Stitch Fix Earnings Call for Q4 2024
Date: September 24, 2024
Time: 5:00 p.m. ET
Participants:
- Hayden Blair, Senior Director, Investor Relations and Treasury
- Matt Baer, Chief Executive Officer
- David Aufderhaar, Chief Financial Officer
Overview
Stitch Fix (NASDAQ: SFIX) hosted its Q4 2024 earnings call to discuss the financial results for the period ending June 30, 2024. During the call, forward-looking statements were made, which involve risks and uncertainties.
Key Points from the Earnings Call:
Opening Remarks:
- Hayden Blair opened the call, welcomed participants, and provided forward-looking statements disclaimers.
CEO Matt Baer’s Remarks:
- Matt Baer reviewed his first year as CEO, highlighting the company’s progress and the transformation strategy focused on embedding retail best practices, increasing operational efficiency, and optimizing the organizational structure.
- Baer emphasized efforts to reimagine client engagement and detailed initiatives that resulted in expanded gross margins and positive adjusted EBITDA for the last seven quarters.
- Baer shared insights on financial health, noting $247 million in cash, cash equivalents, and investments with no debt. Expectations for returning to revenue growth by the end of FY ’26 were underscored.
CFO David Aufderhaar’s Remarks:
- David Aufderhaar discussed FY ’24 financial performance, including a 16% year-over-year decline in net revenue to $1.34 billion and a decrease in active clients by 20%.
- FY ’24 gross margins improved by 190 basis points to 44.3%. Adjusted EBITDA for the year was $29.3 million, reflecting a 2.2% margin, and free cash flow was $14.2 million.
- Aufderhaar provided FY ’25 guidance, anticipating total revenue between $1.11 billion and $1.16 billion and adjusted EBITDA between $14 million and $28 million.
Strategic Initiatives:
Transformation Strategy:
- Stitch Fix’s strategy involves three phases: rationalization, build, and growth.
- The rationalization phase involved exiting the UK market, closing fulfillment centers, and optimizing corporate headcount, leading to over $100 million in SG&A savings in FY ’24.
- The company is currently in the build phase, focused on improving client experience and leveraging AI and data science.
Client Experience Enhancements:
- Introduction of StyleFile for personalized styling, showing a 5% uplift in conversion.
- Increased visibility of stylists with personalized profiles, enhancing client-stylist relationships and resulting in a 12% increase in engagement when photos were shared.
- Expansion of the fixed model to allow up to eight items per box, significantly increasing revenue per order.
Product Assortment:
- Addition of thousands of new styles and the launch of two new private brands, Montgomery Post and The Commons.
- Extension of existing private brands, Market & Spruce, We Wander, and 01.Algo, to include kids’ styles.
Brand and Marketing Efforts:
- Refresh of Stitch Fix’s brand identity to strengthen connections with clients.
- Targeted marketing efforts, such as campaigns during Teacher Appreciation Week, resulting in a new client conversion rate double the average.
Board of Directors:
- Addition of retail leaders Tim Baxter and Fiona Tan to the board, bringing expertise in apparel, retail, merchandising, and retail technology.
Financial Performance and Outlook:
Q4 Financial Performance:
- Q4 net revenue was $319.6 million, a 12% year-over-year decline.
- Revenue per active client grew to $533, a 5% year-over-year increase.
- Adjusted EBITDA for Q4 was $9.5 million, a 3% margin.
FY ’25 Outlook:
- Total revenue expected between $1.11 billion and $1.16 billion.
- Adjusted EBITDA anticipated to range from $14 million to $28 million.
- Gross margins projected to be approximately 44% to 45%, with advertising expenses around 8% to 9% of revenue.
Strategic Focus for FY ’25:
- Emphasis on acquiring healthy clients and engaging existing ones.
- Investment in areas predictive of sustainable, profitable growth.
Questions & Answers:
- Analysts posed questions regarding revenue growth predictions, client retention strategies, the impact of macroeconomic conditions, and sustainability of cost savings.
The call concluded with a reaffirmation of Stitch Fix’s commitment to its transformation strategy and confidence in returning to sustainable, profitable growth by FY ’26.
