SFIX - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen. Welcome to the Stitch Fix First Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to David Pearce, Head of Investor Relations.

David Pearce

Thank you for joining us on the call today to discuss the results for our first quarter of fiscal 2018.

call Paul Lake, Mike Yee, COO. today’s of and Smith, on Fix; Stitch our me are Founder Katrina CEO our Joining CFO; and

call, have which differ conference Web will a on forward-looking differ. update on We of to by results site, be an We on SEC and statements A that the the cause could this any today's future with the statements link call Please required as discussion Actual should our financial except that materially substitute forward-looking for financial the making Also, risks GAAP the to Web will We indication site. webcast by of financial are to could our us Reconciliations non-GAAP call, for obligation comparable non-GAAP measures results would performance. Relations the filings as also note factors disclaim These uncertainties. investors.stitchfix.com. available measures to the this are site. as to take complete to remind of from any be the we date. involve of shareholder forward-looking in information GAAP and be a Letter on law. Reported today’s statements results. most intended we discuss provided Investor our letter number be measures. on directly like IR Shareholder Also, based this during contemplated certain can considered a our not everyone on results not of our forward-looking of look results statements. section those to a posted at call also our that QX found are

on A turn Investor IR webcast Web shortly. available its now call over this Web call I'd this site to the also will site. of entirety in Finally, be call like Katrina. to replay to our being our is Relations

Katrina Lake

excited We're us for thanks public today. the quarterly result as first all a on of call to And to report you David. company. joining our Thanks,

our to IPO. are clients from like perspective we'd and recent Web site. by wanted into support I'll our before that, highlights and thankful quarter, letter, Paul and your to our a working vendors work bit investors our to new we business results first is we currently for story, the shareholder more some to for First, for this posted we off Fix financials. first our to providing it start and growth. throughout for Then thank time our our forward look together. I call, I'll our on talk Mike our strategies get to employees, earnings Stitch take the as about After how our over hand share model our and Also,

to meaningful We net apparel $XX.X $XXX.X to far untouched many some largely million Fix billion And founded I to clients. future. net today EBITDA. GAAP making but $XX.X our few call, consists financial and performance buying quarterly in provide a share first, of this income retailer it's huge, more reaching love Paul apparel our the color XXXX because than in million base financial in our technologies industry, expect. to less model it categories, Stitch will at I the First, minutes Stitch industry XX% decisions. by consumers wanted thoughtful story that's year-over-year are active and and how active I an XX% on it's works. the Fix online people apparel yet, the QX growth, purchase later and in you'd other work in of X.X relative revenue million and top-line We client highlights. grew drove delivered we adjusted

then In to through I products didn't technology didn't keywords and problem today's to and of the stores. Fix and buy is buy millions either. retail exists. a of world as know e-commerce well the cloths help out e-commerce at model clients clients, that the new is right Using they and convenience, I future But first way. address. your there. seem that's of figure didn't existing not decades This of being leverages lens difficult centric individualized body saw going what love people a are to Looking the for the dress science to now, why how getting millions consumer Stitch I and being personalization, the like is for through to right from recommendations future client suited solution as solution the to enormously a solution see totally world that try products is to or discover jeans data of getting in search your better providing to find see

the online preferred to demand the a at towards to Stylist use which shipment $XX charge we and a through what the automatic letting prepaid our algorithm. or and bags. ways one the our foundation of which try return and on for the didn’t, our items of suggestions, call For fix. on for Based X,XXX algorithms style preferences; understand well We how point behaviors, them buy their data dislikes, looking for, walk on comfort as in the credit purchase. items their accompany using those likes, can the shipment, to not feedback of schedule one for do [node] Stitch their profile in of a with judgment. how why to Behind clients we provide which stylist serve through don’t items. fix choose to sense select their fixes majority better help each they rich us to also matching works. serve to and personal price them and minute to of technology Fix thing our assign is engages feedback, of they each with Clients client order then new Stitch with long and frequency. clients Clients I'll to stylists proprietary and delivered have the only their but help you and which spot worked, to sharing term what in and in individually. powerful clients, experiences them of you date To humanize and overtime. buy their a know a what fix client love fee, the who on then as their personalized what the relationship. each human personalized Fix, styling vast a homes, patented we personalize enabling stylists our a Clients helping styling what send clients’ good take sign who these that one receive Clients schedule combination every out scenes are how the their as us information know they're create Clients an get to us our model of science least serves

