SFIX - Earnings call transcript Q2 2021

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone. And welcome to Stitch Fix Second Quarter 2021 Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. David Pearce, Vice President of Investor Relations. sir. ahead, go Please

David Pearce

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

me you Spaulding, are of call like to CFO. on Founder we also from Joining CEO are our that and offices. joining I Katrina would Stitch today and President; Lake, Elizabeth mention Dan remotely Jedda, Fix; today’s home

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

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

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

Katrina Lake

strategy. momentum are today, our we Thanks, our David, our seeing by and demonstrating business. will three closed results shareholder joining with more the we and After quarterly details today’s focus issued on On call, things, letter you for market us. we on thank in

we have offering over migrating see continuing opportunity are to rates highest time. we in are gains seen and our the to we our First, share accelerate about clients years to at the excited

strength, Second, first-time And to and and buy Fix demand plan with end and the the our direct buy enhance QX. is of clients. our evolve launch to as existing to look continue offering ahead. new we conversion and our product third, new existing roll resonating retention confidence preparing a to we clients to fiscal clients give it Combined, quarters at of to us out are clients direct we innovation to

in this expect a updated our I year, see near-term As back will discuss full factors moment, fiscal half the impact of result, a we we as we outlook. and also have year will that

the our from quarter. year. our I first level Before QX, themes, $XXX revenue me XX% to generated Fix let into review Fix results in net first these In highest growth increased in year their the of over Within shipments quarter offering, reflecting five we years. million, dive growth

This dates. process meet process times. shipped promised face to to have the times, we ensure warehouse, for Fixed our at been pandemic, we items when be guidance file Fixed we cycle We our when other revenue revenue between not cycle client recognize range. increased for ship cycle of the delivery we able checkout, shipment. recognize from QX the time point of delays, receive e-commerce the revenue not these to unprecedented carriers to all holidays In would we we the adjustments as companies, impact client the within during duration in quarter. these and and items defined our any unlike back volume at in Fixes and the saw the our Adjusting in response we made resulted we believe to and have due planning during increased us However, being from

mindset. million, continue remainder call. a generated also representing or two are and holiday It efficiently. our We growth more grew last than all what self-purchase we than In to the primary reflected we this strongest last us QX, quarter. offering outbound direct our mix January catch our the growth, With any of of Postal carrier increase and Fix year-over-year of a partnering more active which gifting with quarter-over-quarter carrier the process diversify on buy steps that are Service review to to helped results returns quarters our record demonstrated and this replaced on taking expanding month-over-month our in achieve also we United power of revenue performance increase of complement our client base January the of client we States is this softer have during window our and to buy. historically in XX% year. growth. than Dan, similar anticipated That said, of factor. direct more our our in did to core is later behavior a we twice new addition will about period learned offerings Fixed holiday this a QX, in seen XXX,XXX, believe also of in clients saw the delivered we In our $X.X plan more and with more form we nearly client XXXX holiday We what fiscal we that detail the in subsides seasonality XXX,XXX

I will in the share this the our why we to long-term on and opportunity. more and us ongoing confidence capture Now, share gives shift in continue that landscape retail how

shopping five share in in starting nearly worth year ago. moved The online approximately and the by online first, shift to resulted XXXX. past nearly away a forecasts from alone government physical stores. stay-at -home apparel of moved for now consumers that occurred estimate COVID-XX enacted online, mandates apparel year predominantly increasingly and were observers massive have half as years’ shift acceleration a share Industry U.S. for of call This

we of that share. demonstrate of is position us our capture more embrace convenient offering and demand our that here are to consumers client seeing the and model and we believe radical personalized than fair As a to our stay result, discovery well growth trends

broader which growth begins we primarily country is its environment In and accelerated five category, reopen our first quarter. the delivered highest be our overall apparel quarter, XX% shipments growth believe demand for rate and the years. increase the last first we women’s win. XX% since was strength XXXX Fix will from, to the to and over driven over nearly in year-over-year past second to which As positioned growth highest Fix year-over-year, in growth was incredibly growth up This by and well will normalizes,

