Stitch Fix, Inc. (SFIX)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY2025 revenue was $312.1M, down 5.5% YoY but above company’s prior guidance, with gross margin at 44.5% and Adjusted EBITDA of $15.9M (5.1% margin) .
• Management raised FY2025 guidance: revenue to $1.225–$1.240B and Adjusted EBITDA to $40–$47M; Q3 FY2025 guidance set at $311–$316M revenue and $7–$10M Adjusted EBITDA .
• Men’s and Freestyle channels returned to YoY growth; AOV rose 9% YoY driven by higher keep rate, AUR, and items per Fix; contribution margin held at 33% for fourth straight quarter .
• Active clients declined 2.6% QoQ to 2.371M (smallest sequential decline in ~3 years) while RPAC increased 4.3% YoY to $537; company ended quarter with $229.8M in cash/investments and no debt .
• Near-term stock narrative/catalyst: above-range revenue plus raised FY outlook and channel growth signals transformation traction; watch for continued AOV strength vs active-client stabilization and tariff/macro risks .

What Went Well and What Went Wrong

What Went Well

• AOV strength (+9% YoY, +4% QoQ), powered by higher keep rate, AUR, and items per Fix; January AOV +16% YoY; contribution margin sustained at 33% .
• Men’s and Freestyle returned to YoY revenue growth; private labels The Commons (top-5 brand in men’s) and Montgomery Post performing well; targeted category wins (women’s dresses/workwear +60% YoY; men’s cashmere +400% YoY; performance workwear +150% YoY) .
• Management raised annual revenue and EBITDA guidance; gross margin outlook maintained at ~44–45% for Q3 and FY; ad spend disciplined at 7.8% of revenue in Q2 .

Management quote: “We exceeded our expectations in Q2 with revenue of $312.1 million and adjusted EBITDA of $15.9 million… both our men's business and our Freestyle channel returned to year-over-year revenue growth.”

What Went Wrong

• Active clients declined 2.6% QoQ and 15.5% YoY to 2.371M; revenue down 5.5% YoY; free cash flow was -$19.4M in Q2 due to working capital timing .
• Sequential revenue down ~2% QoQ; CFO cautioned that strong AOV gains create tougher revenue comps into FY2026 while active clients may continue declining into FY2026 .
• Ongoing macro/tariff uncertainty; although SFIX does not expect margin or price impacts in H2 FY2025, it remains a monitored risk .

Financial Results

Sequential trend (oldest → newest)

Q2 YoY and vs guidance

Operating metrics (oldest → newest)

Notes:

• Net loss from continuing operations in Q2 2025 was $(6.6)M; diluted loss per share $(0.05) .
• Free cash flow in Q2 2025 was $(19.4)M; management reiterated expectation of full-year positive FCF .

Guidance Changes

Management also noted they do not expect tariffs to impact client prices or margins in H2 FY2025, but will continue to monitor macro/tariff risks .

Earnings Call Themes & Trends

Management Commentary

• CEO: “We exceeded our expectations in Q2 with revenue of $312.1 million and adjusted EBITDA of $15.9 million… both our men's business and our Freestyle channel returned to year-over-year revenue growth.”
• CEO: “We launched enhancements to our models that deliver better stylist recommendations… percentage of clients requesting the same stylist for their next fix hit the highest level in nearly 5 years.”
• CFO: “Q2 net revenue… down 5.5% YoY and 2% QoQ… AOV up 9% YoY and 4% QoQ… contribution margin in Q2 was 33%, our fourth consecutive quarter above our historical range of 25% to 30%.”
• CFO: “We are raising our annual revenue and EBITDA guidance… expect both Q3 and full year gross margin to be approximately 44% to 45%.”

Q&A Highlights

• Customer demographics/TAM: Management emphasized attitudinal/behavioral segmentation across income bands; value proposition solves shopping friction, with rebrand and experience changes driving engagement across cohorts .
• Tariffs: Established mitigation plan with vendor/country optionality and brand mix; expect no impact on client prices or margins in H2 FY2025 .
• Gross margin outlook: Seasonal dynamics noted; comfortable with 44–45% for back half and full year .
• Quarter-to-date trends: February/March momentum continued; Flex Fix adoption up ~40% from end of Q1 to end of Q2; January AOV +16% YoY .
• AOV comps vs growth: Six consecutive quarters of AOV increases create tougher two-year stacks; active clients likely continue declining into FY2026, considered in outlook .
• Path to sustainable growth: Opportunity in both engagement/AOV and client growth; aim for long-term growth with both levers .

Estimates Context

• Wall Street consensus (S&P Global) for Q2 FY2025 could not be retrieved at time of preparation due to provider limit constraints; comparisons are made vs company guidance and actuals .
• Implication: Expect sell-side models to raise FY2025 revenue/EBITDA following the above-range Q2 revenue and raised FY guidance; monitor revisions for active client trajectory and AOV sustainability .

Key Takeaways for Investors

• Above-range Q2 revenue and a bold raise to FY2025 guidance (revenue $1.225–$1.240B; Adjusted EBITDA $40–$47M) indicate execution traction in the transformation strategy and support near-term positive sentiment .
• Mix improvements and newness are driving AOV and margins, while Men’s and Freestyle channel growth broaden the top-line base; continued investment in AI/stylist personalization should sustain engagement .
• Active clients remain the key swing factor; sequential declines are moderating, but CFO guides continued modest declines—watch acquisition/retention efficiency and reactivation rates into H2/FY2026 .
• Gross margin stability (44–45%) plus disciplined ad spend (7.8% of revenue in Q2; high end 8–9% for FY) support contribution margin durability despite macro/tariff uncertainty .
• Cash/investments of $229.8M and no debt provide flexibility; Q2 negative FCF reflects inventory timing, but management still expects FY positive FCF .
• Trading setup: Catalyst path via Q3 delivery within guidance and confirmation of H2 margin stability; monitor AOV resilience vs comp headwinds and active-client trend to assess timing of overall revenue re-acceleration (targeted FY2026) .