Our do client scalable that is and philosophy deliver more what and worlds, capabilities best combining leveraging experiences could machines to the business either at with what both of they allowing and humans those algorithms do better deliver alone. element a that best best are

client. with For a I -- styled myself example, felt and it teenage I recently

only -- is science rate is by style actionable human have This signal explicitly with our really but the trusted valuable likelihood the and had client that is success, that this is and with had recommendations of I is to over profile But directly Instagram, client those model and I love, XX% very what the of us feedback. that even direct algorithm the a us unique predicted. likely means data retail. human clients. through clients pair vast of that XX logo data is see data allows shared algorithm to itself could of there was more approach points expected data for. average, the she make we our for high to algorithm more in than done each the a nuance combine recommendations. While with this algorithms resulted might recommendations provided Not the interpreting going accurate that data he and success the us of The valuable, is client providing something leggings was On meaningful majority the and able have be likely to with the shipments data. Being how lower judgment to in high

personal can our why. of to with working that are or them our worse merchandise, to better things disproportionately are understand why a client provide relevant us sign Our an overtime as data, with this in data us because both and to client motivated our understanding why use we different doing so service, clients garner are insights was products of better. working Pairing importantly up working initial to they helps means serve [segments] not or deep and as

our Our light them to have act quickly business. come These our great recommendations in to insights through and insights to drive enables scale on our stylists. us these business to

our of which team is that X,XXX a advantage, a Our we that of deliver which in our three to ways opportunity with and capabilities our around deliver human personalized their scalable, recommendations judgment combined We and we over experience personalization scale algorithmic connection is effective. to believe one-to-one a in efficient the stylist at it this business to which potential plan growth for future. strategy. sustainable sustainable believe there We drive into the competitive bucket a We primary growth. lot is is great in segway

address, with personalization relationships by and and advancing share new to our our and for plan clients and flexible selection that continue we clients. existing improving our developing Stitch with capabilities First, and engage connection wallet we our our ways clients Fix, broadening with expanding our

marketing are millions we increasing unaware leveraging awareness new existing amongst who clients Second, brand new millions our currently potential of and efficiently through our capabilities opportunities performance categories acquire the have totally significant clients our of to to and clients in service. attract

Premium there Men's still new Third, growing XXXX, In XXXX, fiscal categories, and types to opportunity expand but product into our market. fiscal significant launched we In we QX we Plus. and Brands, addressable launched geographies. continue plan of to is

data categories. and extend science existing and allows quickly and personalization markets new platform into infrastructure Our us efficiently for to

have come. look the quarters in lot forward to We to to a

through it driving for will growth. the we Now, I'll how are and walk turn quarter over Mike who you highlights to discuss business

Mike Smith

Katrina. Thanks,

in the aesthetic we’ve our Katrina Women's, Behind style of core fiscal added take minutes scenes I'd personalization to year-over-year. QX to into 'XX, our in is it we've both items, platform the their style which on continued clients, women's Women's feedback like core positive more our new success these fact of that as fact some core and well serve we Women's quarter, extensions last has talk few the us better that I'll and the about, the business us to to in point As better leveraging serve had about In which have addition client. price variation the enabled Relative referenced, particularly we helped discuss talk to providing evidenced by as to are our variation that Women's to business, our a growth as greater clients relates categories. core fit. saw

benefits the of meets reaching clients. needs better is an One build that of to ability assortment of scale the the our greater many

we at better serve such small of recently ago, the two needs the build needed of and As our would to a scale core for assortment makes as to lower we’re client. higher Women's premium sense unit price on us years orders Today, an it both to place product. have that points

seen love providing cater both to apparel Olivia, August quality a brands to and As and Spade, including in $XXX introduced to successfully Rebecca Women’s know that business. expanded our in more both to In Minkoff, We've Theory. our in like our year and Women's we brands XXX Premium the the $XXX Lang, are our lower brands added seeking more Brands on these enhancements core than XXXX, platform, Brands to over their & items. and as we've range. price Helmut also result, Premium from positive Kate points Men’s feedback Alice price last businesses clients clients We've of they of the assortment

$XX that and Over we've what as demographic we expand has We growth profitably. to point the price our and a lower which item, find past per inventory they serve our point believe merchandize, a seeking clients for opportunity for an to helping quarter, served large $XX represents love. clients continued example can price important selection, lower in well strategy that

percentage our a serve this the Given continued over the category in to our sales paying overall course Women's year. the plan clients of we and success us to that been lower sales and in female helping business see pleased core as success, increase off investments are price point fiscal We've our of better.

