Stitch Fix delivered a resilient Q2 FY2025 result set that underscored meaningful progress from its transformation strategy, even as the business continues to navigate a softer consumer backdrop. Revenue of $312.1 million declined 5.5% year-over-year but exceeded guidance, while gross margin expanded to 44.5% (up 110 bps YoY). Adjusted EBITDA reached $15.9 million (5.1% margin), marking the fourth consecutive quarter above the company’s long-run 25–30% contribution-margin target and signaling improved operating leverage driven by better inventory management and the evolving cost structure. The company also highlighted durable momentum in AOV (+9% YoY; +4% QoQ), higher keep rates for new inventory (+7% YoY), and a normalization of the Freestyle channel, which returned to year-over-year growth in Q2 after targeted marketing and forecasting enhancements.
Management framed the quarter as a validation of the transformation playbook: enhanced assortment quality, AI-driven merchandising, expanded Fix flexibility (up to eight items per Fix), stronger stylist relationships, and continued investment in Freestyle as a complement to fixed offerings. These initiatives contributed to higher items-per-Fix, improved categories (notably Women’s dresses and denim; Men’s cashmere and performance workwear), and a broader non-apparel mix (sneakers, jewelry, accessories). Active client declines persisted (2.4 million, down 16% YoY), but the company noted its smallest sequential decline in three years and an improving 90-day LTV trajectory, suggesting a path to eventual client growth as the transformation beds in.
Guidance was raised for FY25 on the back of Q2 momentum. Full-year revenue is now guided to $1.225–$1.240 billion with adjusted EBITDA of $40–$47 million, and Q3 revenue guidance of $311–$316 million with gross margins of 44–45%. The company emphasized tariff mitigation plans and does not expect tariffs to impact client prices or margins in the second half. Cash generation remains constructive but near-term free cash flow is negative as working capital needs and growth investments persist; Stitch Fix finished the quarter with approximately $230 million in cash and equivalents/investments and no debt (net debt roughly flat to slightly negative). Overall, Stitch Fix positions itself for a return to revenue growth in FY26 as the transformation delivers continued operating leverage and expanded wallet share through Freestyle and private-label propositions.