SFIX Q4 Loss Narrower Than Expected, AI Investments Boost Engagement

Stitch Fix, Inc. SFIX reported fourth-quarter fiscal 2025 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. The top line declined from the year-earlier quarter. Meanwhile, the bottom line fared better year over year.The company’s progress was driven by the successful execution of its transformation strategy, highlighted by enhancements to client experience and product assortment. Investments in AI capabilities, a broader selection of leading brands and the personalized service of its Stylists further strengthened the platform, supporting higher engagement and positioning Stitch Fix for continued growth.Stitch Fix, Inc. Price, Consensus and EPS Surprise Stitch Fix, Inc. price-consensus-eps-surprise-chart | Stitch Fix, Inc. QuoteMore on Stitch Fix’s Q4 ResultsSFIX reported an adjusted loss of 7 cents per share, narrower than the Zacks Consensus Estimate of an adjusted loss of 13 cents. The metric was also narrower than the loss of 12 cents incurred in the year-ago quarter. Stitch Fix recorded net revenues of $311.2 million, which surpassed the Zacks Consensus Estimate of $301 million. However, the metric decreased 2.6% from the year-ago quarter.The number of active clients engaged in ongoing operations was 2,309,000, marking a year-over-year decline of 7.9%. The average net revenues generated per active client (RPAC) from ongoing operations were $549, representing an increase of 3% from the previous year, surpassing our estimate of $545. This marks the sixth straight quarter of year-over-year revenue per active customer growth, underscoring the strong engagement of clients who are joining and staying with the platform.Fix average order value (AOV) increased 12% year over year, marking the eighth consecutive quarter of growth. This growth was fueled by a higher number of items per Fix, reflecting greater adoption of larger Fix offerings, as well as a 7.6% year-over-year increase in average unit retail, supported by the introduction of fresh, trend-right merchandise across the assortment.Insight Into SFIX’s Margins & ExpensesIn the fiscal fourth quarter, this Zacks Rank #3 (Hold) company’s gross profit declined 4.7% to $135.7 million from $142.5 million in the year-ago period. Also, the gross margin decreased 100 basis points (bps) year over year to 43.6%. The year-over-year decrease was primarily attributable to higher transportation costs stemming from carrier rate increases, including those from USPS, as well as a mix shift toward non-apparel categories. We expected the gross profit to decline 7.1% year over year to $132.4 million.Selling, general and administrative expenses (SG&A) declined 20.3% from $184.4 million in the prior-year quarter to $146.9 million. SG&A expenses, as a percentage of net revenues, were 47.2%, down significantly from 57.7% in the prior-year quarter. We anticipated SG&A expenses to decline 17.2% year over year in the fiscal fourth quarter.Advertising expense represented 9.5% of revenues in the fourth quarter, up 50 basis points from the prior-year period, reflecting the company’s broader reinvestment in revenues and active client growth while maintaining a disciplined approach to spending. Stitch Fix reported an adjusted EBITDA of $8.7 million compared with $9.5 million in the year-ago quarter, reflecting its ongoing cost-management discipline. We note that the adjusted EBITDA margin declined 20 bps year over year to 2.8% in the quarter under review.SFIX Stock Past Three-Month PerformanceImage Source: Zacks Investment ResearchSFIX’s Financial Snapshot: Cash, Inventory & Equity OverviewThe company ended the fiscal fourth quarter with cash and cash equivalents of $114 million, short-term investments of $120.9 million, no debt, net inventory of $118.4 million and shareholders’ equity of $203 million.The net cash provided by operating activities was $7 million and the free cash was $2.8 million in the fiscal fourth quarter.Stitch Fix’s FY26 GuidanceFor the first quarter of fiscal 2026, Stitch Fix anticipates net revenues between $333 million and $338 million, representing year-over-year growth of 4.4-6%. Adjusted EBITDA is projected to be $8-$11 million, implying an adjusted EBITDA margin of 2.4-3.3%.The outlook for fiscal 2026 reflects a modest growth trajectory, with total revenues expected to range from $1.28 billion to $1.33 billion, indicating a 1-5% increase over the prior year. The company projects a full-year gross margin of 43-44% and adjusted EBITDA of $30-$45 million, suggesting a margin of 2.3-3.4%. Advertising expenses are forecast to be 9-10% of revenues, and Stitch Fix expects to generate positive free cash flow for the full fiscal year.SFIX stock has surged 69.2% in the past three months compared with the industry’s 11.4% growth.Stocks to ConsiderSome better-ranked stocks are Genesco Inc. GCO, Urban Outfitters Inc. URBN and Tilly's, Inc. TLYS.Genesco is a Nashville-based specialty retail and branded company that sells footwear and accessories in retail stores. It currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for GCO’s fiscal 2026 earnings and sales implies growth of 67% and 3%, respectively, from the year-ago actuals. Genesco delivered a trailing four-quarter average earnings surprise of 28.1%.Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home decor and gift items. It carries a Zacks Rank #2 (Buy) at present.The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings and sales indicates growth of 27.6% and 9.5%, respectively, from the year-ago actuals. URBN delivered a trailing four-quarter average earnings surprise of 24.8%.Tilly's is a specialty retailer in the action sports industry, selling clothing, shoes and accessories. It has a Zacks Rank of 2 at present.The Zacks Consensus Estimate for Tilly's current fiscal-year earnings indicates growth of 8.8% from the year-ago actual. TLYS delivered a trailing four-quarter average earnings surprise of 60.7%.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Urban Outfitters, Inc. (URBN): Free Stock Analysis Report Genesco Inc. (GCO): Free Stock Analysis Report Tilly's, Inc. (TLYS): Free Stock Analysis Report Stitch Fix, Inc. (SFIX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks