Dive Brief:
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Stitch Fix posted a milestone in its turnaround Wednesday, as its number of active clients in Q3 edged up from Q2 to 2.3 million, though that was a nearly 2% drop from a year ago. It was the first quarter-on-quarter increase since 2021, according to William Blair analysts.
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Net revenue per active client rose 6.6% year on year, reaching $578, its highest level yet. That helped drive net revenue up 4.7% to over $340 million, the apparel-box retailer’s fifth straight quarter of growth.
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Gross margin contracted by 50 basis points to 43.7%. Net loss narrowed dramatically to $1.5 million, from over $7 million last year.
Dive Insight:
Under CEO Matt Baer, who arrived three years ago from Macy’s, Stitch Fix has focused less on just stoking growth and more on cultivating active clients who stick around — including wooing back previously engaged customers — and giving them reasons to buy more.
Total active clients and new clients opting for recurring shipments are both growing, he told analysts on Wednesday. In Q3 the company “meaningfully outperformed” the U.S. apparel market, he said, citing Circana data.
The Q3 performance, which includes higher retention rates, more active and new customers and increased sales per active customer, helps vindicate a business model that had been abandoned elsewhere and was increasingly inviting questions and even doubts.
Stitch Fix has leveraged its wealth of data to improve its assortment and customer experience, William Blair analysts said Thursday, noting expanding margins despite increased marketing costs.
“Taken together, these results support growing confidence in a business many investors have largely discounted, as new management appears to have better control of the model and is building a more profitable, sustainable customer base,” they said in a research note. “While the business historically did a poor job identifying and speaking to potential customers, we believe today's Stitch Fix has a clearer vision of who to sell to, and how to do it.”