and is particularly exciting this of market product our Given acceleration that and addressable market, our women’s highlights fit category that and majority business migration comprises a underway. large is our strong the

subsequent significant this impact times, to demand, to QX. standpoint, in seeing continue But that time Both and product cycle look we of in orders. operations inventory, carrier back our clients well have As for a of we February. delay These which cycle recognition at Fix we times support also can factors topline. delays ahead. and highs first we migrating to longer client and our and opportunity to in seeing fiscal are at are styling the throughput dampen year, emerged there the which investing Fix period revenue but longer continued half and across are to serve multiyear have From that Stitch demand are also comprising the We we see clients this consider. important to saw are namely these quarters

growth. fiscal in some In products this to time first rollouts expect to of addition, later revenue buy we feature move to direct push the some would tied year, clients rollout, out to anticipated launch the which

will in clients a the at first performance Elizabeth before investing QX. the strong we and the and plan experience launched our remains to end enhance of time time direct discuss As are buy moment to effort fiscal product

in moving unchanged. we believe more these Dan seeing for but and Given we in will fiscal to products around the remains call, are revenue the discuss it’s our prudent the detail confidence adjust are excitement later the year. demand building parts, and our we outlook this

across of offerings. Elizabeth we will Now, hand our it share some will I to more enhancements over are the on delivering who

Elizabeth Spaulding

hello long-term and the and We the value these increase of Thanks, more investments service a and in like share buy personalized suite strategic direct Fix of play are us all expect our across innovation and our existing on get we I’d we customers. you Today of full increase to from will allow which growth. we customers new the relevance on offerings of investing addressable believe will the shopping drive market our occasions, to Katrina, to line. to in expand

lasting we shared to data filing and our science cement Fix continue deliver last talented relationships. and our As to offering our on team outcomes by long evolve large, capabilities leveraging capitalizing client quarter, stronger we

unique believe a drive our Our X,XXX in we vision as to expert, are our style competitive in offering, result, and value. elevate will we personalization, as a personalized share nearly and experiences product who advantage stylists, that enhance wallet we lifetime increased a view investing greater is

The discussed to first proposed we for their items it’s which is as give shipped. opportunity Fix the these next experiences clients last quarter view Fix Preview, of before

value opting engagement in with demonstrated increase are Preview to drove nearly meaningful we feature which the Fix saw launch, efficacy benefit that feature algorithm. average Initial for QX. included a feedback conversion Preview rich client Fix from compared of that as experience. XX% nearly our clients to in also efficiency added three client half quarters also rates We When order more without this An the rates, retention. clients to of results we we these clients give client keep of of higher increase Fix improved expect Fix is Preview, agency and and the U.K. of because outcomes which and and strong able improves collect our

clients the With recently XXX% all clients year. our of of we Fix these of to end U.K. Preview our to to U.S. results, by ramp scaled plan encouraging the we fiscal and

beyond are transaction to experiences We further collaborative long form relationships. additional that that to our leverage investing personalized, engagement facing extends deliver client in lasting the also stylist

we session to their that where experiences create stylist their these join talk is clients hosted XX-minute incubating a styling video and partner for call have to stylist of a to co Fix. One by live our advice through begun styling, with

As offering trust offer. our we able that retention are it evolves, and to believe deepen help client client improve this stylists the guidance and will that with

for we gather Fix offering, experiences we this learn by new allow investing Over may product these us expand experiences are accelerate will growing experiences, time, engineering the rollout of to product the and for our in increase pursue to styling lifetime the like client additional styling and dimension outcomes we interactions value. conversion, believe engage for to from enhance teams. These provide those community with and of that multi-touch To off and the future. would early long-term Preview our we improve data live and opportunity with clients an clients, creating interactions. jumping thus, ways our like points points quality still While

let clients direct among we are strong exciting to-date, made increase from where the nearly discuss our to quarter offering some buy purchase direct our buy engagement one clients category. to a active we With and the women’s with and largest me client of existing behavior. engagement Now, see of progress have purchase pleased our scale having made such client continues

repeat In these two-thirds months of have launch, women’s initial six purchases within their since of nearly addition make clients returned purchase. to

We clients acquired values marketing and we engaging buy previous early few higher found in have past also that actively the lifetime channels paid are with quarters delivering cohorts. than to direct are have

months as ago, in introduce as engagement seen cumulative and This year. confidence more optimism believe gives client end have year we than The continue six contribution expands, we clients are more grow. seen us generating profit of months we these our fiscal to offering the at have clients that clients and one direct client to clients will values buy our buy their new largely to are direct to momentum Fix that look lifetime only. increases incrementality the who first three Specifically,

We now interface, client and logistics user streamlining foundation in tightening information. client efforts solid largely for the time our and collection and have experience on-boarding development on This operations, style and a includes process first evolving focused expanding our place are clients.

breadth time are offering the this life balancing and later while we bring to experience, buy direct to in individual remains of the preferences, We clients will expanding client personalized and focused way the time accommodate client’s us the direct first taking believe to more year. highly buy on within to experience scale Specifically our experience the this the assortment allow engaging. ensure effectively to discovery fiscal and optimize for that browse

buy ecosystem Our begin will client that years journey help market. in Fix and goal unlocking as with Fix Stitch way, ahead starting expect full and apparel direct direct we the is buy in enter engagement by best our their addressable the to help they fuel with possible drive as clients soon or the acquisition either greater

ahead. exploring We more to expand vendor flywheel of like attract can handed clients track assortment. has believe inventory accelerated and on We touch we to used our to models, accelerated and began model Dan, to growth. higher dropship. but including quarters over position in this model, I’d us have selection, expand the year, I inventory new limitations our Before of this a details places vastly offer on time which will growth. company enable us fiscal we selection for allowing quickly to to create Historically, topic we been we to depth the that moving inventory effective a on look managed very clients, more long-term demand over inherent to the breadth efforts sharing a and wholesale as Earlier the meaningfully forward multi-inventory

you can With to continue our see, to and our that, to turn over This models ungating focus demonstrate retail share on new in apparel more us long-term gives taking in our driving buy, innovating ability and our creating I commitment to our growth. landscape. scaling win this experience, confidence evolving will and Fix As inventory Dan. direct ways it

Dan Jedda

the into share. Thanks, am I joining stand few wanted hello the to that had to just call. I on dive business. months us role over Elizabeth, things into three and today’s and out the I have everyone A to opportunity

unique of space and provide client the in unmatched. this to and First, innovate is experience a the passion personalized dedication and team

meaningfully that the generated scale increase be that, give forward Second, in I the excitement excited which and In capabilities finally, me data quarter, impressed scale year, trajectory our of team. team creative the to Fix with look business our built. over discuss couldn’t making Stitch science in of growth And am direct are over I more XX% note styling will we incredibly part the an helping evolve time. results. to year over we and revenue the be $XXX representing I has buy million, QX growth long-term I With QX. our is Fix net to and investments offering growth our

both performance -- for Katrina year-over-year, to the buy period. times, and and by active As times to the holiday for also our guidance XXX,XXX range. mentioned, these the revenue related delays, we $X.X In revenue as believe client holiday declined would the within quarter, of clients Fixes, we direct than do we increase increase million, revenue impacted of softer X.X% year-over-year. cycle quarter QX than This cycle carrier our delivered well increased largely more are client was per impact our anticipated which is during quarter. which have what resulted for an twice active nearly for increased Adjusted XXX,XXX been in as with last of quarter-over-quarter, XX% clients in $XXX consistent expectations. an of Net adjusting

