Stitch Fix, Inc. SFIX reported first-quarter fiscal 2025 results, wherein both top and bottom lines beat the Zacks Consensus Estimate. The top line deteriorated from the year-earlier quarter. Meanwhile, the bottom line fared better year over year. The company raised its fiscal 2025 view.
The company's fiscal first-quarter performance highlights the ongoing transformation of its business, with results meeting expectations despite challenges in active client engagement. Key initiatives during the quarter included enhancing customer experiences through AI-driven personalization and reimagining product assortments to better align with evolving client preferences.
Additionally, the company expanded its offering flexibility, enabling more tailored product selections and fostering deeper customer relationships. These efforts are part of a broader transformation strategy designed to drive long-term growth. The company has raised its fiscal 2025 outlook, with a clear focus on returning to revenue growth by fiscal 2026.
Stitch Fix, Inc. Price, Consensus and EPS Surprise
Stitch Fix, Inc. price-consensus-eps-surprise-chart | Stitch Fix, Inc. Quote
More on Stitch Fix’s Q1 Results
Stitch Fix reported an adjusted loss of 5 cents per share, narrower than the Zacks Consensus Estimate of an adjusted loss of 14 cents. The metric was also narrower than the loss of 22 cents reported in the year-ago quarter.
SFIX recorded net revenues of $318.8 million, which surpassed the Zacks Consensus Estimate of $306 million. Also, the metric declined 12.6% from the year-ago quarter due to lower net active clients.
The number of active clients engaged in ongoing operations was 2,434,000, marking a year-over-year decline of 18.6%. The average net revenues generated per active client from ongoing operations were $531, representing an increase of 4.9% from the previous year.
Insight Into SFIX’s Margins & Expenses
In the fiscal first quarter, this Zacks Rank #3 (Hold) company’s gross profit declined 9% to $144.8 million from $159.1 million in the year-ago period. However, the gross margin expanded 180 basis points (bps) year over year to 45.4%, supported by improvements in transportation leverage and product margins. We expected the gross profit to decline 14.3% year over year to $136.3 million.
Selling, general and administrative expenses (SG&A) declined 18.1% from $187.8 million in the prior-year quarter to $153.8 million. SG&A expenses, as a percentage of net revenues, were 48.2%, down 330 bps from 51.5% in the prior-year quarter. Advertising was 9.4% of net revenues, up 120 basis points year over year. We anticipated the gross SG&A expenses to decline 17.8% year over year.
Stitch Fix reported an adjusted EBITDA of $13.5 million compared with $8.6 million in the year-ago quarter, reflecting its ongoing cost-management discipline. We note that the adjusted EBITDA margin improved 180 basis points year over year to 4.2% in the quarter under review.
The company ended the fiscal first quarter with cash and cash equivalents of $137.2 million, short-term investments of $116.1 million, no debt, net inventory of $119.1 million and shareholders’ equity of $190.5 million.
The net cash provided by operating activities from continuing operations was $14.3 million and the free cash flow was $9.9 million.
Stitch Fix’s FY25 Guidance
For the second quarter of fiscal 2025, Stitch Fix anticipates revenues to be between $290 million and $300 million, indicating a 9-12% year-over-year decline. Adjusted EBITDA is expected to be in the range of $8-$13 million, indicating a margin of 2.8-4.3%. The gross margin is projected to remain steady between 44% and 45% for both the second quarter and the full year, with advertising expenses constituting approximately 8-9% of revenues.
The outlook for SFIX in fiscal 2025 reflects a cautious yet optimistic approach, with total revenues expected to be between $1.14 billion and $1.18 billion compared with the previous guidance of $1.11-$1.16 billion, indicating a 10-13% year-over-year decline when adjusted to a standard 52-week period. The company is now projecting total adjusted EBITDA to be between $25 million and $36 million with a margin of 2.2-3.1%, up from the prior estimate of $14-$28 million.
SFIX stock has gained 27.1% in the past three months compared with the industry’s 16.3% growth.
Stocks to Consider
Some better-ranked stocks are The Gap, Inc. GAP, Abercrombie & Fitch Co. ANF and Steven Madden, Ltd. SHOO.
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It presently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2025 earnings and sales indicates growth of 41.3% and 0.8%, respectively, from fiscal 2024 reported figures. GAP has a trailing four-quarter average earnings surprise of 101.2%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present.
The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 67.8% and 15%, respectively, from the fiscal 2024 reported levels. ANF has a trailing four-quarter average earnings surprise of 14.8%.
Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 8.6% and 13.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.8%.
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