US' Stitch Fix returns to growth but client base shrinks in Q3 FY25

Despite the revenue growth, Stitch Fix's active client base declined by 10.6 per cent year-over-year to 2.35 million. Net revenue per active client increased by 3.2 per cent to $542. However, the gross margin dropped by 130 basis points to 44.2 per cent, driven by lower product margins. The company reported a net loss of $7.4 million, or $0.06 per diluted share, the company said in a media release.

Adjusted EBITDA stood at $11 million, with a margin of 3.4 per cent, while free cash flow was $16 million. Stitch Fix ended the quarter with $242.1 million in cash and no debt.

“Stitch Fix delivered strong third quarter results, marked by our overall return to year-over-year revenue growth,” said Matt Baer, CEO, Stitch Fix. “Our performance, which exceeded expectations, is the direct result of the strength of the Stitch Fix value proposition and the team's disciplined execution of our strategy. Now in the growth phase of our transformation, we are focused on cementing our role as the retailer of choice for apparel and accessories by consistently delivering the most client-centric and personalised shopping experience.”

Looking ahead, Stitch Fix forecasts Q4 revenue between $298 million and $303 million, down 5.2–6.7 per cent year-over-year, or flat when adjusted for the extra week in FY24. Full-year net revenue is expected to total $1.254–1.259 billion, down 5.9–6.2 per cent (or 4.3–4.7 per cent on a 52-week adjusted basis). The company expects to end FY25 with adjusted EBITDA between $43 million and $47 million and remain free cash flow positive.

Stitch Fix anticipates full-year gross margin to land mid-range between 44 and 45 per cent, and advertising spend to be at the high end of 8–9 per cent of revenue.

ALCHEMPro News Desk (KD)