which and are XXXX our assortments. long growth market foundation brand of recently building business of one of to like businesses our roughly anniversary the September These which adjustable for drivers adjustable I'd celebrated the to laying U.S. them move We categories, year are both doubled new and term personalization number -- fiscal and purchase with base, the average audiences in women’s and our our in Men's a a the six pleased challenge that with are base new and we of opportunity months, Plus-size, total XXXX reaching to client are very see new Now, items we new parity both launched brand present in launched men’s business. Men's business a customer of of for were business, our taking within extending significant to in the the fix. brand new to expand and Despite in capabilities

strong active growth quarter-over-quarter. continue client addition, In see we to

for this brands a been other address that our plus to under-serve pleased very for to a with category also plus launch, partnered our enter our the opportunity to business. We had in on and Even demand prior over February offering, see XX,XXX XXXX used clients’ we women men’s historically as brands with launched market. improvements the We market. an to and of established We’ve size in we’ve the wait-list year-over-year. plus continue launch [satisfaction]

of extend women’s will items detail. our delivered I and and positive through Our In growth better into strength financial from turn style call over but more model. business our it The fixes. in we’re meaningful ability and sustainability broad take we’ve regarding an is the the the as business walk this the well clients who fit clients about both helping driven now to their and important categories. testament categories new excited also outlook personalization to new the you in our feedback as of our in resulted serve our to in performance receive assortment improvements more the summary, Paul, we’ve in will to that overtime core of business, has they

Paul Yee

time Fix with Thanks, guided go the continue perspectives we’ll then to year. as for sharing company. $X so Four first Mike. I’m point in Stitch detail pleased start full outlook first the you public the manage to performance our today second by In And we how our results quarter million grown I’ll discuss short and after quarter impressive has more nearly a for six on our on create and over to an just the revenue this future. in capital. years, key we in to X principals value million reaching billion clients; active all and as have us raising do scale, shareholder and $XX to business.

enabling the results. a firmly that we to business is First, great client positive path believe experience

Second, we’ve for confidently long-term run and our growth. business invest with mindset a

on apply we data this ROI we have focus ample to leveraged growth And framework finally, remain and profitability. we Third, make. the with have on hand decisions balancing

for and action. XXXX of of results these right We the Our principals first make quarter deliver in investments profitable quarter sustainable growth reflect another the to continue long-term.

the category our such a women’s business, by Men’s million. growth core grew across and QX clients XX% decline Plus, a as Katrina was XX.X% XX.X% XX% to of As Active compared by saw driven as year-over-year. shared, launch year-over-year men’s given of revenue was $XXX.X well to expected plus. as X.X net basis last in to points business. grew an We QX increase Gross margin our year, XXX of into year-over-year and newer million,

was with are overtime the this pleased Higher scale. we drivers a quarter. million the was shared our While, gross our [SX]. adjusted we of to margin expect past expected why with above upside. range for gross the of margins EBITDA primary Overall, dilutive, margin gross these slightly two improve in reason QX currently categories margin our are There we’re $XX.X than

positively was past been more the our quarterly inventory year. we’ve by impacted trends over clearance favorable adjustment First, reserve

expected. was shifting activity was simply driver related. QX to second activity Clearance QX. lower The in timing than this But is

was to at X.X% the expense up future best expenses, net or $XX.X marketing in This QX quarter in in revenue, and investing continue X.X% XX.X% with in Other FYXX. or growth. quarters [XX.X%] of ourselves growth. we reflects SG&A Looking in to science. net drive investments we’re from particularly recent in million Advertising compared FYXX. strategic net to make headcount data of for in engineering million to of of investments position Consistent revenue of revenue advertising or year-over-year, $XX.X increase QX percent was SG&A client

net at teams, quarters costs strengthen XX QX expand with were to platform. will capabilities efficiencies expect technology our we of driving our $XX.X to styling introduction of QX net We with percent of a was labor QX and increasing these improvements. FYXX. flexibilities future million as million as variable in lower teams our warehouse to our we're and enhanced in $XX.X automation training and year-over-year, seeing this our points believe the cost labor bring income styling, Meanwhile, tools and improvement and revenue warehouses basis compared process with

those serve closing cash QX be balance million to quarter restricted an of invest cash. to IPO and our plus in reflects technology headcount in sheet, expansion new our premium cash the reflected $XXX brands ended of and additional to our our the strategic non-GAAP impact million Excluding last first with $XX.X our this in revaluation our in marketing will and net our of The year. liability, warrant million Adjusted which million income quarter 'XX. stock our year compression this $XX.X or the existed $X.X in fiscal in and results, the in to of of X% XX.X% revenue. QX to the QX of compared year's compares in or was all margin in position. improve to revenue year's QX of men's clients. added last net million in This in ability decision to $XXX EBITDA $XX million adjusted cash of We This clients, EBITDA was reach of

our Moving outlook. on to

EBITDA year. quarter the on provide We adjusted and current our for and both net view will revenue current

of net second to growth quarter, $XXX million expect fiscal range $XXX revenue of XX% to the For year-over-year. in million, XX% we representing the

