American personal styling service company Stitch Fix has delivered a stronger-than-expected start in the first quarter (Q1) of fiscal 2026 (FY26), with revenue rising 7.3 per cent year-on-year (YoY) to $342.1 million, driven by higher spend per client and improved assortment performance.

Gross profit rose to $149.3 million but gross margin slipped to 43.6 per cent, down 180 basis points, due to higher product costs and promotional activity. Adjusted EBITDA increased to $13.4 million, reflecting a margin of 3.9 per cent compared with break-even levels seen in earlier turnaround phases.

Stitch Fix has reported a strong Q1 FY26, with revenue up 7.3 per cent to $342.1 million and improved adjusted EBITDA of $13.4 million.
While active clients declined, spending per client increased.
The company posted a $6.4 million net loss but ended debt-free with positive free cash flow.
With rising engagement and an AI-driven strategy, Stitch Fix expects continued growth through FY26.

The company reported a net loss of $6.4 million, nearly unchanged from the $6.26 million loss in the same quarter a year earlier, though operating performance improved on an adjusted basis.

Active clients fell 5.2 per cent YoY to 2.307 million, though revenue per active client improved 5.3 per cent to $559, signalling higher engagement among retained users. Inventory levels increased sharply to $141.5 million from $118.4 million last quarter, aligning with assortment expansion and seasonal buying, Stitch Fix said in a press release.

The company closed the quarter with a strengthened balance sheet, holding $244.2 million in cash, cash equivalents and investments and remaining debt-free. Operating activities generated $10.9 million in cash, and free cash flow turned positive at $5.6 million, marking a key milestone in the restructuring roadmap.

Looking ahead, Stitch Fix forecasts continued growth in the second quarter, projecting revenue between $335 million and $340 million—equating to 7.3-8.9 per cent annual growth. Adjusted EBITDA is expected to range from $10 million to $13 million with a margin of up to 3.8 per cent.

For full FY26, the company expects revenue between $1.32 billion and $1.35 billion, representing 4.2-6.5 per cent YoY growth. Adjusted EBITDA guidance stands at $38-$48 million with a 2.9-3.6 per cent margin. The company anticipates a full-year gross margin between 43 and 44 per cent, advertising expenses representing 9-10 per cent of revenue, and positive free cash flow.

As part of its operational reset, Stitch Fix continues to reflect its discontinued UK business separately, following its exit in fiscal 2024. The company noted that non-GAAP measure reconciliations are unavailable due to uncertainty around restructuring, taxes and other one-time cost fluctuations but cautioned these factors could materially impact GAAP outcomes.

With stabilising financials, rising revenue per client, and accelerating execution of its AI-led retail model, Stitch Fix signalled confidence in sustaining momentum as it moves deeper into fiscal 2026.

“Q1 was a strong start to the fiscal year—we accelerated year-over-year revenue growth to 7.3% and captured considerable market share gains,” said Matt Baer, CEO, Stitch Fix. “As a result of the successful execution of our transformation strategy, we are increasingly becoming the retailer of choice for more of our clients’ apparel and accessories needs. We are doing this by leveraging the latest in GenAI technology, the expertise of our human Stylists, and our assortment of leading brands to deliver the most client-centric and personalised shopping experience.”

Fibre2Fashion News Desk (SG)