SFIX Q1 Loss Meet, Revenues Beat on Robust Client Engagement

Stitch Fix, Inc. SFIX reported first-quarter fiscal 2026 results, wherein the bottom line matched the Zacks Consensus Estimate while the top line beat. The top line also increased from the year-earlier quarter.

Detailing Stitch Fix’s Q1 Results

SFIX reported an adjusted loss of five cents per share, which met the Zacks Consensus Estimate. The metric also remained flat with the year-ago quarter’s reported figure. The company recorded net revenues of $342.1 million, which surpassed the consensus estimate of $336 million. Also, the metric increased 7.3% from the year-ago quarter. SFIX’s commitment to client engagement and operational discipline bolstered revenues and market share gains.

The number of active clients engaged in ongoing operations was 2,307,000, marking a year-over-year dip of 5.2% and 0.1% quarter over quarter. The average net revenues generated per active client (RPAC) from ongoing operations were $559, representing an increase of 5.3% from the previous year, surpassing our estimate of $558. This marks the seventh 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 roughly 10% year over year, marking the ninth consecutive quarter of growth. This growth was fueled by a larger fix offerings and enhanced assortment resonating with clients that better serve their outfitting needs. The company is seeing gains from the disciplined execution of its transformation strategy. SFIX is leveraging the latest in generative AI technology, the expertise of human stylists and its assortment of key brands to offer the most client-centric and personalized shopping experience. It is reinforcing its competitive position and expanding market share in its core apparel business. The company’s strategic expansion into non-apparel categories is further aiding growth.

The company is experiencing broad-based growth in both its women's and men's businesses. In women's, it witnessed a solid start to fall sales in key seasonal categories like sweaters, coats, jackets and vests, which together rose 19% year over year. Sneakers, which surged 63% year over year, backed by New Balance, Gola and adidas, and Wide leg Denim increased 217%, thanks to outsized performance in Dave's Denim, Pistola and Madewell. 

Seasonal categories, including fleece, sweaters and outerwear, grew 57% on a combined basis, while denim rose 30% and sneakers jumped 24% year over year. Brands such as Travis Matthew and Vuori registered outsized growth and were client favorites for style, versatility and quality. The new brands like Katon, Industry and NN07 were introduced with more style and trend into the assortment. SFIX’s expanded relevance in activewear and athleisure, footwear and accessories positions it to capture meaningful wallet share. Based on the current client base, management expects a fair share in these categories to represent roughly $1 billion of incremental revenues.

Insight Into SFIX’s Margins & Expenses

In the fiscal second quarter, this Zacks Rank #2 (Buy) company’s gross profit rose 3.1% to $149.3 million from $142.5 million in the year-ago period. Also, the gross margin decreased 180 basis points (bps) year over year to 43.6%. We expected the gross profit to rise 2% year over year to $147.6 million.

Stitch Fix, Inc. Price, Consensus and EPS Surprise

Stitch Fix, Inc. price-consensus-eps-surprise-chart | Stitch Fix, Inc. Quote

Selling, general and administrative expenses (SG&A) rose 2.7% to $157.9 million from the prior-year quarter. SG&A expenses, as a percentage of net revenues, were 46.2%, down 200 bps from 48.2% in the prior-year quarter. We anticipated SG&A expenses to grow 2.2% year over year in the fiscal first quarter.

Advertising expense represented 9.9% of revenues in the first quarter, up 50 basis points from the prior-year period, reflecting the company’s broader reinvestment in revenues and active client growth. 

Stitch Fix reported an adjusted EBITDA of $13.4 million compared with $13.5 million in the year-ago quarter, reflecting its ongoing cost-management discipline. We note that the adjusted EBITDA margin declined 30 bps year over year to 3.9% in the quarter under review.

SFIX’s Financials: Cash, Inventory & Equity Overview

The company ended the fiscal first quarter with cash and cash equivalents of $114.5 million, short-term investments of $129.7 million, no debt, net inventory of $141.5 million and shareholders’ equity of $204.1 million.

The net cash provided by operating activities was $10.9 million and the free cash was $5.6 million in the fiscal first quarter.

Stitch Fix’s Q2 & FY26 Guidance

Management raised fiscal 2026 guidance, reflecting the positive business trends. For fiscal 2026, it projects total revenues in the range of $1.32-$1.35 billion, reflecting growth of 4.2-6.5% from the last fiscal. The total adjusted EBITDA is likely to be between $38 million and $48 million, with a margin of 2.9-3.6%. It expects positive free cash flow for the fiscal year. Fiscal 2026 gross margin is likely to be roughly 43-44% and advertising costs are expected to be between 9% and 10% of revenues.

For Q2, Stitch Fix expects total revenues of $335-$340 million, representing year-over-year growth of 7.3-8.9%. It forecasts adjusted EBITDA between $10 million and $13 million, with a margin of 3-3.8% for the fiscal second quarter. Resilience in client demand will continue to act as a tailwind. It expects active client year-over-year growth rates to continue improving in the fiscal second quarter. It remains on track to deliver a sequential rise in net adds in Q3 FY'26. 

Given the existing trends in consumer confidence and the inflation impacts on discretionary spend, management assumes certain headwinds in the back half. The company will also witness tough AOV comps as it starts lapping the double-digit growth seen in the second half of fiscal 2025.

Management is confident in its strategy, which prioritizes sustainable growth. The company is investing in AI and innovation, which is likely to boost solid client engagement and retention in time.

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