Stitch Fix Inc Q4 2024 Earnings Call Transcript

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

Question: Youssef Squali - Truist Securities - Analyst : Hi guys. Good afternoon. Two questions, please. So returning to revenue growth by end of fiscal 2026 is quite a bit of time later than I think when most of us expected you guys to do that. So can you maybe talk about the biggest gating factors there? Anything in the macro that's going on that you guys are taking into account? Or is it all company-specific dynamics? And does that comment also hold true for active clients as well, meaning that you do not expect active clients to turn positive until the end of 2026? Thank you.

Question: Dana Telsey - Telsey Advisory Group - Analyst : Hi, good afternoon, everyone. As you think about the active clients and the reductions you've had, can you talk about who is the client today, what you're seeing change in that client base, and how you think about it going forward? And given what you talked about with the promotional environment in the current quarter with the net revenue per active customer is kind of improving, how are you thinking about that going forward? And how does the private label help or hurt? How are you thinking of those dynamics? Thank you.

Question: Dana Telsey - Telsey Advisory Group - Analyst : Correct.

Question: Aneesha Sherman - Alliance Bernstein - Analyst : So if I look back to where the business was about kind of seven, eight years ago in 2017, 2018, you had a similar-sized active client base of about $2 million to $2.5 million, but the margin profile was a lot stronger. You were doing about 5%, 6% adjusted EBITDA margin. Can you talk about kind of how the business has evolved? Like if you compare the cost base then versus now on a similar sized customer base and similar sized revenue base, could the cost base get back to that kind of algo? Or what are the things that have changed over the last seven, eight years that prevent you from getting back to that margin profile?

Question: Aneesha Sherman - Alliance Bernstein - Analyst : That makes sense. And then I have a quick follow-up. David, you mentioned new client acquisition. I know all the -- as you were talking about your success with teachers and certain pockets of consumers, I maybe wonder whether you are seeing more of a referral strategy work out for you. I know there was some adverse selection in referrals a couple of years ago and you backed off from that. Is that part of the increase in advertising spend? And is that a strategy that seems to be paying off now as you look closer into it?

Question: Maria Ripps - Canaccord Genuity - Analyst : Great. Thank you. Two questions, please. Can you please talk about any additional costs associated with including up to eight items in one shipment? How should we think about sort of any additional inventory investments needed to accomplish this?

Question: Maria Ripps - Canaccord Genuity - Analyst : Got it. That makes sense. And then I just wanted to follow up on your expenses. So your fiscal '25 guidance implies sort of further decline in expenses in terms of year over year. So as we look towards fiscal 2026, so it looks like it's going to be another year of revenue decline for the full year, it sounds like. But how should we think about sort of margin that year? And would you expect sort of your expense base to decline maybe a little bit further in 2026?

Question: Alexander Vasti - William Blair - Analyst : This is Alex Vasti on for Dylan. Thanks for taking our questions. Firstly, maybe just a bit of a follow-up on one of the prior questions. Maybe if you could just talk about your expectations for advertising spend heading into the holiday season and throughout the rest of fiscal '25. You previously mentioned that you're being very judicious with marketing spend, targeting specific client cohorts especially, given the elevated broader advertising spend going on in the industry. I would just love to get an update on how you're viewing advertising spend for the year. And maybe any color on how you plan to spend it, via bias towards new or existing customers? Anything on that? Thanks.

Question: Alexander Vasti - William Blair - Analyst : Got it. Makes a lot of sense. Thanks for all that color. And then just one quick one on modeling, a little clarification. So you talked about the SG&A savings that came as a result of your rationalization phase at over $100 million for fiscal '24. Just wondering if you could give a bit more color on these savings going forward. You mentioned in a response to a prior question that some of these savings are run rate going forward and then that you'll also be getting the full annualization of others. I'm just wondering if you could give a bit more color on where you expect overall SG&A savings to land in fiscal '25, if that $100 million number is a good run rate one going forward? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 24, 2024 / 9:00PM, SFIX.OQ - Q4 2024 Stitch Fix Inc Earnings Call

Question: Mauricio Serna - UBS Securities LLC - Analyst : This is Mauricio Serna dialing in for Jay Sole. We were just wondering how things are trending in August and September so far, right? So in terms of top line and also kind of just based on how things are trending so far in August and September, where do you expect active clients to come in?

Question: Mauricio Serna - UBS Securities LLC - Analyst : Got it. Got it. And just to follow up. So if there is a macro downturn or the macro downturn continues, are you planning to make any additional adjustments?