Stitch Fix Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Youssef Squali - Truist Securities - Analyst : Great, thank you very much. Hi, guys. Two questions for me. First, Matt, you talked a little bit about reimagining the client experience and how that's on schedule. You teased a little bit something coming up. I think you talked about a first experience, something coming up this summer. Could you maybe unpack that a little bit for us and just how different is the new experience going to be from what we're used to? And then David, based on all the things that you guys are doing to drive user growth and reactivation, et cetera, how should we be thinking about the decline in active clients for Q4? I guess, what's baked into that guide? Thank you.

Question: Youssef Squali - Truist Securities - Analyst : Great, that's helpful. Thank you both.

Question: Simeon Siegel - BMO Capital Markets - Analyst : Thanks. Hey, everyone. Good afternoon. And I guess progress on the gross margins. Could you quantify maybe the quarter's moving pieces a little bit more and how you're thinking about how those should look both in Q4, but then really as you make these changes how you think about beyond what gross margin could look like. And then just apologize if I missed it, did you give the 90-day RPAC? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 9:00PM, SFIX.OQ - Q3 2024 Stitch Fix Inc Earnings Call

Question: Simeon Siegel - BMO Capital Markets - Analyst : That's great. Thank you. And then just, did you guys give 90-day RPAC?

Question: Simeon Siegel - BMO Capital Markets - Analyst : That's great. Thanks a lot, guys. Best of luck for the rest of the year.

Question: Aneesha Sherman - Bernstein - Analyst : Thank you. So congrats on a nice quarter. So you've talked in the last few quarters about cycling through some lower LTV clients and retaining kind of higher LTV fix first, higher-quality clients. It looks like some of the metrics of quality in your P&L are improving like RPAC, gross margins. Do you feel like you're almost there? I know you're guiding for another quarter of active declines, but a lower number. Do you feel like you're there at the point where you should start to see improvements in active client numbers in 2025 with a higher quality base of clients? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 9:00PM, SFIX.OQ - Q3 2024 Stitch Fix Inc Earnings Call

Question: Aneesha Sherman - Bernstein - Analyst : Okay, that's really helpful. And then can I ask a quick follow-up on gross margin and dig into some of the drivers? David, you talked about product margin strength, just putting inside the transport side, just kind of underlying product margins. Can you elaborate on the drivers of that? Is that primarily the private brands mix or lower markdowns or something else?

Question: Aneesha Sherman - Bernstein - Analyst : Okay. Really helpful. Thank you.

Question: Maria Ripps - Canaccord Genuity - Analyst : Good afternoon, and thanks for taking my questions. So you talked about some of the new or improved functionality like Quick Fix. Can we dive a little bit deeper into some of the specifics behind the Q3 outperformance, especially what seems to be on the revenue per customer side, and maybe just talk about how sustainable some of those could be as we kind of look over the next -- sort of towards the next couple of quarters? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 9:00PM, SFIX.OQ - Q3 2024 Stitch Fix Inc Earnings Call

Question: Maria Ripps - Canaccord Genuity - Analyst : Got it. That's very helpful. Thank you. And maybe just a quick follow up. Can you maybe share an update on the advertising spending environment? And is there anything to highlight around the competitive intensity?

Question: Maria Ripps - Canaccord Genuity - Analyst : Yes, can you maybe share an update on the broader advertising spend environment? And is there anything that you would highlight around the intensity of the competitive dynamics or competitive spending out there?

Question: Maria Ripps - Canaccord Genuity - Analyst : Great, thank you both.

Question: David Bellinger - Mizuho Securities USA - Analyst : Hey good afternoon, thanks for the question. Let me do a follow-up on the last one. Just on the active customer number, down about 20% year over year. Looks like you're guiding to a similar level for fiscal Q4. And those are both while ad spend is moving up and moving higher year over year. So maybe just walk us through that. You talked about the headwinds on new customer acquisition. So is there potentially a re-baselining higher ad spend dollars in order to even maintain your customer base, if not even grow further from here? How do we think about the level of ad spend required in 2025 and going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 04, 2024 / 9:00PM, SFIX.OQ - Q3 2024 Stitch Fix Inc Earnings Call

Question: David Bellinger - Mizuho Securities USA - Analyst : Understood, that's very helpful. Then my second question, maybe more of a macro one, but a lot of our companies have been talking about the splitting between the lower and the middle or upper income consumer. Have you seen that play out or widen even more as the quarter progressed? Just any update of what you're seeing in your customer base, any differences across the segmentation?

Question: David Bellinger - Mizuho Securities USA - Analyst : Very good. Thank you both.