Stitch Fix’s Gross Margin, RPAC Forecasts Clash With Prior Guidance in 2026 Q2 Earnings Call

Date of Call: Mar 11, 2026

Financials Results

• Revenue: $341.3 million, up 9.4% year-over-year
• Gross Margin: 43.6%, slightly above the midpoint of FY26 range of 43%-44%

Guidance:

• Full year FY26 total revenue expected between $1.33 billion and $1.35 billion.
• Full year Adjusted EBITDA expected between $42 million and $50 million.
• Full year gross margin expected to be approximately 43%-44%.
• Full year advertising costs expected between 9% and 10% of revenue.
• Expect to be free cash flow positive for the full year.
• Q3 revenue expected between $330 million and $335 million.
• Q3 Adjusted EBITDA expected between $7 million and $10 million.

Business Commentary:

Revenue Growth and Market Performance:

• Stitch Fix reported revenue of $341.3 million for Q2 FY2026, up 9.4% year-over-year.
• The growth contrasts with a 0.5% contraction in the total U.S. apparel, footwear, and accessories market, highlighting Stitch Fix's market share gains.
• The increase was driven by the Fix channel, leveraging unique curation capabilities and expert stylists, with strong demand across categories like activewear, footwear, and accessories.

Enhanced Average Order Value (AOV) and Assortment:

• Fix Average Order Value rose 9.8%, driven by more items per Fix and higher Average Unit Retail (AUR).
• AUR grew 7.7% year-over-year, the sixth consecutive quarter of growth, due to improved assortment quality and favorable mix.
• The growth in AOV was supported by increased flexibility in Fix formats, including larger Fixes and themed Fixes, with average order values nearly double that of traditional Fixes.

Private Brand Performance and Consumer Cohorts:

• Revenue from private brands increased significantly, with brands like Market & Spruce and Montgomery Post up more than 35% year-over-year.
• Sales from new styles rose approximately 50% year-over-year, reflecting a focus on newness and trendiness.
• The strong performance across income cohorts and improved private brand offerings contributed to increased client engagement and revenue per active client reaching a record $577.

Active Client Trends and Retention:

• The company ended Q2 with 2.3 million active clients, marking the seventh consecutive quarter of improvement in year-over-year active client growth rates.
• New clients grew year-over-year for the second consecutive quarter, and three-month LTVs for new clients have grown for ten consecutive quarters.
• Improved client retention, with the highest retention rate in nearly four years, was driven by enhanced client experience and retention initiatives.

Strategic Focus on AI and Client Engagement:

• Stitch Fix is leveraging AI through tools like the AI Style Assistant and Stitch Fix Vision, which has led to a significant lift in Freestyle spend.
• AI-powered styling and data science integration enhance personalization, enabling better client engagement and increased sales.
• Continued investment in AI capabilities and merchandise mix aims to drive durable revenue growth while preserving margin integrity.

Sentiment Analysis:

Overall Tone: Positive

• Management stated 'Q2 was another strong quarter, marked by our fourth consecutive quarter of year-over-year revenue growth' and 'We’re incredibly pleased with the strong results we delivered this quarter and the improved guidance that we shared for the back half of the year.' They also noted 'We continue to successfully execute our transformation strategy' and 'We’re confident the growth in our business will continue and that this growth will be sustainable.'

Q&A:

• Question from Dana Telsey (Telsey Advisory Group): Nice to see the progress. Wanted to get some more color on what you’re seeing from the current consumer. It sounds like the AURs are being well accepted. Is that existing brands, new brands? You’ve brought on new brands over the past couple months. How has that gone? Would love to know more about active client growth and sequentially how you’re thinking about it going forward.
  Response: Consumer strength is broad-based across all income cohorts. AUR growth is driven by improved assortment quality, with private brands resonating strongly and outsized new style sales up ~50% YOY. On active clients, results were in line with expectations, seasonally softer in Q2; confident in sequential net adds in Q3, with focus on sustainable, profitable growth and returning to YOY growth in FY27.

• Question from Dylan Carden (William Blair): The comments around revenue per decelerating as you lap harder comparisons. I mean, you already kind of started to lap some of those comparisons, so can you give a sense sort of what’s behind that, or is that just sort of general caution?
  Response: Back half guide reflects more challenging AOV comps (Q3/Q4 last year grew 10%/12%), expects AOV growth of 4%-6% in H2; holiday strength in Q2 created pull-forward into Q3; macro environment and consumer sentiment volatility also considered. Focus remains on durable AOV and client growth.

• Question from Jessica Tian (Bernstein): First on the H2 guide, it looks like the Q2 beat on Adjusted EBITDA didn’t fully flow through to the full year outlook. Should we read that primarily as conservatism on your part, or is there anything in the underlying margin trends that caused you to hold back some of that upside? Second, on the Q3 active client inflection, sequential inflection, with new clients growing year-over-year for the second consecutive quarter and five-year low dormancies last quarter, can you talk about what’s driving the expected sequential increase in the adds?
  Response: Full year EBITDA guide was increased (low end by ~$4M, high end by $2M), indicating healthy flow-through. Sequential active client adds in Q3 are driven by strength in new acquisition, re-engaged clients, and improved retention, reflecting a methodical focus on rebuilding a healthy client base.