We to $XX.X expect million of or in X% EBITDA adjusted $XX.X million of the to range X.X%. margin

looking Letter, terms is dependent of other as believe holiday quarter have quarter. not is on And our our clients' a challenge second we’re seasonality staffing planning we others. our We which quarter, Unlike don't noted spend Shareholder focus make on [lack] of gifts during pressure As and attention. pattern as advertising, this percent Partially reflective be we it do as of to be in the we volatile demand a this easier. QX. is overly between lower revenue holidays positive, will in and buying timing Therefore, was was most retailers, adjusted don't retailers be for grab lower mentioned have consumers' view as this of in our in quarters. net than This offsetting year. to of this spend margin; our lower EBITDA, advertising advertising shift it clears a quarter last for expect at expect we guidance a already QX seasonal than QX. I gross to that the it

QX, sweaters sales due In addition have we which and to winter and in the strength seasonal like costs and expect shipping coats, of slightly size. packaging to higher are to our larger offerings heavier in

range expect the year-over-year. fiscal we XX% $X.XX revenue billion billion, of For full net of representing year, XX% the in growth to $X.XX to

the to adjusted expect $XX margin in to X.X% X.X%. million or million range EBITDA of We $XX of

approach investments. pace to and sustainable, strategy our grow reflects outlook responsible Our toward a take at thoughtful

today on by long the SG&A achieve costs. path. the leverage help toward goal and this higher margins margins XX% believe making term, is XX% investments range, our fixed we’re adjusted driven us to Over We EBITDA our to gross in

pleased with we the in our We’re first results achieved quarter.

stages a in of early very growth. our still We’re

in to reporting look your our attention. We’re our and forward for quarters come. future you excited progress Thank to about the on

questions. now We’re for ready Operator?

Operator

Druckerman Instructions]. Goldman Lindsay Thank We’ll with you [Operator Sachs. from first hear

Lindsay Druckerman

a I question to active guess on wanted just users. with I start

think which the talk added one to of you to? a first quarterly attribute net back as might And of we’ve from run something a and net to considerable the users, This as that it rate? of cause the what like quarter-over-quarter the be the variables accelerate you kind about, quarter fourth that you of decelerate second quarter, of net-adds all, about strongest the or this half sometime. the Is adds how second, that in seen rate? run sustain relative will is you that we XXX,XXX that Can should look what momentum some pace? Or we this are at year quarter to able

Katrina Lake

question I if a quarter this maybe and start in great fill then is Yes, for I'll with miss Paul can anything. us. this

saw the we’re that expected. customer the efficiencies we -- we than we acquisition marketing side, on we actually, with what were what side, in and saw in expected channels On line some better

pulled of advantage actually to marketing of that and efficiency saw we efficiencies we that those saw. take those positive some we so of And forward some spend some

definitely that so very of customer drove was on the And part side. ad this what quarter successful

in we’re of I momentum, overall I would as think should what is next the of think capable should is of what going And guide in terms best guess I probably sharing of we’re you say take the quarter to year you and what that terms In our you doing. this quarters expectations the full you, indicative for I are. what expect the guidance come, be of to

is second very little for This we The marketing on this inbox lay-off competitive side. so a is time you it people marketing the is now when quarter your is attention side. are in a the consumer’s expensive on a typically that’s probably time a see the and today. when and quarter can time screaming Right bit that very

a terms the do very on the and see this in be deliberately think of side lay off good in think, quarter the But you’ll was expect, quarter bit I for that is for and can next definitely doing. you team and signal of you that that’s what us quarter. And should a something capable in a this so little good marketing I

Paul Lee

feel comments, we’re Kat’s to to clients. even QX, our clients confident in And of we to overall ability doing with and drive retain would to I marginally what of our based add just abilities

as to and even we of businesses for terms our plus active We to guidance as core women’s well in clients think just I would that. net new business. both the think In have, more revenue, men's count client bring with opportunities driving on of new is

revenue net be net do expect overall clients. we our So continued [driven] by growth new to in

Lindsay Druckerman

follow-up this a margin -- on the and you quantify clearance of in secondly, how two just you benefits the also this your mark second maybe gross margin year-over-year? you in covered from gross were parts, detriments And the comment, downs address shift but timing quarter with side. quarter versus the the shift? quantify maybe from the can timing clearance quarter And of that Can in

Katrina Lake

first the not part business. the Why don’t you take benefits Paul, about On I the big then and part the part timing. and our have take is gross margin a markdown, of

it's tested for full not concept better a quite a at is price we this when off and that love people we've of there's fit doesn't lot we're down. some retail fit dress bit they’re going also spending doesn't $XX at than reality imagine $XX, a to that at marking dress can that of our working, it rather as And that So have with a this dress in backgrounds. the example if you model

in not markdowns And a so are general driver. big

warmer had I we One would say. of saw, the we things a fall,

And so do. through selling we product later were sold through this than summer that we normally year -- we

were kind at you shorts through through that. September of full most And normally see tank that wouldn’t so and and we price tops weeks selling of

talk about Paul And gross is saw can that in benefits from timing you margin. reflected then some we And shift. maybe seasonality so the probably that and

Paul Lee

Yes.

