SFIX - Earnings call transcript Q3 2018

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Operator

Good day and welcome to the Stitch Fix Third Quarter 2018 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. David Pearce, Head of Investor Relations at Stitch Fix. Please go ahead.

David Pearce

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

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

as that statements information Relations complete disclaim review to as call Investor the required that discussion our performance. also today's results would this of forward-looking we are call of statements. on an contemplated could We have our factors note on Reported by indication webcast differ also obligation our forward-looking involve on for posted remind a everyone our be law. to with results letter on from investors.stitchfix.com. be can financial Please any the of like of today's statements QX We our will found site. SEC the the to differ. the in risks cause to making of website, statements and could update that any results considered those future based which except call shareholder the our section link on uncertainties. A conference by Actual Also, results forward-looking us should filings be as forward-looking date. to available not We materially

shareholder provided non-GAAP to the our measures. the These results. most to not in intended Reconciliations on directly Relations we financial financial substitute During be non-GAAP call, GAAP measures certain for are this are discuss will our GAAP measures comparable a website. letter Investor

call shortly. the now over and IR webcast being on like to the is Katrina. a website entirety our I'd it's in available call replay to this of be this website will call turn Finally, to

Katrina Lake

while the which highlight issued thank and against us I'll encourage After to today, you our on take how a from of letter GAAP income demonstrate adjusted to net our looking a marks which exceeded future We our strong to investments growth guidance discuss to $XX.X over range. growth the more and in high closed in our of quarter executing more to also we growth details for market guidance. results the we we continuing we the and quarterly as excited in delivering our David We approach third million topline discuss shareholder our net moment quarter. with opportunities, for increase million, our disciplined QX representing moment. financial consecutive EBITDA million results our roadmap. to are and I today. our QX in men's XX, delivered EBITDA business. you results, measured results fifth revenue Thanks, quarter XXX,XXX exceeding on make strategic $X.X year-over-year the in delivered across XX% XXXX, call. read. exceeding for launch this category drove opportunities joining and growth April X.X revenue and In year-over-year. women's discuss our adjusted and of year-over-year million client to an of delivered will end net strong are detail categories later our both XX% These our account future Paul newest QX, growth We growth. to XX% active in grew $XXX We guidance our

roadmap pillars consists growth. for three primary strategic Our of

greater us and engagement Style and we makes drive get clients front; and QX In Extras. our thus a greater them by expand to Style to continue through we wallet relationships for two existing initiatives serving and share access increasing to is more better friction Pass less share. wallet it Pass with on our First, clients to allows announced fixes this flexibility.

women's and the what still five to Pass's their we're that are post-launch in male to Fix. above which rates items leveraging great we've a are choose I'll the excited unlocked in allows enrollment also their begun needs. Extras to in from seeing fixes apparel capability that in unserved shop items. initiative the build service Style we our for our track receiving add their about is to Clients moment. in is is now all so This far days by of than clients and and services as an newest a continue capability pilot engagement early, incremental more way and the fixes. discuss able more category product are clients. items This to able we category the what While socks more fixes with and observed are such ship being both, seeing female is items intimates to choose their but client We've in previously to fixes they to and still this categories five Stitch in early and

growth in performance our for is to we've capabilities have year-over-year these our growth increasing our The pillar serving of believe marketing new active leveraging efficiently count in acquire clients client second awareness. seen business. existing brand is Our We result significant and opportunities in that efforts, new the XX% clients. we

just This whole base. served us for them already our will and school. parents client that offer given for Third, back Stitch share we market this we examples Today, through launching is we natural geographies. as which this It as excited we're leverages Fix capabilities, of product plan extension launch newest so and to are for to are Kids and many our and Men's way category continue new well our we an of in effortless existing categories, to the types as course announced to a upcoming family. time expansion our shop growing into plus our addressable category.

the I diverse call investments unique to size across our items our give Extras. to kids serve business market of themselves and items five as of our of ship kids of to exclusive We brands. the wearing. XX to earlier to mix kids brand. to own will style from will under-served great feel which expands clothing fixes of addressable a of more well mentioned as to aesthetics we learned portfolio XX% We We X to recently third-party portfolio and in the we've and range is market the we've consisting fixes has women supports anniversary diverse kids express sharing than platform our of Plus some well, quickly over made estimated and The market offer our of In which ahead. affordable Plus about category the spread addition the with year, plus women's about clothing This kids as be the they launched look States. marketing freedom to and in United forward in brands, comprised capability celebrated more styles preferences quarters of in information In our in XXXX, one-year past our provides category historically informed exclusive the updates as February offering. size our address represent a scale.