• Question from David Bellinger (Mizuho): I want to ask on the Q3 guidance, revenue growth up something above 2% at the midpoint. I think if I’m hearing you correctly, a lot of that deceleration from this quarter has to do with the lapping positive revenue growth last year, some of the AOV uptick. Is there anything else that explains the deceleration? Any other context around the external pressures that you’ve started to factor into the guidance? You got gas prices moving up. Is any of that starting to show up in the business?
  Response: Q3 deceleration primarily due to challenging AOV comps and a strong holiday pull-forward in Q2; macro factors like gas prices and consumer sentiment were also considered. Despite this, Q4 guide implies revenue growth acceleration to ~4% midpoint. Business is well-positioned to serve clients during wallet constraints due to deep client relationships and broad assortment.

• Question from David Bellinger (Mizuho): My second question, I wanna ask about GLP-1 usage. That seems to be a relatively new and positive customer driver. Can you help frame up any exposure to the business? Are these customers more sticky, more engaged, and can you simply get more of them as GLP-1 usage becomes increasingly popular?
  Response: Service is well-suited for clients undergoing body transformation, including those on GLP-1; marketing efforts have successfully targeted this demographic. Client mentions of weight loss in Fix notes tripled over two years and surged 75% YOY in Q2, showing strong resonance and confidence in serving this population.

Contradiction Point 1

Gross Margin Outlook

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

Dylan Carden (William Blair) - Dylan Carden (William Blair)

2026Q2: The back-half guide reflects...prudence around macro headwinds (consumer sentiment, gas prices). The full-year guide was raised, showing continued momentum. - [David Aufderhaar](CFO) & [Matt Baer](CEO)

What is behind the deceleration in revenue per active client (RPAC) in the back half due to lapping comparisons, is the assortment for the women’s business where you want it, and how should we think about repeat customers increasing their wallet share? - David Bellinger (Mizuho)

20251205-2026 Q1: For Q2, gross margins are expected to be similar to Q1, around the midpoint of the full-year guidance range (43-44%). - [Matt Baer](CEO) & [David Aufderhaar](CFO)

Contradiction Point 2

RPAC (Revenue Per Active Client) Growth Trajectory

It involves changes in financial forecasts, specifically regarding the trajectory and drivers for RPAC, a key metric for customer engagement and revenue growth.

What are your thoughts on the company's recent performance? - Dylan Carden (William Blair)

2026Q2: The back-half guide reflects more challenging AOV comparisons... expects AOV growth of 4-6%... The full-year guide was raised, showing continued momentum. - [David Aufderhaar](CFO) & [Matt Baer](CEO)

What factors are contributing to the deceleration in RPAC, the status of the women’s business assortment, and how to think about repeat customers increasing their wallet share? - Jay Sole (UBS)

20251205-2026 Q1: The drivers of the seventh consecutive quarter of net revenue per active client (RPAC) growth (up 5% YoY)... AOV growth is fueled by: a) More items per fix... and b) A mix shift into higher-priced categories (AUR up 3% YoY). - [Matt Baer](CEO) & [David Aufderhaar](CFO)

Contradiction Point 3

Growth Drivers and Market Share

It reflects inconsistencies in the company's stated growth drivers, shifting from expansion into new categories and market share gains to focus on assortment quality and brand additions.

Dana Telsey (Telsey Advisory Group) - Dana Telsey (Telsey Advisory Group)

2026Q2: Consumer strength is broad-based... AUR growth is driven by improved assortment quality, particularly in private brands... Strategic additions of national brands... are resonating well. - [Matt Baer](CEO)

What are your observations on current consumer acceptance of AUR for existing versus new brands, and could you provide an update on active client growth and sequential expectations? - Dana Telsey (Telsey Advisory Group LLC)

2025Q4: Growth is driven by two key factors: 1) Expansion into non-apparel categories and 2) Incorporation of established brands... The company is gaining market share from retailers... - [Matt Baer](CEO)

Contradiction Point 4

Consumer AOV Growth Trajectory

It involves changes in financial forecasts, specifically regarding AOV growth expectations, which are crucial for understanding consumer spending patterns and revenue sustainability.

Dylan Carden (William Blair) - Dylan Carden (William Blair)

2026Q2: AOV growth of 4-6%... The back-half guide reflects more challenging AOV comparisons (lapped 10% and 12% growth in Q3/Q4 last year) - [David Aufderhaar](CFO)

What factors are contributing to the deceleration in revenue per active client (RPAC) in the back half due to lapping comparisons, is the product assortment aligned with current goals particularly for the women’s business, and how should we assess the potential for repeat customers to increase their wallet share? - David Bellinger (Mizuho)

2025Q3: The return to growth was driven by a 10% increase in AOV (7th consecutive quarter), fueled by larger Fixes... This momentum continues into May. FY26 will have tougher comps due to this strong performance. - [David Aufderhaar](CFO)

Contradiction Point 5

Macroeconomic Environment's Impact on Growth Strategy

It reflects differing characterizations of the macro environment's effect on growth and client focus, shifting from a share gain opportunity to a factor requiring prudence.

David Bellinger (Mizuho) - David Bellinger (Mizuho)

2026Q2: Macro headwinds (consumer sentiment, gas prices) were also considered in the back-half guide. However, Stitch Fix is uniquely positioned to maintain performance in a challenging wallet environment... - [David Aufderhaar](CFO)

What factors, beyond lapping strong AOV growth and the holiday pull-forward, are contributing to the deceleration in Q3 revenue growth guidance, including the impact of external pressures like rising gas prices and Stitch Fix's exposure to GLP-1 usage on customer stickiness? - Aneesha Sherman (Sanford C. Bernstein & Co., LLC.)

2025Q3: The macro environment is a share gain opportunity. The personalized service and client-stylist relationships allow Stitch Fix to adapt to budget needs. - [Matthew Baer](CEO)