a our cleared to inventory we QX because less noted, rather use, success we in or have of the we’d sell Katrina of -- did probably clearance lower ability the we markdowns As And is term think margin I is would in say timing. from items. QX. that's we upsize into standpoint, gross We of [logic] our versus shifting what expected a third summer more roughly magnitude

to that [gives half size we a But from of in [indiscernible] we quarters. and first planned with that what line for quarter expect two standpoint, had for clearance the you] the hope really So down. be the

Operator

Our with Douglas next Anmuth question JPMorgan. will come from

Douglas Anmuth

hoping like you should retail, harder qualitatively progress on it with bit frequency and points, second talked trade-off Brands there maybe forward. Can just terms in any value? terms talk price -- end a push guys trends both the end lower and will those just high Women's seems little help in we with of on you order the how and rate, lot order average you're about us going average each a that just about Premium of of of in And you're keep the the could seeing unit low then about think just metrics? also anything you Thanks. First those around making you

Katrina Lake

price one are progress we’ve is that we lower the think on price now to make really have and against is a I benefits of customers scale we're be preferences understand that at that matching First, tuned higher able we our those. points, the the what in that way fine is can and sure we’re

the made really more to there. that can two see we're successful. end, we years ago, to And be we us excited the we've at it weren’t or been invest a so And on scale for much where where do higher sense place lower and now at a

help on what better. people's really improvements we we data being indicators to clients get ability the And well serve our to to to that seeing for style we’re us front Those are fit share those seeing and share higher good what that able so is ratings of on just that life. us point is and come and

the of like I higher other of the how at terms range price and think been $XX opportunity that’s more-and-more for, we range. the very historically, seeing greater effectively. serve demand there but a each guess price fits lot you expect can price In that And I a perspective, doing than that the price our those is Premium to volume that we've Brands point it's could profitably in obviously, point a are from well, is product $XX a price point we’re we -- lower that offset significantly

probably is there price that be the going Premium so in lower point one. than And in greater investment to

effect. will net-net, client able well. a point they will, that dominant more other how about And each have guess bit, I very How cancel so price your that think, to I think inputs, could you do we’re probably the serve lower I while affecting out think a that

overall; perspective that fixes that qualitatively on terms many satisfaction segment, Obviously serve I client’s we of though, spend to with there’ll in in wallet the market in And the in clients lower, also [indiscernible] men’s; serve ability some we’re market do. improvements we’ll [AOB] better is guess so Overall, pressure Data well. in that across Their seeing smaller of size; the happy business; all core men’s, that are client because than is we’re able our that price women’s units as you is really; than of opportunity we’re see be business our in about that very less very plus the how size. keeping performing that’s seeing in the downward about client we’re true women but of it from that positive. we’re men’s very will we’re to woman. our well. from size plus seeing, seeing two-thirds men’s qualitatively, trends tell that point is people see

would I is not size regular the think the of in still exactly also think we’re share plus size size will plus opportunity wallet market on look less. tell opportunity or if terms I you undecided like but a customer

I clients point in fixes that a our frequency we’re that in that on will business both in depend particular well, a overall, average I in in is people particular that are see to aggregate example that as success directionally, that’s think improve. lot price think very but making finding primary segmentation. of metric serving But of segments as little means be things and their we’ve growing lower lower so those pleased that’s volume, you’ll love And in and really the metrics either the different those for our the with, focused bit terms seeing a little plus order men’s see sharing, affects in there, able size not we’re we’re being I bit they been it sure on in mean,

Operator

Our Ross comes Sandler next question with Barclays. from

Ross Sandler

I have two questions.

marketing. data on in to capabilities assign the mentioned to you’ve letter First marketing, yet you that science your

then And seeing So And that [indiscernible], question you when what on I what’s might up reducing when second do you or efficiency see improvements and that your the given opportunity happen timing guess, in on around what’s thinking is the that you’re that. mentioned? you do driving already extras. timing

above few You talk opportunity economics guys the you. Can overall higher in driving keep adding just there? or extras with you five threshold with the more you recently the rate Thank started that unit and started the ago. box opportunity testing around years about higher a items

Katrina Lake

Thanks Ross. about how there early think, merchandising in marketing, quantify in of we data it understanding and have And data on significant business in a in think deeply pervasive science very being and ROI. lot And a science happened our dollars is marketing, we -- as side On I and styling. use we and apply the to in what We generate how we’re after science. marketing spent to days. of analysis data

data to And think science today, than so would that results to we’re results. actually delivering say rather about how using about we, I think our

had for but acquire, a that a I acquire. bidding we a don't though that really to so we example, the good we a if we client the them was have be that's pay actually for probably look to generate overtime. say be going frontier think they client That's There, data we expensive even $XXX that today capability LPV dollars be client we're that today thousands clients. science client more And to is science next should acquire way is because that us client of be to using in, would of for in more data to a this would to who the using could