growth, their primarily by journey more is cohorts decline this quarter, spending maybe time new these of our in our until last platform. per lower with us are driven clients increasing influx client revenue new clients that shared of early have we an on As with new client

primarily addition, fourth driven was XXX-basis-point rates In impact higher will expense quarter trial QX the to continues next due same our decline our carriers. by gross calculation last our include year, quarter. XXXX QX representing of shipping margin which, to quarter trailing from we increased the XX.X%, largely lap with COVID

reserves less is impact decline more inventory near-term from selected to higher increased meant pandemic category a clearance. impacted the of men’s well as targeted men our COVID these from are to the these we X.X% so inventory to function the expect by addition XXXX. shopping believe backdrop. during as as frequently level, emerge QX, women’s kids. slowly In This improve rebounding revenue was from than inventory of this due in some net in we of times, and QX Advertising trends X.X% compared We was

channels, spend so to wages warehouse in same of compensation was significant the revenue expense, to advertising growth and our by associates. revenue hour an net we higher saw December. strongest advertising fulfillment center and $XX in and CPAs benefits saw our to driven The additions January SG&A compared advertising contributed pull period, period accordingly, Other XX.X% CPAs excluding on on holiday including XX.X% record. at which increase last increased improvement of tied January, increase in to was all U.S. active back month-over-month year-over-year Entering we higher any in and wage full-time the year. QX, increased at certain During least in we for client is hourly per our

adjusted operations. and million, $XXX.X lower COVID investment securities. And $X.X reflected the was In of $X.XX. in shipping loss QX costs. no higher cash impact loss expenses and QX related quarter revenue people net deluded our million addition, million rated and in equivalents increased it per the costs cash, marketing share finally, lost quarter, of the we $XX EBITDA reflecting with and ended highly and was and debt in higher

our to outlook. turn will I Now

We full retention client That in are and client new healthy are also order increased seeing engagement guidance. fiscal strong near-term updated ‘XX buy. ship impact half back year there of direct our the said, with and trends, acquisition reflected that are factors levels may

a our subsequent impact year. that February the that Fix we persisted delay could in First, that in large and majority of client cycle the delays, revenue clients recognition given recurring a times impact carrier orders longer revenue and believe second we times These Fix shipments. saw QX cycle period in half mainly in receive longer of comprising can

buy our time forward about existing clients. offering, we uncertainty momentum still rolling second, it In seen clients as more we we and of outlook. to look to to first with approach particularly out are result, have given direct lot measured COVID, the there’s excited and very a a our addition, And our

mentioned, Elizabeth features to new Stitch product focused As on of to is Fix experience the the that to from onset user direct that a experience buy onboard our teams ensure expanding great clients.

As such, plays full products to the product late QX our rollout we continue guidance. to This in time fiscal also launch in QX and a before scale plan testing fiscal into role QX. revised

these factors, guidance. me and full share year our now let QX Given XXXX

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

advertising, our We range X.X% we of This negative reflects expect negative million to earlier. million $X in the discussed adjusted in to and X.X%. $X investment styling EBITDA ongoing or that operations

these quarters to growth on While to come, client also in in investments will the near-term. it EBITDA benefit the we weigh adjusted expect

we in that investments we Operator, the giving will will to product EBITDA full over this last and year For seen range full to client for including long-term by hold in increasing this our From precise to are turn primarily you. billion of spend that newest I mature for platform. growth. $X.XX XX% few innovation over timing they growth have the our year-over-year, moving by of confidence product from adjusted guidance expect the client ready we revenue position growth XXXX us we the driven several standpoint us excited new now as are our and questions. there with we providing accelerating time. year year-over-year investment combined demand on active off on your net pieces, now quarters, given at remain cohorts that, With an XX% it billion, launches, $X.XX representing trends In of summary,

Operator

KeyBanc you. Instructions] Markets. today Capital from will Yruma hear with Thank We Edward [Operator first

Edward Yruma

taking for I Thanks guess, two first. guys. questions. afternoon, the Good Hey.