the believe clients segments, to women's years of seen combination learn paired we've purchased new serve business clients of client plus the uniquely positioned our offering. with to that many We the we have are parity about fix with per quickly number evidence with us. plus learning in what size our of items the broader because insights As ability and clients share our our historically of of already reached

history advantage but XX% plus-size each in gives either in execute clients' approximately not inventory right continue us strategic quarters deep keep her. our crossover our This the roadmap. the understanding and in ahead wear the you we of delivering of product mix needs meaning, diverse We'll on and supports to of insight for updated sizes, our or business both. plus-size our us they clients what example, bottoms For tops as

over it through who to turn Mike, highlights for walk you the some operational I'll Now, will quarter.

Mike Smith

understanding we volumes web-based feedback our data style client compliments In with shipments the at and between Style and clients at that Fix which style hello of demonstrate integrate an across thumps discuss checkout. moment aggregate I'd call. rate through technology a clients call initial the how interactive game shuffle today's recent with data initiatives Katrina which and of to shown to a on thumps take we're Stitch and item-specific share us taste The or individual mobile to continuing Thanks, are us began style a two variety we preferences and Participants up of testing strengthens fix science down. everyone, business. joining to profile with level. our game they like us allows merchandise shuffle. that and fix to client rich collect which to collect already large enables the we feedback both in XXXX

decisions, styling to engagement platform the are stylist implementation, inform shuffle's early among better higher use currently this client we're We gain. in that while the clients seeing and style to satisfaction feedback our applying

We and driven financial and resulting data spend science capabilities. piloted that centers view capabilities, to fix call update five our Fix's further drive cost in to in efficient walk opportunities to we plan most now you initiative by I in house We a algorithms the also Paul, who many improvement women's Last of in our efficiencies week the efficiency apparel. recent a we product this to turn capabilities engineering Overall, also like remain to I'd cost to this through technology has a applying opportunities picking minute operational improvement and November will our will both, to technology and the men's see program that data to to this XX% the operational integrate warehouses drive opportunity By believe outlook. after expanded further our on efficiencies to this all inventory management drive significant ahead. Stitch proprietary process. quarters our XXXX, to across the our and leverage initiative to and our these we share future. we'd you and April Shortly use performance over of drove our decisions distribution one savings. have in highlights history. our expansion, in a

Paul Yee

Thanks, Mike.

we strong client delivering QX As consistent revenue We're reported today, in growth. financial and continued story. our

of principles our is business the we're QX and the our management through that more have of Today's broadly, launch, for these a profitability business investments Kids long-term. and flow Even profitability and our announcement track P&L, that investments flowing most choice profitability then and upcoming made, we've our Balancing free reflect one our yielded is the we strategic clients. where we of have action. record [ph] in our cash flow, results current reinvest. right growth subtle cash and making of We believe key with a and for

for year-to-date. Allow Our highlights. some overview of shareholder and an quarter share to our letter provides financials me the

quarter XX% well above as to plus, growth. this our of categories for XX% Driving growth Our and was as accelerated men's newer net $XXX of at the our offering. our million, women's growth were guidance XX% revenue representing traditional year-over-year and

in seen results, prior quarters. our QX net more growth expect we with line QX levels pleased be our revenue in to we're we've in While with rate

QX [Indiscernible] As spend context, inefficiencies from help in-house this year. to that provide last year outside we comparison agencies. marketing migrating easier efforts an

year-over-year As noting we've the also gross expansion EBITDA grown our we and topline, worth QX the margin about and margin. it's saw

improvements a expenses is extent inventory largely improvement While a and was XX.X% QX This driven reserve our shipping [indiscernible]. product our This which investing and the year-over-year commitment of partially may lower management. Gross drove to lesser in our to results. by a increase as this margin increase basis long-term freight impact was rigor quarter's from in execution year. expense, an of future by XX.X% for a offset a inventory margins, to teams representing result points last XX

or the of leveraged year's point on continue of but a quarter We as represent in QX of expense revenue million even net increase spend year-over-year. X.X% strategic to percent revenue. from improvement a dollar investments. million last we SG&A have was This $XX.X basis basis $XX.X make a XX Advertising

