Stitch Fix, Inc. (SFIX)·Q1 2025 Earnings Summary

Executive Summary

• Q1 FY2025 net revenue was $318.8M, above the prior Q4 guide ($303–$310M), and adjusted EBITDA was $13.5M as contribution margin held ~34% and gross margin expanded to 45.4% .
• Management raised FY2025 guidance: net revenue to $1.14–$1.18B (from $1.11–$1.16B) and adjusted EBITDA to $25–$36M (from $14–$28M); Q2 guidance calls for $290–$300M revenue and $8–$13M adjusted EBITDA .
• Active clients declined 3% q/q to 2.434M but reactivations rose 17% y/y, and RPAC increased 4.9% y/y to $531; gross margin improved 180 bps y/y on transportation leverage and product margins .
• Near-term catalysts: “Flex Fix” expansion (5→up to 8 items) driving higher AOVs, increased “newness” in assortment (penetration up >40%), AUR up 6% y/y, and personalized marketing improving CPA and conversion .

What Went Well and What Went Wrong

What Went Well

• “We exceeded our expectations in the first quarter on the top and bottom lines” (CEO); adjusted EBITDA of $13.5M and contribution margin ~34% supported by healthier gross margins and warehouse/styling leverage .
• Assortment “newness” penetration up >40%; AUR up 6% y/y; denim wide-leg/boot-cut sales up 250% y/y; new private labels (The Commons, Montgomery Post) and national brands showed positive comps .
• Flex Fix increased client engagement and AOV (clients requesting ~40% more items; ~50% greater AOV vs 5-item Fix), and recurring shipments rose sequentially for the first time in >3 years .

What Went Wrong

• Revenue decreased 12.6% y/y to $318.8M; active clients fell to 2.434M (-19% y/y, -3% q/q); diluted loss per share remained negative at $(0.05) .
• Advertising rose to 9.4% of revenue (+120 bps y/y, +40 bps q/q) as SFIX leaned into ROAS opportunities; inventory up 22% q/q ahead of fall/winter receipts (working capital headwind) .
• Free cash flow was positive $9.9M for Q1 but management expects Q2 FCF negative given inventory timing; adjusted EBITDA margin guidance for Q2 moderates to 2.8–4.3% .

Financial Results

Notes: Consensus unavailable via S&P Global due to API limits, so estimate comparisons are not provided.

KPIs

Operating and Cash Metrics

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “We exceeded our expectations in the first quarter on the top and bottom lines…clients are responding to the newness in our assortment and improvements to our client experience” .
• CEO: “Newness penetration increased more than 40%…AUR up 6% y/y…women’s denim wide leg and boot cut styles up 250% from last year” .
• CEO: “Clients who choose [Flex Fix] are requesting nearly 40% more items…driving approximately 50% greater AOVs than traditional 5-item Fixes” and “recurring shipments…for the first time in more than 3 years, achieved a sequential increase” .
• CFO: “Contribution margin of approximately 34%…warehouse ops cost/order down 23% y/y…styling cost/Fix down 21% y/y…advertising at 9.4% of revenue” .
• CFO: “We are updating annual revenue to $1.14–$1.18B and adjusted EBITDA to $25–$36M…Q2 revenue $290–$300M and adjusted EBITDA $8–$13M…gross margin ~44–45%” .

Q&A Highlights

• Spend per client drivers: assortment “newness,” seasonal readiness, Flex Fix expansion, and pricing architecture; Fix AOV +6% y/y and +11% q/q; AUR upside from earlier fall/winter shift .
• Private brands vs national brands: private brands ~40–50% of portfolio; higher keep rates/margins; national brands also resonating (Vuori, Marine Layer, Vineyard Vines, etc.) .
• Active client file: focus on “healthy” clients, engagement, LTV; Q2 expected down 2–3% q/q; 90-day LTV highest in almost 3 years; anticipate q/q increase in active clients during FY26 .
• AI-enabled engagement: AI is “in our DNA,” leveraged for promotions and reengagement while sustaining contribution margins .
• Reactivations: +17% y/y; second consecutive quarter of y/y growth; key driver of slight beat vs internal active client expectations .

Estimates Context

• Wall Street consensus (S&P Global) for Q1 FY2025 EPS and revenue was unavailable due to access limits at the time of retrieval; therefore estimate comparisons could not be provided. We attempted to fetch “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” and related metrics but were unable to obtain values from S&P Global; comparison to estimates is not available [GetEstimates error: Values retrieved from S&P Global were unavailable].
• Company results did exceed its own guidance ranges for Q1 revenue and EBITDA (as previously issued in Q4 FY2024) .

Key Takeaways for Investors

• Mix/assortment change is working: substantial “newness” penetration, higher AUR, and national/private brand traction are lifting AOV and margins; this is central to turning the top line by FY26 .
• Flex Fix and personalized marketing are durable levers to raise engagement and AOV, evidenced by sequential recurring shipment growth and TV-driven CPA/conversion improvements .
• Structural cost leverage (warehouse/styling) plus transportation/product margin gains underpin contribution margin stability despite higher ad intensity (9.4% of revenue in Q1) .
• Near term, inventory timing will pressure Q2 FCF and EBITDA margin to 2.8–4.3%, but FY2025 guidance was raised, with gross margin expected ~44–45% for both Q2 and FY25 .
• Active client trajectory is still negative, but declines are moderating; reactivations +17% y/y and RPAC +4.9% y/y provide signs of healthier client economics .
• Watch for continued AUR/AOV expansion and reactivation momentum into Q2/Q3; execution on men’s, brand expansion, and “newness” cadence are likely narrative drivers in the next prints .
• Without published Street consensus in this analysis, anchor near-term expectations to company guidance and margin commentary; upside scenarios hinge on sustained AOV/AUR gains and stabilization in active clients .