are follow-up seeing of needs why bit work initial that people was clearly direct -- clothing, then an seeing direct in other early delayed? maybe launching a of there cold understand your more demand kind product i.e. the more the buy out signs little indicated signs the cycle launching? are on workwear? started uptick we of commentary before going to you buy apparel kind that and you. a kind in Thank First, rotation seeing help are us that as you And kind just And of were a why that

Elizabeth Spaulding

Ed. This those. Elizabeth. Those both Happy questions. of Yeah. Hi, take to great is are

consumer was about, have continue demand I that not very items -- and sneakers rates this Both then first to there being in patterns. strong surprisingly we seeing have and casual growth your of growth are activewear. just are are think people differences outsized environment. on And question we that kind growth. categories we kind First, of can in of those work-from-home in type and one, slower And and in, in seen particular surprising specific wearing items, mitts, strength workwear not see

keep to but largely still bit that a little stronger lockdown are the of similar. are on a that more pulse out they little We year-on-year up have phase categories, markets those bit trends on A is and have down Markets which quickly. in are a moved of some workwear tried interesting. opening basis,

we think COVID, continue continue be kind are we to anticipating then So more of our come I these direct some are in of this to terms both there. we to casualization of work-from-home to really active but on what persist trends And seeing client about demand. buy, excited

in it that have As and we are women’s timing, want call, very last we value right it And when really get we our a sure now we relative mentioned Fix-only as strong clients of a are X:X really terms margin out. and contribution of more then to roll lifetime were to quarter we we and product The of make on been a just offering. year building our incremental in the offering.

have and our so and really you And exposing right data to those for a one that in in call cold selection is very unique on our that work we continue we but also areas, of sure mentioned on the we on to start way. way. categories assortment is the that our the that the assortment about those new We generating talked last way, customers expanding the for we some categories of on-boarding personalized in access call things is are a working mentioned the

based see little a We have dynamically internally are it you generated about akin might preferences. thought the in to Netflix your being bit genres on kind of that

on sure that that continuing areas they selection new to for customers breadth make when join. it’s adequate we and are there’s work like those and to So

Edward Yruma

Thank you.

Operator

We will Advisory Dana with next hear from Telsey Group. Telsey

Dana Telsey

Good afternoon, everyone.

think capacity side? with in the through the the expense capacity terms of timing through progressing you. balance do chain As as how and year move see of Thank your go on fiscal we as issues you and the you the this, inventory sense how we supply impact delivery, what’s

Dan Jedda

can the take question that of part second I inventory. on

We in and second direct have get seen are inventory as increase our we our expansion buy our for up, ready expanding quarter and roll selection. also as we

to we to both expand So, continuing repeat and our and to invest selection the grow ready breadth to in Fix of launch you direct question are to depth, continue of inventory Fix buy and that continue part non-Stitch first we will can get we offering. customers our please? And as

Dana Telsey

you As do how of when, think normalize? When will of capacity, goods timeline you to and receiving you of does and when -- think delays about when the do think the start diversifying it deliveries normalize?

Dan Jedda

Yeah.

about have specifically ports, L.A. West our the XX% coming product of Coast through in We

our on that impacted on yet. to been inbound haven’t We

you. very at closely. -- either at materially to-date it hasn’t monitoring future it point. closely impacted impact or if very we we on Again, watching inventory are we update are impacted can this selection We calls, this it our but do It us us. if hasn’t But our does and something

Dana Telsey

you. Thank

Operator

Ross will Barclays From we move Sandler. to

Ross Sandler

guys. Hey,

that couple a follow-up just of gross one. of the So, questions kind last on on margin

shipping based there. demand much on partners I that and looks you one quarter, were likely given Services that inventory in any over Postal then in are like and shipping forward how and would the sort was we Fixes like doing clearance to that on you basis? is on process then an the the And out issue. you pretty has outbound contract through some pretty here industry tight men’s across of to understanding follow-up volume this the among there side you ahead have go or what less business more many was fourth you the it or you quarter good of know Do guess, are happened dependency a it of what sense going have that that So, time? of most think Our

still So inventory, clearance the any that given men’s on and along more basis level ramp in that color margin issue gross have the a you same lot. of up on go-forward confidence of Thanks the a quarter? January given do

Dan Jedda

I take across unprecedented Elizabeth period, that, volume obviously, during first and will and we to second will impacted across the the all With networks was Ross, on the respect shipping of I -- part men’s to the category. holiday and the take by networks the there were ask part shipping, that.

contracts. do Katrina We carriers do we well. have although FedEx standard as USPS, mentioned, use also including We other use we as use,

so surcharges. was we also and we rates, but not year-over-year do margins. to impact shipping see a higher unexpected And only did holiday That our it saw not us so

our our the strike monitor sure costs We right and our that Fixes the our fixes of is do the We client going something and to working the manner. trying cycle a warehouse we and style important can holding both the line. and also the time getting monitor to door cost am time that I the about is again buy quickly, along are in getting in very to keep time exits alleviate on, diversification something respect so earlier. some we question, we to to making very on diversification at us. focused timely the to But get carrier in and active we But very closely. on And your you orders diversifying between talked that with between category. the carrier tradeoff let to are take the check with closely. are clients Elizabeth, in out direct from focusing outbound their balance that’s men’s to the fixes and that on going network, We on returns, carrier some client balancing are reverse their logistics something we carrier the

Elizabeth Spaulding

Hi, Ross. Yeah. Yeah.

women’s, we expected in just incredibly area and can client And that little business inventory for it U.K. think, just in some continued So seen bit consumer function I resulted was little than one touch strong on that kids, is QX mean, what’s more frankly, the has just believe across is we higher of come a it’s of exciting I have incurring some growth we that been I men’s. Men’s and a reserves. our set. us that softer back a slowly bit think

probably addition think little the of and we seeing we that, lounge in some in are the demand that were bit I from highest a wear shift as athleisure to slower that client dramatically segment. to into

-- we balancing we to when open on demand So focused more expect been in are capitalize and in our be start when the back see both very come market better better with on positioned also fulsome a and a to rightsizing have assortment position way. be demand now that to we market that to men’s overall

Operator

Squali will with Youssef on We move Securities. Truist to

Youssef Squali

Great. A couple starting from Dan. with me, you, Thank you. maybe questions

end On maybe full year direct buy February could sustain back that the into year us three for Thanks. the versus on slower rollout. time, U.K. you guidance year? between are guidance months And buy business the longer saying was the which you and you second, that the going you geos state appetite the can you just shared seen the wondering that just for additional have us rollout you to When your was a discuss at I cycle or assume -- of add so? little the ago, next when your did in direct initial bit over now with maybe of and if guys revenue, then

Dan Jedda

let off January When we we Hi, coming Youssef. in we modest respect briefly would see the but hit and With like South first cycle on in saw about are times. of two it improvement seeing that And the February, in times to cycle talk entered the of did thought for what weeks. we many me question. guidance, that and all, it we the as Midwest this then wasn’t did back. Certainly back impacted January. in trend the to pre-COVID has from Thanks weather trend last the the and levels, the us we improved

this where it So expect it’s in were previous February. cycle our expect let second buy guidance, roll throughout it We point little to bag to mixed what clients, in We stay we are are non-Stitch we as elevated although, And product going direct we the be our is QX say delay still cause earlier. for breaking been question. year improve than the Elizabeth to as respect was. now. to half going we out been rate the in to the the out get, is we year, late to to guidance. the launch cycle a it your with U.K. to Except Elizabeth impact planned a plan although, not to mentioned am of take when I quarter, now times revised to roll that originally a from back we for say of it’s get anticipated. do they of didn’t just out times that in that going the Fix But it’s we as later