helped to in call in to offset in remains efficiencies improvement leverage versus engineers driven Adjusted QX and and was These investments net of These of our excluding attract or quarter million SG&A EBITDA end warehouse compensation by Other quarters. our basis which in continued in million cost driven hiring stock-based costs our to more reflected best seek scientists. Our versus revenue, QX shift some million and net higher expense in and our we management. and which XX.X% increasing of retain of range QX X.X% last stable was $XX.X guidance of the acquisition see QX styling was 'XX. include we On exceeded revenue data $X point, guidance. latter QX XX.X% net the as in results did million $XX point advertising continued our in talent. the prior we $X XX from was also of a our high This teams, noted timing by results to a revenue. we

rate prior compensation credits quarter and deductions for and stock-based study. tax tax effective on based the year-to-date to from the Our period estimated downward completed R&D provides is benefits XX.X%, due

$XX.X delivered cash flow free of we Finally, year-to-date. million

results. to capital approach management disciplinary Our contributed our light relatively these inventory investments to and

net range QX includes our Regarding our Kids range $XXX million the from quarter the fourth million, fiscal we to XX% for to of $XXX year-over-year. be of This a growth revenue not standpoint. representing outlook; the in we which expect expect revenue launch material impact of net XX% to in

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

billion Our the quarter, QX, adjusted made at EBITDA for Kids as our impact shift operating in people on as QX support outlook reflect guidance guidance $X.XX range marketing our to of of this prior this and year-over-year. XX% net the for raising expense XX% investments $X.XX is launch. reflects an a from representing XX% as full well billion year an into of from we Based growth. a growth fiscal increase range of are follows: This to to XX% as revenue range we to is

terms to and were range or EBITDA narrowing X.X% in an at In that $XX X.X%. increased of range, a $XX to adjusted adjusted the million million to midpoint EBITDA of margin slightly

was reference, million $XX our prior $XX to million. range For

We XXXX turn earnings ready have that, full for for questions. I'll QX over you. With fiscal guidance Operator, to provided our now XXXX in we're on your call. next

Operator

we'll with first Goldman from And take Instructions] [Operator Chris our Sachs. Marin question

Chris Marin

wondering detail upside could us in was give a quarter. I more guidance what little drove you the bit the about to if

progress talk that's about the in is what quarter, list; there declines letter prior quarter active think I forward? that most per going if and waiting we that what Plus curious And is from think any the for I XX,XXX can after guess in other category active I we a categories think way drove that so the people highlighted you the for you. far? in about and milestones just of was mentioned was that or outside through should a flattish shown maybe something client then, expect so specifically women Thank bit in revenue you can the ballpark category? customers perspective, have

Katrina Lake

on and revenue then, bit I'll take a I'll Paul just per directionally on then little on active take your have questions the maybe category guidance. and part client,

is -- the doubled have each benefit there successful, about the and available that's the size those both warm women's, of In or bodies course, been really of men's than less out way that men's than terms could the research categories those there great women from Stitch Fix our with addition in of are for women higher. audience and that think -- of have XX plus of customers that of U.S. with lot business, half more of a a been to kind shows is obvious -- and

been -- directionally, of So significant the those before was the audiences have new addressable of Plus people waiting these XX,XXX added that longer of opportunity successful term very of us not for are the launched both us. the and totally lot on providal before were even our that amount actually for total addressable market path market waitlist for of are Both paving in growth. we were both number business. kind and

than So benefiting today we higher grow. from won't the exact that people significantly be continues is of while certainly service to and providing are that that number numbers,

Plus are the I'm we'll all then able perspective, us all many think long-term from excited of see category size many, be and really So those. for things to same to growth for with about a tasks have Kids, I and opportunities hopefully, great

of Men the example, businesses for just client, that spent so clients about within talked historically about -- spent. of is XX% revenue have many our and dynamics Fix Stitch entered. active per there what think multiple we've have terms we new In I there have women

little So dry that bit basis revenue you annual going so will on an can be active is a a imagine spend be that lower per on to client.

Style and so also of in consider the be we both same time, those drive these we likely At example, expand we the really forward, As are Kids, last impact share. [ph]. is intention to Extras, will and about lower; things capabilities that quarter, that for Pass things are where the as those talked look two wallet should

share Style quarter, we than enrollment quarter we've what in and shared so we of addition this Pass higher to -- what that Extras incremental that's to that enrollment, beta with seen we've Extras, certainly in are certainly been we great selling business. that last with we're we shared a expected So higher pure the selling in saw we fixes saw lot that And before. product the a than is

we're active wave going of waves wallet there. is have client, guidance per not be -- both but that's that on revenue both -- for to and there growth countervailing something the kind so the effects share are And providing wave also

Paul Yee

women's really quarter; to with new our the both XX%, to our results XX% our we categories, going efficiencies on well as sales seen XX% above with add men's active for a marketing XX% year-over-year growth we our to ability to for have Just clients standpoint, and track and engage retail our various with our as the tools to from and clients. by clients clients, spend, was and was pleased we're grew driver please reengage that range really of really to we've and

did think last standpoint. marketing transition what I'd have in year our as remarks, I also I activity our we for from note QX, prepared some noted

growth to for fall. we'll full strategy for back for inefficiencies and growth old our guided the in update full year-over-year in at look that's reflective profits the But saw growth to give and that XX% you I've a we're long-term an year drive the Stepping XX% helped of certainly last expect year, quarter we with. we growth within quarter QX. pleased our rate we normalize the the when year which So so boost to

Operator

next Anmuth Our from with comes question JPMorgan. Douglas

Douglas Anmuth

I wanted follow-up bit Mike, on just to little a that more.

and between and the hoping room is understand you revenue that and further efficiencies be potential a you little a growth; obviously you whether just of to gain logistics the and in some some about what warehousing trying everything, gap going areas could efficiencies? could client Just up about bit a lot you've Mike still And Thanks. growth on then, talked gained that of more. forward there terms tightened probably active bit talked to little elaborate

Katrina Lake

to being kind level than -- revenue XX% and I I the have speak of and tighter kind a think quarters. at that tighter XX%, -- set a high of the active growth XX% in to it they client guess past

I think countervailing are effects. the those

On And business. the being women's hand, these down more reflected effect will expect from the retention, is clients to then in will the but that are revenue greater as and to we growth one engagement, the a at client to all kids where that do and be our initiatives, our you countervailing I categories such wallet same longer client -- to benefit in be of and markets lower huge those the able add think we greater for see annual newer per than spend are great what be share seeing our trajectories term you're eventually men's more composition still as so see where of number time and derived us base. contingent

are So are about there. I Mike, talk factors you play want that the those efficiencies? to think at two

Mike Smith

where versus just delivered and bigger a one being main past, but still we're And, business leverage in for it's we by in two. businesses the the in have get experience getting putting lot and we we they being that about efficiencies the is other all new just just start we've an in warehouse about talk -- of Yes, in that as talked have we've scale, those contribution a that three ones; example, as to great lot another in we customer new can you there of ensure some businesses I'll and of start more men's network in know, added skill, just as in warehouse five leverage we margin, benefit warehouses by one, seeing two as warehouses. a businesses room I think terms little model. get

continue four in just is get warehouse; about still The automation there creative the more we one in but as way that I warehouse second the think of was within to the more but data opportunity and as in warehouse, is we for science walls area one return. is there more talked the to XX% and just the the so handle lot others in use well picking opportunity

talk So roll about I room as there more think those is for calls future and we'll sure in out. initiatives we

Douglas Anmuth

as Just business about and you help different the any us can Kids think around to just margin profile follow-up; there? how kind the dynamics of understand a

Katrina Lake

patterns of elements we not kind size I a a both of the number on that clothes, and one be think units it's and way able and of order, as their important. it to about about be probably having and of specific of the the share -- to think the think as Kids early too going we definitely going of we're different the bit higher to little kids the guidance average business but is, sex the purchase is important people

one that so of be And opportunity the what able about kind it and our Extras that wasn't to kind we capability flexibility on is Extras how back talked putting bit expand was use. -- this we quarter little more it and add the talked our necessarily our last is really a but of to that about -- of and service

a to from in girls our but a be likely $XX, clothes think have dress of that an hope see for pair and we -- business the of XX men's so Stitch but between and items will bulk Kids fixes of to for And of kind that than that see Fix price our will will in of that so buy significantly what XX see points counterbalance will and lower course people kind that. with unit number range fashion, that regular we seeing we that they opt kids in having that $XX and it can you to into items more that offering, average of people women's the we're want legging on be the as that X X occasion that could the

so the done think opportunity of accretive, so And to definitely it it profitable, a expect a it's we're already potential we're that big to for households big but and able opportunity, it's that we place don't growth a be where numbers, in do serving take we've will we to it's advantage Stitch definitely have specifics. us think I will going at we're big and Fix share a the

Mike Smith

to And amends smaller Just rear higher add we clearance expect we are the that products. distribution have buy are have investments we're to categories in costs sure is well. journey more margins to fewer all due in by to and Kat's the start lower -- just with with on be comments, sort inventory higher which centers upfront, the going of finally, [ph] to kids better distribute made back And shipping or we initial in targets XX make three rates follow, we some as can sort of -- to from fronts, we the include year-over-year. really lying the we new based months we -- new clients

We our are leveraging the third have quarter. warehouse assortments, scale optimizing, might aggregating, better I this our we as getting business. last margins our just initial we're merchandising clearance And the quarter with rates are lower that teams higher mentioned as describe then, added to we're

for has been it leasing -- So had. our kids categories that as journey we that our we for expect

Operator

question. RBC go Capital with your Mark Markets, ahead please Mahaney with

Unidentified Analyst

two please. Mark, [ph] This for questions, is Shweta

talk question regarding and growth? keeping is it improves you. it the initial algorithm engagement men's impact you've So to dilutive finding has in satisfaction on gross fixes? this clients it's That's how about how coming and margins; margins the pluses, you to odds and men's average their Thank past driven client did repurchasing, about Could grow strength much like order value. question of that so on given that and one. mentioned the second And related markup quarter impact

Katrina Lake

a for turning gross helps are gross cases what on we only our want we find margins. is repurchasing take washes on many our and demand through repurchasing. we're in XX, more Yes, algorithmic also efficient product to end reordering means only demand there for there and up Denim ending product I'll better undoubtedly It know be for helps that so and we selling sizes. the based we may margins we may because much, and we ultimately, the we because less I question and example, faster, ordering algorithmic certain be so or of cash want to that we on that XX -- mean we're style in exactly certain for reordering style a see second product. it we're margins what on faster, all up that know that that is that's much we're that with clearance sizes with

also the to well. And repurchasing so benefits but our client business as that all like grew are significant the to

you Paul, one? On want the on take margins; that to question second

Paul Yee

quarter to markets give it's grow shrink, quarter-over-quarter, if something last engineering to the a each on other that call that business operating including like of to front. the is shrink as we'll otherwise I our leveraged fraudulent new like still you were as we're that fairly is that for year-over-year report and revenue under continues focused we year-over-year percentage our tell there any in constant QX. giving business, cost but Sure. mentioned, transactions have reduce updates do points in to of our only scale chances XX us were as things you QX the and men's grown In basis that Specific can in every I men's margin up, we number quarter

Operator

take next We'll our question from Ross Barclays. with Sandler

Ross Sandler

follow-up margin. the on on and I gross Kids had one one question

look like are that and -- color do be Kids; margin, would like new would critical customers gross about versus on seems on and value do a on actually and Kids strategy? lot so the stuff lapped on you previous have men's we us is on women's conversions that is expect clients sequentially And said what like you of you. inbound organic think going have those gross up what's know to Kids, flush we the could process Just color of on just here you then, to have Extras our Thank Katrina, for how evolve what -- do prop any be going So with boost now the helpful. that the than different driving headwind percent kids margins, saving, questions? time And any this what guys you beyond to acquire more stylist so we're having out how congrats you data? is up what meaningful have that guys -- you have sequentially, any to

Katrina Lake

it a where what Firstly, marketing, may and having And percentage survey. we've very, going that guess, which and maybe ages onboarding clients able your are of do well. kids very offering is we this but significant of -- half and of our know if XX X of we going other is to question us. serve skip Kids our our to have be advantage are in signal for our a question what that, majority we give ahead know around kids certainly exactly, than really helpfuls their and as between kids, to don't to on to to more be is be good to is have that clients a I as Well the the put we

households we lives marketing people what business. and into So going men's we who we who saw there from women with we Fix Stitch lot some men's see coming the did business became were influencing men the was and seeing women's scale business that that noticed of in were the is their a

men with clothes, ultimate kind and expect parents still decision choices buy marketing where We are in they of marketing primary and scale are going this greater that the so their kind make and but even to maker women, men's the maker the of case greater of are decision with kids. and they scale the

to we And so be a and parents advantage it's have able many households fixes, are significant pretty already can getting to leverage. who many that

it of but more that to a I a scale going element given think a looking value think better, In we're scale to we it prop; will terms be shipping still I we're X of guess, styling have fixes I in -- XX. to

at this have had we jeans. however, with clothes still want -- elements to I styling kids wanted things to really about want -- little really Many you you great kids feel convenience. adults proposition in to their about want your job we've who who focus the constrained feel know, from very it's and who was you because in job, adults, your hear find would meant best and this And own as is it who kids value cute case, soft, feel kids just groups from think the you be the and that to little I similar that done important so fast. being boy wanted we to him fast, isn't the like you kids that feel to mean, hear want boy's we be them same in fast, wanted heard you fabric by felt confident, didn't actually help preferences, kids that to --

there similar help to and what do very them be proposition so men's to market us and have to confident, listen that dollars I think value already. help to feel because to greater with looking history in And in for built this deliver be that women's our serving we we able able scale are and to kids ease what of the to we billion it's but businesses greater the capabilities

Ross Sandler

would probably the any be be is will to helpful. pricing? the expect you be, -- would I will certainly do merchandise it color I your dugout lower, marketing keep differ? -- seems but That similar one to the on like here going Thanks. other rate your higher? The are be Is -- unit how any mean, guess margin economics how be will

Katrina Lake

update be honest, to we most go. as we'll think you of have I To this

we share unit along feel the significant we portfolio point, we do more will as with economics we'll into it about we'll as business, all men's as of per -- of provide for and business we're capabilities get a launching and business peer the modeled drive more do to able we -- color think be actually and once we people really we buying reasons, we've our what part haven't brands market, the are that exclusive to similar be expect hopeful -- probably think will be economics, those to able I I that that we will be we meaningful brands is of the unit it and been but be shipment, our exclusive but this differences. of that's good marketing already expect has plus be any short the leveraging we'll a way so for see and materialize

Paul Yee

gross I'll margin question. take the

saw of noted, expansion year-over-year. XX we points As basis

clearance be moments an Basically, I'll inventory in our reserve and against that. will We go year-over-year portion cleared at we've things a the to time and few that I have factor that is also a a Extras happy of because from this. To have on which that's ultimately. lower be expansion, actually year done sort take business might a inventory best the mean, inventory not, invested categories you is our to first been at quarter-over-quarter, changed to in still -- us evidence amount thing reserve historically been noted allowed quarter-to-quarter. our with as still honest, has add Within kind it's we very clearances which close of reserve So look per And of we comments, that technology deeper rate a and my think look has and sequentially each over men's the What we quarter than our but had inventories the like new at we're improvement we've it's fix plus. When at gross us P&L. that's hypothesized that of saw incremental the improved have immaterial is you our future. in really do the our launch margins, as allowed capability in like is XXX size standpoint and more Extras for basically, to one about rate turn I Kids. in

is a hopefully for kids future. to for for gross together that buying our clearance really and our quarter already drive So from testament -- is rates the helping what's this algorithm, margins the to is styling our coming and

Operator

go next with William ahead Domyancic question. your please Blair, from Ryan

Ryan Domyancic

progress first So acquisition anything the and around on the or did like that any advertising And during side, personalization anyway? quarter getting emails did in ads benefit you better that? or display costs customer make

Katrina Lake

acquisition ago cost we've efficiency -- last right Paul now the the fact been as learning's alluded customer to is anniversarying we're a in guess that. of in we and stability we've that few over now were as so seen was channels I and able bringing house and we've just quarter bit what year do to exactly a before So quite seen

bring I in-house, been is think is good channels of of email, at a so those still to we've lot is -- there that's you but bring still what think those house, we've do so lot able for think a I I example, been area in far opportunity to around And the there learning's referenced an opportunity.

to as bring around a personalization next forward, way so marketing, in looking same algorithmic fixes. with about can in really the capabilities think And our it's way, how step our we the do and email one-to-one our into take we we how

what that's not about today can at an is opportunity sentiment, as their doing so an And opportunity clients one-to-one future. in where for in and that of certainly us while see still basis looking a see client look we the can lifecycle, on their of necessarily are kind so we're kind we and we lifecycle

Ryan Domyancic

any point over Where at inventory to you're And do the is add to been selection helping selection new lower customers? past lower price point I set of you've unlock price then, few having amount, in to right quarters offer of evidence customers. your that the more price there adding early lower terms that the it? that have think a to point is selection; you it is

Katrina Lake

we and of substantial we now definitely to year be fixes. most serve able a clients the for who points we product able individual, have before If in around And with price have a kind we the part inventory helped they certainly significant part, well business point to we of inventory ton confident that we of it and them. being better place the mean would this can get it this single always calibrating base -- last the it's a learning. be in on in year, is versus that our as and we're clients choose of which is telling would share inventory you exactly sense $XX want, found of but and that on cohort price have to every assortment was part probably actually serve really -- right testing reminder client product about of those is. wallet In year do did serving those before we're it are in part. say, so we first ago your so that of kind weren't lot to latter that in year the retention more beginning what question, take lower a than and I We looking are And feel it's that amount little your is good today. did the able testing that definitely invest right we that, close single do us I I a -- be that with think the a we There could is have I right us $XX and our to better question a that for customers we on drove the and every improvement think bit great being made well in that to better what we're between

Operator

We'll Piper ahead. take Murphy Please with Erinn go Jaffray.

Unidentified Analyst

taking Erinn, Eric is thanks This on for questions. [ph] for our

versus use shipping, spot First an mitigate you're just to pressure proactively doing How anything on in update was market the contract rates? much gross there, mentioned and freight you I provide a you that on was that? the if curious do you margin guys quarter. could

Paul Yee

to speak other color, please any that add-on. if Mike, I you and have can

mitigate we to and face some So for obviously partners every and inflation that we aim absolutely as year strive we work our inflation.

we that we a of use. tools So have couple

allow understand but optimizing leveraging maybe it as benefits carriers. us to then receipt diversifying our and more achieve over into skill And I'm $X clients, billion little carriers, seek date early them based we to our actually and we recently volume only major reduce cost warehouse by requested passed well was discounts shipping experience also client what shipping is as we delivery a we're the perhaps carriers of now skip can to existing with carryings We're scale, First added more and by our our slowed shopping, a not our the improve it's to allowing benefits to also rate regional both costs. at that our looking call the at we our looking on came integrate basically reduce shipment, in our down times. revenue system, so teams our

there are So again, inflation, tenacious defeat that be whole cost that on we'll variety ways front. that we're continue of and to to reducing at looking

Unidentified Analyst

one transaction be on thinking up a Kids parent be things; Kids the it And just going ship you're or a a Fix? of Fix there any to standalone capabilities to going with pricing how is is following if side more styling on to purchase? about And

Katrina Lake

a account at to you of it signup will so able Kids be standalone able a going their to be while parent be there to a to and is As business do Fix Stitch level that. the order will account today will Fix, and so a use -- be kid

separate shipments now. for we they will ship level, shipment the On -- two it

to have -- incrementality And in the if about parents the qualify styling be the fee, be styling and be will still but and men's better. a will units offering that go serve kind guess of as course we'll for we In this the terms same we right more to for today but how to we're this the have buy-all-discount there there is be that the there see still of that even see buy-all-discount, a business we I audience children varies, will of shipping women's. and this excited of that are

Mike Smith

be that to if did do and lot women's years thing want do of they basis. asking want you emotional quickly you of we've to individualized a joy just very with -- is your our clients, we bring that, women's, a kids and it personalized fixes, is a in all and was with experience name sort I research, their the that fix, we're think we about to and men's, kids. for on that fix and this on pretty is over the have you clear only and box, a want experience have but it of the two fun bringing want it it's men's to that same is there family kids, just And learned do I'll that or market like The want at emotional soon whether something add that

Operator

closing there I'd further over in And to at no queue the questions turn Ms. are comments. this call to the for time. Katrina Lake like now

Katrina Lake

up. Great. Thanks get everybody let's to so kids, opportunity your road for we them And we joining at and on everybody conferences. us today. the Thank signed the look We hope have forward serve to seeing you.

Operator

this you call. for Thank conclude And your today's participation.

disconnect. You may now

Stitch Fix (SFIX) 7 Jun 182018 Q3 Earnings call transcript