Stitch Fix reported Q3 FY2024 net revenue of $322.7 million, down 16% year over year and 2% quarter over quarter, reflecting ongoing client base normalization amid a transformation that aims to improve unit economics and profitability. The quarter delivered a gross margin of 45.5%, up 280 basis points YoY and 210 basis points QoQ, driven by stronger product margins and transportation leverage as the company continues to optimize its logistics mix and vendor relationships. Adjusted EBITDA was $6.7 million (2% margin), above prior guidance due to better-than-expected top-line performance, margin resilience, and disciplined cost management, even as GAAP net income was negative at $21.3 million (EPS -$0.18).
Stitch Fix emphasizes a two-pronged transformation: (1) strengthening the foundation via AI-driven inventory, pricing optimization, and CRM enhancements to lift profitability and wallet share, and (2) reimagining the client experience to improve engagement and conversion. Management highlighted a substantial potential upside from pricing architecture, with more than $20 million of annualized contribution profit opportunity, and noted that the AI inventory tool informed nearly half of all inventory receipts, with merchandise outperforming non-tool selections. The company expects Q4 net revenue of $312–$322 million and Q4 adjusted EBITDA of $5–$10 million, guiding full-year net revenue of roughly $1.33–$1.34 billion and gross margins of 45–46%. Importantly, Stitch Fix maintains a debt-free balance sheet with $245 million in cash, cash equivalents, and investments at quarter-end and no outstanding debt, underscoring financial flexibility to fund its transformation.
Near-term headwinds center on new client acquisition; active clients declined 20% year over year to about 2.6 million and are expected to be down ~5% sequentially in Q4. Management continues to optimize media mix and channel effectiveness, targeting higher lifetime value clients through the reimagined experience, promotions, and targeted offers. If the transformation yields sustained improvements in AOV, keep rate, RPAC, and client quality, Stitch Fix could reaccelerate growth as the new experience launches and marketing efficiency improves.