Stitch Fix returns to growth

Stitch Fix shows early signs of a comeback as it posts revenue growth and rolls out AI driven features under Matt Baer.

Stitch Fix Returns to Growth Under New CEO

Stitch Fix posted its first revenue growth in 12 straight quarters for the three months ended May 3, signaling a revival under chief executive Matt Baer, who took the role in June 2023. The company is forecasting a second straight quarter of top line growth. Revenue per active client rose to 542 dollars, up 3 percent from a year earlier, and average order value has increased for seven quarters in a row. The customer file remains smaller, but the company has expanded its options with on demand fixes and a broader freestyle catalog that lets customers shop directly. The company continues to charge a 20 dollar styling fee per fix and has not posted an annual profit since 2019, though free cash flow is positive and the balance sheet shows no debt.

On the cost side, Stitch Fix has cut more than 100 million dollars in annualized general and administrative expenses and plans another 80 million in savings for fiscal 2025, according to analysts. It has exited the United Kingdom market, closed two fulfillment centers, and trimmed staff to align with the business size. Those moves helped reduce operating costs and improve margins. The private brand portfolio now accounts for 40 to 50 percent of sales, and Stitch Fix has launched new lines such as The Commons. The company is using artificial intelligence for product design and plans to expand its AI driven styling to improve recommendations and reduce returns. It is also launching a platform that lets shoppers connect directly with their stylist for advice. Baer notes that he continues to visit client focus groups and styling fixes to stay in touch with customers.

The turnaround rests on a blend of cost discipline and product repositioning. The gains are real but fragile, with the active customer base still shrinking and growth forecast to be modest in the near term. The company relies on private brands to lift margins and on AI to enhance recommendations and cut returns, a strategy that could pay off if it translates into sustained engagement and higher conversion. The bigger question is whether the gains in efficiency and new shopping options can offset ongoing customer churn in a crowded market. Investors will watch if the free cash flow stays positive and if the revenue gains outpace cost growth over the next few quarters.

Highlights

The road ahead will test whether the comeback can endure beyond a quarterly gain.