A month has gone by since the last earnings report for Stitch Fix (SFIX). Shares have lost about 2.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Stitch Fix due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent catalysts for Stitch Fix, Inc. before we dive into how investors and analysts have reacted as of late.
SFIX Q4 Loss Narrower Than Expected, AI Investments Boost Engagement
Stitch Fix reported fourth-quarter fiscal 2025 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. The top line declined from the year-earlier quarter. Meanwhile, the bottom line fared better year over year.
The company’s progress was driven by the successful execution of its transformation strategy, highlighted by enhancements to client experience and product assortment. Investments in AI capabilities, a broader selection of leading brands and the personalized service of its Stylists further strengthened the platform, supporting higher engagement and positioning Stitch Fix for continued growth.
More on Stitch Fix’s Q4 Results
SFIX reported an adjusted loss of 7 cents per share, narrower than the Zacks Consensus Estimate of an adjusted loss of 13 cents. The metric was also narrower than the loss of 12 cents incurred in the year-ago quarter.
Stitch Fix recorded net revenues of $311.2 million, which surpassed the Zacks Consensus Estimate of $301 million. However, the metric decreased 2.6% from the year-ago quarter due to higher net active clients.
The number of active clients engaged in ongoing operations was 2,309,000, marking a year-over-year decline of 7.9%. The average net revenues generated per active client (RPAC) from ongoing operations were $549, representing an increase of 3% from the previous year. This marks the sixth straight quarter of year-over-year revenue per active customer growth, underscoring the strong engagement of clients who are joining and staying with the platform.
Fix average order value (AOV) increased 12% year over year, marking the eighth consecutive quarter of growth. This growth was fueled by a higher number of items per Fix, reflecting greater adoption of larger Fix offerings, as well as a 7.6% year-over-year increase in average unit retail, supported by the introduction of fresh, trend-right merchandise across the assortment.
Insight Into SFIX’s Margins & Expenses
In the fiscal fourth quarter, the company’s gross profit declined 4.7% to $135.7 million from $142.5 million in the year-ago period. Also, the gross margin decreased 100 basis points (bps) year over year to 43.6%. The year-over-year decrease was primarily attributable to higher transportation costs stemming from carrier rate increases, including those from USPS, as well as a mix shift toward non-apparel categories.
Selling, general and administrative expenses (SG&A) declined 20.3% from $184.4 million in the prior-year quarter to $146.9 million. SG&A expenses, as a percentage of net revenues, were 47.2%, down significantly from 57.7% in the prior-year quarter.
Advertising expense represented 9.5% of revenues in the fourth quarter, up 50 basis points from the prior-year period, reflecting the company’s broader reinvestment in revenues and active client growth while maintaining a disciplined approach to spending.
Stitch Fix reported an adjusted EBITDA of $8.7 million compared with $9.5 million in the year-ago quarter, reflecting its ongoing cost-management discipline. We note that the adjusted EBITDA margin declined 20 bps year over year to 2.8% in the quarter under review.
SFIX’s Financial Snapshot: Cash, Inventory & Equity Overview
The company ended the fiscal fourth quarter with cash and cash equivalents of $114 million, short-term investments of $120.9 million, no debt, net inventory of $118.4 million and shareholders’ equity of $203 million.
The net cash provided by operating activities was $7 million and the free cash was $2.8 million in the fiscal fourth quarter.
Stitch Fix’s FY26 Guidance
For the first quarter of fiscal 2026, Stitch Fix anticipates net revenues between $333 million and $338 million, representing year-over-year growth of 4.4-6%. Adjusted EBITDA is projected to be $8-$11 million, implying an adjusted EBITDA margin of 2.4-3.3%.
The outlook for fiscal 2026 reflects a modest growth trajectory, with total revenues expected to range from $1.28 billion to $1.33 billion, indicating a 1-5% increase over the prior year. The company projects a full-year gross margin of 43-44% and adjusted EBITDA of $30-$45 million, suggesting a margin of 2.3-3.4%. Advertising expenses are forecast to be 9-10% of revenues, and Stitch Fix expects to generate positive free cash flow for the full fiscal year.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
The consensus estimate has shifted 22.22% due to these changes.
VGM Scores
At this time, Stitch Fix has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Stitch Fix has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Stitch Fix, Inc. (SFIX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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