that and much be acquiring today. a capability as that could could don't client be perspective being we would more have develop. so a advanced at have I example, for that That individual personalized that capability on that to we're capability And the very able clients we then think what LTV look is individual on

and year closely we're what a specific in and yet extras, that around increasing of think going say have marketing with of dramatic we timing, of what But on after. silver think we're already your before science who timing commitment There performance is going I think this to that. to On optimistic this on but terms so some have about already bullet. on be Eric an question Today's So I I isn't more is a that those of our think of runs more when excited it's I kind we'll not have see don't capabilities devoting I data resources. and already. switch, And data working really that off we're specifics can don't be is and and seeing we would far. impact, the a any science

that last this as socks five or the lever or can it buy a optimistic find our a more is such of there’re so good and being bras be extras and to people what to clients the would know about is really of of underpants it they're lot and today as testing loving help you for; we're Stitch buy in is able is year; categories as in So positive it's have certainly concept like on but to any we've the and we economics. timing opportunity. interest it have idea easily today Fix little today, that there a and definitely great product have bit But that items this to the existing that a specific a on through a that positive we impact don't there a think done unit opportunity experience; at to we

Operator

to go with RBC. We'll Mark Mahaney

Mark Mahaney

you. Thank since the beginning you campaigns you've been the brand awareness about year. talk the brand running on questions or could of please. the impact One your Three

were you out seeing because you And they at customer of the could of the we're of much, there shopping Thank survey Secondly, issues biggest on that the you're could retention way very that customer it had was third, showed reasons shopping price impact an that just we acquisition? and Are get points Is then trends since stable? slicing find work the one points? that or much. advertising acquisition talk now. the impact not asked you -- you relatively seen comment about lower Stitch retention already that lower people you've on brand to I price not on cost Fix. pain please some with the Did customer that of big the as done spend?

Katrina Lake

the of one awareness. impact brand on The first

more advertising, women’s had we last a campaigns I'm And men’s that drive we think, the that’s but to I if those way been wrong, Stitch XXs the TV in what So pleased which on role inside. just to effective male correct featured is been men I were shared Men’s, we've actually it TV even we've targeted XXs towards think We in that it each Paul, done on from, Fix awareness than doing in aren’t has de with. the more being the commercial last, the Men's, think the through able channel three or we the we month minimis. ways actually been men's me effective something to driving with is was really And in measuring started just prominently that also. that today. two that. on

that drive business the use to men's excited we’re So to also.

think And the campaigns positive so is but unaware seen a on based broad still service. we’ve the opportunity a been seeing we’re that awareness who of still we’ve is are many TV what we’ve impact seen doing I lot and through brand there also of completely people

more range. $XX show point that a get interesting accessible was better your work that. and acquisition, from Stitch but Your point that service question and $XX for The like wanting of price to price survey the opportunity serve also there looking lower Fix, that big that’s that show this retention impact are clients feedbacks on we to of a who on clients the

And so better been did a in make and had that we we -- us still signal the how to some -- opportunity drive through lower assortment. year drive say that way have were we out sure assortment build year, this find did that we early would served can a in test assortment well. build last room or that a opportunity better a that very serving we was and aware half we to the We that but to longitudinal better client satisfaction can we’re continue to great we’ve today, an better XX we’re able us part out point really there, that that’s did price this and test, the for to attention been And how tasks with we with as client in that that that there, improve. really focused we of. on so, a were I able And to

think to side, interesting finding I service going price are not clients On from to in doing to the targeting, point personalization there you’re TV it’s or naturally the segway be acquiring that anyway. try channels as we’re what looking for that like where who $XX much -- are TV acquisition the $XX we’re to side, want are and that going

we to serve way we’re acquiring and more assortment the be a as really based doing less that so that range of And that clients. clients the that’s to it's advertising, of we’re of important full more able have broad targeted even needs

And is so marketing that more point lower important we’re price as mix. that diversifying

that’s acquisition that we’re acquisition customer the that stable not we I'll But that of customer terms that is what is pockets share say kind of trends seeing, we’ve opportunity. specifically. In of and -- a we’re we mean, seen that and think figure can I share I

channels those of QX, in a channels. actually efficiently there in more where what we than couple so And expect we channels saw those performing

been lot of pull we for some stable that that But have And dollars a to forward. fire of as able we overall, growth. confidence pretty and and us there’s power potential were still so term lot long we about has number think a

Operator

We’ll to Jaffray. on Murphy continue Piper with Erinn

Erinn Murphy

A term or couple how level the margin businesses time to me, gross could longer expect over I'm gross of so potentially how and you’re the what [indiscernible] closer you on curious newer whether questions you your women’s? guess, on think five big do margin. from Premium, do those your I those at first men’s just or it's category, be a to -- big scale fully of all what optimizing that

