really when have differentiation term advantage we we the of get acquire unique competitive that the business client, from and the model such we over right organic reengagement our that them. long

You media results the that you're or from that your of to -- terms that relative that going reduction median spoke client in terms one-to-one in in standpoint we see degradation been where of just client In our a has investment other count. client to. see retailers, to in normally marketing reduction

once us, real that, of but in as to investment it with is that other business also as opposed the much to stream, For on fully client closer to takes able board able a over time. fixed right period fix, organic that time reengagement, is recurring we revenue benefit get that several fix, to that occurs that you're and in happy they're a assess that something e-commerce ensure months another we they subsequent it get and organic where have get we optimized.

to these continue future see build those into to encouraged make we those to continue the by we'll and we into to going invest be methodical appropriate. as to and on results, continue and sure judicious, be we're early So are

clients, I we On a And as from results. Fix calls, few first on side the of early prior a this that's dormancy year levels of point. expect engagement again, said But over of last I we the Aneesha quarters. and dormancy of earlier. saw results client sort data some active just similar and in we think dip on impacted the perspective, add touched last dormancy X more

quarter with where a client here retention that higher seeing first improved and progress in lagging with recent metric. we're We in outcomes is year-over-year. cohorts. But is over both challenge QX quarter dormancy the Fix But saw

overall that's So things X for bit through take of to it's those that a in come going to little metrics. us the see

sense. makes a please. That follow-up, quick Okay. And

a Is So behavioral that what a color you it little in about this is the base? inherently more higher new new different you're much bit a demographic making them higher quality? your . is why difference? clients or difference seeing about quality Can give client

And to add David, Yes. Happy to to any feel context. additional that speak at high level. free a

starts on So terms in going a new clients that been call. it terms market. of is we're just we've in the of last we think conversation again, with, acquiring, started the I how to

the funnel a of hard not for marketing knowledge right such our service that fix subsequent to to into to likely more in high ours, has funnel, a when forth. first potential and of have just have system of between balance they right third upper ship into a has understanding client are clients a they demonstrate really messaging and And team the that working onboarding that and We that the find a the become them, that's the then an interest. them so become brand-driven service, we onboard the fix a client consideration creates and interest they awareness get we have and and and but high level they intent a

terms of as think that that campaign well we've funnel marketing job all in order as spend optimized a in the balance build a and programmatic lower of towards build in such acquire funnel I bottom can to clients the the good consideration we funnel. done finding our media of upper marketing really have So really those in awareness,

talked I receiving about seeing seeing in X-month in in mentioned from is fixes that RPAC callout that that's QX that a are and signs high who new both encouraging hitting that total well, we're think of to And positive compared up months clients helped fixed earlier in We're was the RPAC last think X-month sides we signs that where it. are strong driven RPAC point new the we few and metrics more by the for seeing we to AOV multiyear a first year. boost their as clients RPAC. And also was I that

Our is line Kunal UBS. from [Operator next Instructions] the Madhukar question of from

along same higher the in guide the RPAC should [indiscernible] be line that given AOV why second you quarter, that line the should we on and top Continuing gave that the fiscal guide, flat revenue should are be first simply shouldn't in Q-over-Q will Why the be . the higher the quarter case? come trends improving much on the because of the much terms than second think AOV and higher, much

Yes. Kunal.

to just hearing though, had new bit we understood a But from had as it the we the client I the one think the of also that is then reason RPAC frequency if we're last perspective the Sorry, declined few have a little that one difficulty And drag we highlighted client we've and correctly, And the standpoint quarters. clients clients. is total quarter-over-quarter the because in into I from of on question. see the active the things seen continue things that plays earlier is revenue loss base. that's challenges seeing, well, the more a guide. fixed And I that versus of

probably And be that. factors so that those are impacting would X the

are second extent you some far it. still And do are concerned, the then onetime more quarter? and as with everything? done restructuring restructuring we Got as Or expenses anticipate

material call to small some we're to charges before warehouses out. nothing have We very may out identified the that still it we closing just because but had related

clients, clients. Kunal, active active the also, the point on just more on X And

this expect slightly decline QX, to negative percentage from clarify, be similar higher Just we saw standpoint a in quarter-over-quarter from percentage quarter. we standpoint, a than what the to a

And does the for This in participation conference. I with questions the further you program. Thank your that, no conclude see today's queue. in

day. great may Have You all a disconnect.