As apparel subscription platform Stitch Fix strives to tailor its offerings for the best results, the company has discovered that private label brands may be the perfect fit.
In its latest quarterly earnings call with analysts on Tuesday (Dec. 5), Stitch Fix showcased its merchandising finesse by implementing top-tier buying assortment planning and placing a heightened emphasis on private brands. This strategic shift is anticipated to enhance operational efficiencies and boost profitability.
“Over the last few years, we have increased our private brands from approximately 1/3 to nearly 50% of total sales. Because these brands perform well, generating higher keep rates in margins. We plan to emphasize them in our assortments moving forward,” CEO Matt Baer said during the call.
In addition to this, Stitch Fix is diving deeper into personalized styling, aligning with its September declaration to pivot toward more personalized services. The company plans to blend cutting-edge technology with human stylists on its online platform to create a unique and customized shopping experience, setting it apart from other retailers.
Baer, who only took on his executive role in June, said in September that he admired he robust connection between the company and its customers. He also acknowledged the significance of client relationships and said he is determined to further strengthen and enhance those connections in the future.
Baer noted that Stitch Fix’s individualized styling approach has boosted its success. The company employs data science, artificial intelligence (AI), machine learning (ML) and personalized algorithms to curate clothing that aligns with customers’ taste and preferences.
The CEO also pointed to the connection between Stitch Fix’s users and their stylists as a pivotal element in the company’s success. These relationships cultivate brand loyalty by addressing the pain points associated with traditional shopping experiences.
“The original vision of Stitch Fix is as powerful, relevant and compelling today as it was when the company was launched, and I am confident that our best days are ahead of us,” said Baer in a press release. “This quarter’s results are encouraging, and I’m pleased with the progress we have made to date. We continue to focus on optimizing the business in the short term while working to reimagine our business and operating model with the goal of delivering sustainable and profitable growth in the future.”
In Q1 of fiscal 2024, Stitch Fix discontinued its U.K. operations, reflecting the change in its consolidated financial statements.
Stitch Fix reported net revenue from continuing operations at $364.8 million, a decline of 18% year-over-year but within the higher range of their guidance.
The company achieved an adjusted EBITDA of $8.6 million, surpassing the Q1 2024 guidance. Active clients decreased by 4% quarter-over-quarter and 15% year-over-year to 2,989,000, while net revenue per active client decreased by 6% to $506.
Despite these challenges, Stitch Fix generated positive free cash flow for the fourth consecutive quarter, totaling $16.9 million, and ended the quarter with $262.3 million in cash and investments. Additionally, the company entered a credit agreement with Citibank, providing a $50 million revolving credit facility, though they do not anticipate utilizing it.
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