Elizabeth Spaulding

great Thanks Hi, question. Yeah. for Youssef. a

growth fit. tip incubate saw Fix market we elevate Preview, have ability On first just XX% the particularly that to good the about that to rate in well we used then in the and for that our We there. U.K., our just mentioned as just seen saw in feeling also quarter, strong Fix as we Within continued and continue to market, year-on-year primarily so market momentum and call, really really demand have to which momentum model strong are product great continuing for and our by has women over I a see that Fix AOB. on additive been travel we very And driven we annual contribution internationally. both market also

that have geographies, share that take to more globally, can In market timing we gives say our seen to we that don’t have that confidence so share. over time. the model us terms will we any yet of on that specific we other promise But in

Youssef Squali

Thank you.

Operator

Carpenter JPMorgan. next with will Cory hear from We

Cory Carpenter

to the maybe Thanks I January question. around just kind I comments two, record. back to your in go of your want had one on strongest for times, Januarys Thanks. QX of

secondly, you can just advertising, thinking and year, of on where in ad in your am So to to direct curious pushing just on you. a that just how you? the more back spend fiscal demand started second level the extended starting maybe month, of are the the half see cycle then, context right buy expand in worked in well I Thank economy you about reopen? so are what’s especially to of the times pickup perhaps And a hoping bit you as

Elizabeth Spaulding

of very on on. just January. and advertising Part add touch demand. Fix Yeah. mean, an I with saw and January incredibly can start was we strong strong can that very, Dan I first Yeah.

spend advantage had of rates both took some tremendous active we our and finance. kind mentioned, first really users, daily and down pre-holiday. had of then really we ad we coming just think same and strong then I demand direct we coming conversion just back of we on that, really and saw pulled on been the CPAs with in January seeing seeing momentum we had the elevated incredibly our saw fixed of CPAs top And had just that rushing given in momentum buy, December we back and are

And a the how very, for and advertising together year, be think so can to I balance just will were we continue we are things two very as bit us spending think we maybe touch gave further. dynamic little a January and on and those that the of strong that about Dan to

Dan Jedda

Yeah.

reiterate, dramatically we Not acquisition. to didn’t CPAs and on surprising that customer Elizabeth what the increased we rates December Just in are seeing like said.

ramped We did pull in better and up So did we back. and they get January our would they we advertising. knew

where into And QX, we we so be to going to than likely seeing continue like in will we higher what QX, spend QX. are

Our is customer acquisition strong.

why. is strength advertising is strong a client new reason Our and big

value it our stays how will within long our and of as customer. we we as look our at continue to lifetime So spend analytics

expect can that QX. normalized spend QX the And most rates in back you − to likely so with more and in

Cory Carpenter

Thank Okay. you.

Operator

hear will Murphy. Sandler, Piper from we Erinn From

Erinn Murphy

first, that to I the business A how today or those the quarter. seeing me, just open cannibalizing Fix buy use to already about direct Good talk couple you to with in up are business? expect new offering from Great. existing what that Fix Thanks. the you customers potentially guess, kind Can added the if at least platform the fourth afternoon. you of you

Elizabeth Spaulding

platform can to by want models. on that. there those be are shop, our Elizabeth. wire out Erinn. whether touch both they just they I I mean, having This participate filed is Yeah. I bigger Hi, a think, customers they want or addressable overall, for of whether market to key think we

that similar that experience. clients we incrementality they is have observed participate the both with Fix so, actually both a as to attitude And and seeing active

about traffic thinking in we to of it will similarly that as the new Over are onto but we able just way platform. optimization. come, the indexing be to in probably think and consumers driving able of there participate out not our bring infrastructure the are participate to we I engine time, build works site quarters the eventually to be parts the immediately, as well, site given to search

more catalog a as to opening having to And so driving well offer up product more Fix ways between more to traffic having with to thing just like it’s interact, feel do we by us, win consumers Stitch experience. to and diverse as able our the be more to ways right

Erinn Murphy

per And Thank is Okay. you, between just on, you for Dan quarter your third Thank and you guess, then my revenue second you. just guidance active contemplated what’s customer? question I in can share customers

Dan Jedda

in a customers flat you just very mentioned customer that early is of our times. revenue cycle which QX as Well, cohort of to million, is spending function newer and the client on their per is $XXX at

get clients levels more spend that to more, As expect we do forward. normalized and to increase those going

answer I clients. clients our respect the say guidance active with then on question anything are not think on QX to per that your active and to revenue we was going to

guidance. We not are as giving part of

Erinn Murphy

you. Thank Okay.