Paul Yee

shipping impact I'll history Right and now, start stages, margins. Stitch early that get benefit share the And reflective the to business that But on grow in some new think we businesses a plus distribution time. client on our thoughts are gross and are and business, improvements I'll to our margins. dilutive as Fix we affects do to Mike XXXX you men's mark points up; of their then for XXXX. over of just we from The strategy. the has really at that difficulty], have one businesses. women's threefold; [technical improved higher; initial numbers, there’s was smaller drivers two cost footprints one our our expect more scale on size, look margins merchandise X And few look at from we so are of gross distribution and this as and associated inventory build this three, our costs which if that’s little that way is in is business as the I bit the there’re saw base those

able So to benefits we on fronts. get those want all businesses, over these what be we'll as we feel they I'll Mike. then it And turn clients see grow we and to confident that

Mike Smith

dilutive like centers mean the the today with in in But and get next explicit we're we'll it be two Men's men’s to when business not breaking we we’re is to margin. relates like next in the the one. And is where about I'd business in like scale, evenly be then shipping distribution another distributed again probably to we I of the get out you driver scale, a to feel two is we it's expect we’ll gross categories months, business won't to level. expect the I wouldn't XX certainly timing and sort say where at feel of years could at because or say

Erinn Murphy

the does the call have did months? of on in you internally shrink Just look last some come impact margin, staying out talk XX that guys that And as about of maybe How basis gross XX an level QX. initiatives down? working on to points over you're

Paul Yee

out. start I'll So,

our yes the reflected shareholder that's we year So in shrink increased and in the has MD&A shared letter. past over

strategic from and shrink; other there’s is both we're cash the say of there a carrier and shrink client think definitely tackling on I I standpoint flow shrink. fronts; two opportunities would standpoint. is one buckets is

put on claims. the in staying half side, just it's for customer simply to our a service process On [indiscernible] carrier team just bit

easy of me back pockets. kind very to So it's win for that think money into our get I

probably are charging On client [indiscernible] been been sure that have going on; two we have there’s things items probably that cards haven't making robust is in declined. we as for side, the been one

process have we to enough just to place get make get engineering in So charging the on time are money. to work the we going sure

as to us. we're can are we as I think reaching funnel, into clients I Katrina's right think the who now regarding we the And intelligence to over to kind reaching reaching strategically clients, back strategically distill think fit for point, to are of the think more tying And opportunity new find for still an use we we're more out clients right we to probably for the term. I doing would be the who that sure we’re us intelligence in see fit us. clients make best investing right system long

Erinn Murphy

you versus shareholders. I letter year-on-year? think to the year? the for Paul, year to I you last curious should I that Inventory, the am that up just guidance on question, what expect dollar inventory was was growth Thanks. up see and of sales that how seat, you’re last just And didn't you. your on hot QX for trend one in rate, the more what gave

Paul Yee

for Tommy that teenage is anecdote is the the right what think do Hilfiger in about think of to sure over you what as believe investment make upfront. right of products So And really time. inventory is to I’d our able have in sure but about being clients we Katrina’s our about women's personalized sales really also new XX% thing we inventory our provide have line assortments. want grew to we think year-over-year. for with that make our in that’s categories, categories. about new broadening business remarks our reflects we the On grew sharing When the this her place you that core actually inventory, our client, jacket to And in client to

tactics think inventory the make manage we We outpace over using again for the inventory inventory clients. I all right to we're sure sales. But for offset and our drive to their we helping But bigger data from rest do next the assured, right certainly over it's So growth you investment picture, see the really think have time help this to investment. science us inventory teams want various business. year, our our will that buys, merchandizing using

Operator

from Scott hear Devitt with We’ll Stifel.

Scott Devitt

conviction And the the interested as plan those past business visibility of the cost understanding learning secondly, I of brands, you. roughly manage was around what exclusive exclusives is, And ’XX. How be that the to long-term? you you Thank in in the as acquisition do future a process business in taking then or you’re high on percentage XX% more I’d be how year, to private marketing number more you’re think First in process. much with should in-house about revenue labels of of think we as costs? able of terms have

Katrina Lake

right channels long-term. there bringing those On channels of those house -- gain is as bigger and also were that benefits those able just I learnings efficiency there in-house. brought them on bringing all, algorithm have and when think in is to in-house. those benefits in off actually generate things is the learnings thing marketing we the in there financial is where house, have the we is are to business process, and really possible only then to about able as channels And being we some learnings capabilities like channels And actually we those been the think

is benefit And lot a there. there of so

is I on of have have think firstly channel. In effective the reasons set is lot into acquisition a we a having cost, of too we where diverse confidence of that now it one one reduces being because, are of I right and being liability -- around terms important think to just are dependent of visibility channels any future able

