Stitch Fix's Q4 2025 Earnings Call: Contradictions on Tariff Impact, Active Client Growth, Freestyle's Role, and Assortment Strategy

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: $311.2M, up 4.4% YOY (adjusted) and down 4.2% sequentially
• Gross Margin: 43.6%, down 100 bps YOY and down 60 bps sequentially

Guidance:

• FY26 revenue expected at $1.28B–$1.33B (return to full-year growth).
• FY26 adjusted EBITDA expected at $30M–$45M; free cash flow positive.
• Q1 revenue expected at $333M–$338M; Q1 adjusted EBITDA at $8M–$11M.
• FY26 gross margin expected at 43%–44% (higher transportation costs, mix/investments).
• Advertising to be 9%–10% of revenue.
• Expect QoQ net active-client adds in Q3 FY26; Q1 clients roughly flat to down ~0.5%.
• Shifting comp mix from equity to cash (pressure on adj. EBITDA; positive for net income).

Business Commentary:

* Revenue Growth and Client Engagement: - Stitch Fix reported revenue of $311.2 million for Q4, marking the second consecutive quarter of growth and exceeding their guidance, with a 4.4% adjusted revenue growth. - Growth was driven by improved client experience, increased Fix average order value (up 12% year-over-year), and enhanced assortment with increased demand for non-apparel categories and established brands.

• Active Client Growth and Retention:
• The company maintained 2.3 million active clients at the end of Q4, with active client year-over-year growth rates improving for five consecutive quarters.

• This was attributed to the strong performance of the core Fix channel, strategic acquisition of new clients with high LTVs, and better retention of existing clients.

• Assortment Expansion and Brand Collaboration:

• Stitch Fix expanded its assortment by adding more than 50 new brands, including Barley, Favorite Daughter, and Abercrombie Kids, enhancing their private brand development process using generative AI.

• This initiative has improved client engagement and contributed to the growth in revenue and active client retention.

• Operational Efficiency and Cost Management:

• Stitch Fix achieved its highest full-year contribution margin in the last decade, with a 44.4% gross margin, driven by transportation leverage and efficiency improvements across operations and styling teams.
• The company also reduced overall SG&A spend by $124 million in FY25, reflecting their disciplined approach to cost management and operational optimization.

Sentiment Analysis:

• Revenue of $311.2M exceeded guidance; second consecutive quarter of growth. Market share gains cited. AOV up 12% YOY and AUR up 7.6%. FY25 adjusted EBITDA margin expanded 170 bps; free cash flow positive with no debt. FY26 outlook calls for a return to full-year revenue growth and continued client momentum.

Q&A:

• Question from Dana Tulsey (Tulsey Advisory Group): Where is the most growth coming from with added brands/non-apparel, and how are tariffs affecting AOV?
  Response: Growth is led by non-apparel (notably footwear), trend-right assortment, larger Fix penetration, and stronger national brands; tariffs had negligible impact on AOV/AUR due to effective mitigation.

• Question from Dana Tulsey (Tulsey Advisory Group): From whom are you taking share, and how are you planning for holiday?
  Response: Share gains come broadly from retailers lacking personalization; holiday plan builds on flexibility (larger/themed Fixes, family accounts), stronger assortment, AI-driven features (Vision, Stylist Connect), and enhanced CRM/promo tools.