Stitch Fix Rises 38% in a Year: Is the Stock Still a Buy?

Stitch Fix, Inc. SFIX has experienced a remarkable jump in its share price over the past year. The stock has rallied 38.2%, significantly outpacing the Zacks Retail-Apparel and Shoes industry’s 10% decline. The company’s enhanced operational efficiency and growth initiatives have also helped it outperform the broader Retail-Wholesale sector and the S&P 500 index’s growth of 9.1% and 4.6%, respectively, during the same period. This remarkable surge has sparked curiosity among investors, causing them to wonder whether they have already missed a profitable window or there is still room for further gains. SFIX Stock Past-Year PerformanceImage Source: Zacks Investment ResearchFrom a valuation perspective, this leading lifestyle products retailer is currently trading at a low price-to-sales (P/S) multiple. Its forward 12-month P/S ratio is 0.31, down from the industry and the sector’s ratio of 1.28 and 1.43, respectively. This undervaluation highlights its potential for investors seeking attractive entry points. Moreover, SFIX's Value Score of B underscores its appeal as an investment option.SFIX Looks Attractive From a Valuation StandpointImage Source: Zacks Investment ResearchSFIX’s Client Experience Through Personalization, InnovationStitch Fix’s client-first approach has been driving notable improvements across key performance metrics. By expanding its assortment with trend-forward styles and fostering stronger relationships between clients and stylists, the company has seen a meaningful rise in engagement and loyalty. Customer requests for the same stylist have reached a five-year high, indicating increased trust and satisfaction. Additionally, the introduction of flexible Fix options, now allowing up to eight items per shipment, has further enriched the overall shopping experience.These efforts have led to a consistent increase in average order value (AOV), which has grown for six consecutive quarters. In the second quarter of fiscal 2025, AOV rose 9% year over year, with a significant 16% spike on Jan. 25. This trend reflects improved alignment between clients and products, as seen through stronger keep rates and higher average unit retail. Revenue per active client increased to $537, representing a 4.3% rise from the prior year and reinforcing Stitch Fix’s position in the personalized fashion market.Profitability also continues to strengthen. Gross margin reached 44.5% in the fiscal second quarter, reflecting an increase of 110 basis points from the prior-year level. This improvement is largely attributed to higher AOV and better product margins. We anticipate gross margin to expand 40 basis points year over year to 44.7% in fiscal 2025. Contribution margin was 33%, marking the fourth consecutive quarter above the historical range of 25-30%. Operational efficiencies across warehouse and styling teams have played a key role in this improvement, and the current cost structure is expected to remain stable.Ongoing enhancements in personalization and inventory curation are propelling Stitch Fix’s transformation. Keep rates for new styles have increased 7% year over year, signaling a stronger product-market fit. AI-driven tools are helping the company better understand and meet client preferences. The introduction of exclusive in-house brands such as The Commons and Montgomery Post has expanded customer appeal, with the former brand emerging as a top revenue driver in the men’s category.Stitch Fix Gains on Market Expansion & Brand DifferentiationStitch Fix has been seeing positive momentum in revitalizing previously underperforming segments, particularly men’s and Freestyle. Both categories returned to year-over-year growth, supported by increasing demand for high-quality apparel. In the fiscal second quarter, cashmere sales grew 400% compared with the previous year period, while performance workwear sales nearly tripled. These results reflect a shift in consumer preference toward versatile, premium wardrobe staples. The resurgence of the Freestyle platform has extended Stitch Fix’s reach beyond its core subscription model, opening new pathways for customer acquisition.The company’s focus on proprietary brand development is further strengthening its competitive positioning. New in-house brands like The Commons have quickly gained traction, emerging as one of the top revenue contributors while delivering higher margins. This private label strategy allows for improved inventory control and creates a sense of exclusivity for its customers. By blending these unique offerings with well-known national brands, Stitch Fix delivers a curated shopping experience that enhances client loyalty and sets it apart in a competitive retail landscape.Final Thought on Stitch FixInvestors may find Stitch Fix an attractive buying opportunity due to its ongoing business transformation, focused on personalization, operational efficiency and brand differentiation. The company is showing clear signs of improving customer engagement, expanding margins and revitalizing key segments, all while trading at a valuation that suggests room for upside. With a scalable model powered by data-driven insights and exclusive product offerings, Stitch Fix is positioning itself for sustainable growth in a highly competitive market, making the stock a compelling option for those seeking value with long-term potential. The company currently has a Zacks Rank #2 (Buy).Other Key PicksSome other top-ranked stocks are The Gap, Inc. GAP, Canada Goose GOOS and G-III Apparel Group, Ltd. GIII.The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for The Gap’s fiscal 2025 earnings and revenues indicates growth of 7.7% and 1.5%, respectively, from fiscal 2024 reported levels. GAP delivered a trailing four-quarter average earnings surprise of 77.5%.Canada Goose is a global outerwear brand. GOOS is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. It carries a Zacks Rank #2 at present.The Zacks Consensus Estimate for Canada Goose’s current fiscal year’s earnings and revenues implies a decline of 1.4% and 4.9%, respectively, from the year-ago actuals. Canada Goose delivered a trailing four-quarter average earnings surprise of 71.3%.G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under three types of brands, licensed, owned and private label. It currently carries a Zacks Rank of 2.The Zacks Consensus Estimate for GIII’s fiscal 2025 earnings and revenues implies a decline of 4.5% and 1.2%, respectively, from the year-ago reported actuals. GIII delivered a trailing four-quarter average earnings surprise of 117.8%.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>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 The Gap, Inc. (GAP): Free Stock Analysis Report G-III Apparel Group, LTD. (GIII): Free Stock Analysis Report Canada Goose Holdings Inc. (GOOS): 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