Yahoo Finance Stitch Fix Inc (SFIX) Q4 2024 Earnings Call Transcript Highlights: Navigating Challenges with ...
Net Revenue: $1.34 billion for FY24, down 16% year over year.
Active Clients: Approximately 2,508,000, a decrease of 20% year over year.
Gross Margin: 44.3% for FY24, up 190 basis points year over year.
SG&A Savings: Over $100 million in FY24.
Adjusted EBITDA: $29.3 million for FY24, a 2.2% margin, up 30 basis points compared to FY23.
Free Cash Flow: Over $14.2 million in FY24.
Cash, Cash Equivalents, and Investments: $247 million with no debt.
Q4 Net Revenue: $319.6 million, down 12% year over year or down 18% on a 52-week basis.
Revenue per Active Client: $533, up 5% year over year and up 2% quarter over quarter.
Q4 Gross Margin: 44.6%, up 50 basis points year over year.
Q4 Adjusted EBITDA: $9.5 million, approximately 3% margin.
Net Inventory: $97.9 million, down 25% year over year and down 14% quarter over quarter.
FY25 Revenue Guidance: Between $1.11 billion and $1.16 billion.
FY25 Adjusted EBITDA Guidance: Between $14 million and $28 million.
Q1 FY25 Revenue Guidance: Between $303 million and $310 million.
Q1 FY25 Adjusted EBITDA Guidance: Between $5 million and $9 million.
FY25 Gross Margin Guidance: Approximately 44% to 45%.
Advertising Expense: Approximately 8% to 9% of revenue for FY25.
Release Date: September 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Stitch Fix Inc (NASDAQ:SFIX) delivered results at the high end of their guidance on both the top and bottom line for Q4 FY24.
The company reported expanded gross margins in FY24 and positive adjusted EBITDA for the last seven quarters.
Stitch Fix Inc (NASDAQ:SFIX) has $247 million in cash, cash equivalents, and investments with no debt.
The company has successfully implemented cost-saving measures, resulting in over $100 million of SG&A savings in FY24.
Stitch Fix Inc (NASDAQ:SFIX) is investing in AI and data science to enhance their client experience and operational efficiency.
Negative Points
FY24 net revenue was $1.34 billion, down 16% year over year.
The company ended the year with approximately 2,508,000 active clients, a decrease of 20% year over year.
Q4 net revenue was $319.6 million, down 12% year over year or down 18% year over year on a 52-week basis.
Revenue per active client grew only 5% year over year, indicating slow growth in client spending.
The company does not expect to return to revenue growth until the end of FY26, which is later than anticipated by analysts.
Q & A Highlights
Q: Returning to revenue growth by the end of fiscal 2026 is later than expected. Can you discuss the biggest factors affecting this timeline? Are there macroeconomic considerations or company-specific dynamics at play? Does this also apply to active clients? A: Matt Baer, CEO: The delay in returning to revenue growth is due to both macroeconomic factors and company-specific dynamics. When I joined, we were in a significant revenue decline. We've since improved revenue trends and slowed the decline in active clients. Our transformation strategy is methodical and producing results. We expect to return to revenue growth by the end of FY26, supported by a strong balance sheet and strategic investments. Active clients are expected to track similarly to revenue improvements.
Q: Can you provide more details on the new private brands and their impact on the product mix? A: Matt Baer, CEO: Our private brands currently make up about 50% of our product mix and have higher initial markup (IMU) and keep rates compared to national brands. We are launching new private brands like Montgomery Post and The Commons to fill white spaces in our assortment. The long-term mix will balance client needs with both private and national brands.
Q: How are you managing gross margins for the year, and what are the key factors influencing them? A: David Aufderhaar, CFO: We guided to a 44% to 45% gross margin range. The main factors influencing this include promotional activities and variable labor leverage. Our strong contribution margins allow us to be opportunistic with promotions while maintaining profitability.
Q: Who is the current Stitch Fix client, and how are you addressing their needs? A: Matt Baer, CEO: Our clients value guidance, inspiration, convenience, and personalized recommendations. We are focusing on segmented marketing to better communicate our value proposition. Our improved CRM capabilities and tailored promotions help us engage clients more effectively and drive higher revenue per active client.
Q: How are you approaching advertising spend, especially heading into the holiday season? A: Matt Baer, CEO: We are being targeted and segmented in our advertising approach, which has led to a decline in customer acquisition costs. Our unique value proposition allows us to compete effectively without bidding on the same keywords as traditional retailers. We focus on both new client acquisition and engaging existing clients organically.
Q: Can you provide more color on the SG&A savings and how they will impact fiscal 2025? A: David Aufderhaar, CFO: The $100 million SG&A savings from FY24 will have a full-year impact in FY25. We will continue to drive leverage in variable labor and other cost-saving initiatives. This will help us maintain a strong financial position while investing in growth.
Q: How are things trending in August and September, and what are your expectations for active clients? A: David Aufderhaar, CFO: Trends are in line with our guidance. We expect a quarter-over-quarter decline in active clients, but the rate of decline is improving. We are seeing better engagement and reactivation rates, which will contribute to improved client metrics.
Q: If the macroeconomic downturn continues, are you planning additional adjustments? A: David Aufderhaar, CFO: We have a proven track record of identifying cost savings and driving leverage in our P&L. Our variable labor model allows us to adjust expenses in response to volume changes, ensuring we can manage through macroeconomic headwinds effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