And that to diverse feel and like algorithm, to one so Google be changes channel channels able also. over-dependant for fire feel I means or many we’re But like on a changes And of us set power. algorithm the have don’t of channel. we means impact buzz have a won’t the know of course hear -- Facebook also we you it lot that if we those

to efficient And variety work being efficient about have way, more to in for to and working, just that and ways work put more more to an a important is and men’s and having able dollars that. dollars find that have as to and TV are to for be more avenues that able to to channels we so all able of be social putting think work

So more to that and in visibility very terms future, be cost and of pleased I in in channel-by-channel And would that expect. a of there’s we I us efficient still think lot opportunity that of say be a I been ahead we’ve of where there’s a stable lot some case pretty us. see that think than basis scale to does I that and still ahead what us of today,

about There exclusive And brands continue like -- and in -- growth. right so I ability like in [SX] category-by-category our use are exclusive that so how we brands there think we’re our our pretty XX% to brands. of confident was shared yes marketing marketing much capabilities in now in we our drive exclusive revenue. places basis, like to to on couple on is rely behind of differences a represented business in actually On

example is great branded of in lot a And so for there partners. shoes,

that two and actually And and the important our business represent and of shoes. And women’s and will a there base categories and do so are it we businesses of which two exclusive size was because proportion as important, a X% in are that larger men’s we growing business outpace vendor plus they’re are the didn’t find those of overtime, we started. we as did core when strong where brand

in on off And plus size. that both and men’s have of we brands so reliance a exclusive even higher

plus but well. drive growing a to to to able base, it’s an And so more a that, that evolving that little there more we’ll we’ll it's brands having really we’ve men’s really clients more in diverse been exclusive where customer businesses that expect function -- business bit just and see more it’s are of our overwhelming overtime satisfy not not our size and more do strategy brands use of successfully those a are exclusive and we is

And there. modest so we'll growth expect some

Operator

Thank you.

Schackart William from Our Ralph with final question come Blair. will

Ralph Schackart

how satisfaction in walk men's you I satisfaction, up some today this client data of further what And been men’s you. men's similar satisfaction? of up letter to that how with a to follow do terms you're have the or either main leverage it talked rates? drive And year-over-year. to of how at the Thank Just previous compare think seeing learnings through were about you the from driving and of core drivers satisfaction stage. women's women's, rates the is the the able then algorithms men’s much you being of Could core in terms within in you that the

Katrina Lake

actually answer at at is -- men’s women’s one I the are business women’s now so, is that year is it men’s are far above my going one we is think, one the outperforming do able explain just I'm that were now. right were where and is the in of even we where year little and metric. bit far in so-far Men's Mike volume to how probably on a that? we to scale every have why

Mike Smith

a infrastructure it from many matching get of client quite clients sort of to learnings we’ve that the them. real leverage of and power well. simply mean, existing one we down women's get really understanding so of base early And built; the comes from you I touched Maybe, the it you with real; and our on learnings the personalization like you the really with on. business product algorithms; had some that this platform from starts is

done sort exclusive developing so; because nice helps actually see We've brands one, and vendor men's, of referenced business men's it that the lot bit and more a a in we really being didn't Katrina -- job brand s too. certainly in of a And our prevalent we little exclusive in base.

business. it business but excited about far seen so rest the it's and just client positive than room, there faster better in what and So think the almost is the had we're said, like still, improve expected men's in get to of Katrina the been we satisfaction. there like we’ve got We very and

Katrina Lake

particular, been fit price very done with in point. what think, I’ve around the has I impressed team and

and find team back early and we are from the customer two things fit very reacts able for walks clients very, those be product. in really launch, quickly satisfaction to men's that focused three-four areas to really on I really iterate improve is important and quickly first the particular that in think on assortment into are to the and and the we fit hearing of that months was bring driving

are people And had launching and I significant in price points really focusing certain impact. really where think that a seeing on and investing assortment that.

in see successful really are those be that the on. two think I particular I areas team

Mike Smith

measurements we example, point brands One not to and clothing every can as on of are quick think back that to to we add we extra-extra noticing our see market what's them an large, is trends to in sharing what's able by make we that fit working working other products. where and help better market of piece end even brands up help and

ecosystem, big our see where better for product we So and that's market brands. those data and influence long-term them relationship [indiscernible] you science are the us rally of want to with the but be partner us for a our

Operator

Thank to the you. like Lake Katrina additional closing I'd or to conference any turn back over for remarks.

Katrina Lake

and and to a press seeing keep Thanks wonderful again for everybody. Have with we'll break quarterly you months and in joining our releases. us come to at forward today. calls updated analyst the look We holiday conference investors

Operator

thank and conclude gentlemen. again your does all ladies conference, you, Thank Again, for that today's participation. you

You may now disconnect.

Stitch Fix (SFIX) 19 Dec 172018 Q1 Earnings call transcript