Stitch Fix, the personal styling service, recently held its fourth quarter and full fiscal year 2023 earnings call, during which the company discussed its future strategy and financial performance. Despite a 21% decline in net revenue for fiscal 2023, Stitch Fix reported improvements in adjusted EBITDA and free cash flow, as well as an expansion in gross margin.
During the earnings call, CEO Matt Baer and CFO David Aufderhaar emphasized the company’s focus on personalization algorithms, artificial intelligence, machine learning, and data science as integral parts of its business model. They also outlined plans to enhance the client experience, strengthen profitability, and drive growth.
Stitch Fix anticipates a total US revenue for fiscal 2024 between $1.3 billion and $1.37 billion, with adjusted EBITDA between $5 million and $30 million. In order to achieve cost savings of approximately $50 million, the company has made the decision to wind down its UK operations and consolidate its US warehouse locations from five to three.
Baer stressed the company’s commitment to delivering profitable growth and highlighted the importance of strong relationships between clients and their stylists. He expressed confidence in Stitch Fix’s long-term vision and the convenience and improved experience that the service offers compared to traditional brick-and-mortar and online shopping.
In terms of financial performance, Stitch Fix reported an improved adjusted EBITDA of approximately $17 million in the last fiscal year, with $39 million in free cash flow. The company also made progress in improving gross margin and cost structure. In Q4, net revenue was $376 million, down 22% compared to the previous year but above expectations due to higher order volume. Gross margin expanded to 43.3%.
During the earnings call, Baer and Aufderhaar discussed various aspects of the company’s performance and plans. Baer highlighted the focus on improving inventory composition and the shift towards higher-margin products, particularly through private brands. Aufderhaar provided more details on gross margin improvement, transportation efficiencies, cost savings initiatives, and the expected savings from UK and warehouse closures.
Stitch Fix also addressed customer churn and reengagement efforts. While some customers may become dormant due to life-changing events, the company believes that its service can still have value and is working to reengage those customers. The number of active clients in the UK is expected to decline in Q1 due to the discontinuation of operations there, but the overall outlook for active clients in the US is expected to be better than the previous quarter.
Overall, Stitch Fix is focused on delivering profitable growth, improving inventory position, and attracting high lifetime value clients. The company’s strategic initiatives, including the use of personalization algorithms and data science, are aimed at enhancing the client experience and driving long-term success.