Stitch Fix's Q4 2025: Contradictions Emerge on Active Client Growth, Tariff Impact on AOV, and Private Brand Influence

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

Date of Call: September 24, 2025

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 $8M–$11M.
• FY26 gross margin expected at 43%–44%.
• Advertising expected at 9%–10% of revenue in FY26.
• Active client YOY growth rates to improve; QoQ net adds to inflect positive in Q3 FY26.
• Q1 active clients roughly flat to down ~0.5% QoQ.
• Shifting compensation mix toward cash (pressures adjusted EBITDA; benefits net income).

Business Commentary:

* Revenue Growth and Market Share: - Stitch Fix reported revenue of $311.2 million for Q4, marking a 4.4% adjusted revenue growth and their second consecutive quarter of top-line growth. - The growth was driven by improvements in client experience, assortment, and a strategic focus on personalized shopping.

• Active Client Engagement and Retention:
• The company achieved six consecutive quarters of year-over-year increases in revenue per active client, which reached $549.

• This trend is attributed to acquiring and retaining highly engaged clients, reflecting the effectiveness of their client-centric strategy.

• Men's and Non-Apparel Category Performance:

• Stitch Fix's men's business delivered double-digit revenue growth in Q4, contributing to a positive full-year performance.

• Expansion into non-apparel categories and the addition of established brands were key drivers, with footwear and athleisure leading the growth.

• AI Integration and Client Experience Enhancements:

• The company is leveraging generative AI to improve personalization and client engagement, which includes the rollout of an AI style assistant and a style visualization feature.

• These innovations help Stitch Fix meet clients' individual needs more precisely, enhancing the overall client experience.

• Cost Management and Financial Discipline:

• Stitch Fix achieved a significant reduction in SG&A spend by $124 million in FY '25, leading to an adjusted EBITDA margin increase of 170 basis points.
• This improvement is due to operational efficiencies, strategic cost management, and a focus on sustainable growth.

Sentiment Analysis:

• “Revenue of $311.2 million exceeded our guidance… second consecutive quarter of revenue growth.” “We once again gained market share in the U.S. apparel market.” “FY ’26 guidance anticipates a return to full year revenue growth.” “Adjusted EBITDA… $8.7M… ahead of guidance.” “We generated $9.3M of free cash flow… ended the year with $242.7M in cash… and no debt.”

Q&A:

• Question from Dana Telsey (Telsey Advisory Group LLC): Where are you seeing the most growth from new brands, and how are tariffs impacting AOV?
  Response: Growth is led by footwear, denim, athleisure, and established brands across women and men (men up double digits), and AOV/AUR increases are not driven by tariffs due to effective mitigation.

• Question from Dana Telsey (Telsey Advisory Group LLC): From whom are you taking share, and how are you planning for the holiday period?
  Response: They expect continued share gains via superior personalization and will lean into holiday with flexibility features (e.g., Family Accounts), stronger assortment/CRM; active client net adds expected to inflect positive in Q3 (Q1 roughly flat to -0.5%).