Operator

We Trussell Deutsche with from will Bank. next Paul hear

Paul Trussell

Good afternoon.

for the on rates the were are quite just make color that and into on any to little average Fix capability? speak that that that the more you certainly can Maybe provide value? from With order you that’s you utilize level what keep interesting going retention the feature a much like life and higher styling, and how expect other bit concept. Also about client those of Preview, investment

Elizabeth Spaulding

Yeah. question. Thank you, Great Paul.

Fix customers a and by are are feeling We it scaled of on strength to scaling foresee the and level about those the in back August, that seen on it good the scaled just really we overall, we U.K. U.S., for pilot that ARV look XX% metrics thereafter then Preview, continued continue. soon And the at are little but XXX% it the keep found still recently and XX% to we in fiscal both that that I So call, experience. pretty expansion a end the shared in the in have we modest a at of and particular, we bit we of to and started the lift in have our we We rate, majority that across seen of on XXX%. year.

in previewed almost driving makes we it over about that higher average further And keep somebody and experimenting retention accessory so being driving those even that is if anecdote great One a we interesting happier, with imagine service even values keeps really place they a always that and feel time. clients and it order cart, their and could it.

Fix item that little life Preview. we on we then on are also certain with be bit add just think type, are feature. than So to with styling, exciting And a that an we will earlier

We thing trends envisioning just you And would you other wanting that don’t things we to this and clients to are I value offshoots are lot the But and order patterns the like a in something go so with you around really me me how still things in might scale incubating of Like it? just to of say, that Can it but a us. share find just we are my with that forth. I show response almost that immediately. different same And seeing lot create hey, are let permit. closet. plan to love elements experience richness

services testing that to other our still and are in figure way for. out and mode it might of what that to the kind looking incubation scale are of is what clients the imply sort We best

are our in from our program. we are frankly by we participating and and really who as both loving clients from far So, excited the gotten so well feedback have the stylist

So we come. will share to more quarters in the

right platefuls that we direct that on between Fix got follow and our for will Preview something we have FY will incubating think buy now, probably in ‘XX. but keep I

Paul Trussell

bit little time a it’s QX? helpful. overall spoke around impact, styling extent just And on up, what And quick more advertising, what that outline you delays, both and operations a think about think revenue guidance, is about how this these having you investments what also in the to talk saw can mean, you you as to we in with That’s weighing and just the the to I follow QX about P&L, the impact ongoing you QX in quarter? it cycle

Dan Jedda

batches. your take processing the question can happens becomes a lumpy on talk that What returns times as time impact. we did in get is one. large about revenue To I of time, the lot cycle we

operational that so we and It on some cycle that been so, have And there’s closely. our material. burden centers are managing hasn’t time does fulfillment

processes able better been around get. sort we implement lumpiness that on and to have any that to of new We align work

so it the on so that -- it’s in -- that from material cycle times a because processing. standpoint, structure cost I have us we especially we been And assume proactive the to how would not returns just manage

so revenue a is it potential impact more subsequent Fixes. And recognition, of including the to

than it is that on it’s from standpoint, so, side. And on the the more side revenue cost primarily

Operator

from Ike next hear Fargo. We Wells will with Boruchow

Ike Boruchow

everyone. Thanks, Hey.

two. that? it of I of I buy. then how you and on neutral box last kind direct buy the curious we component other the gross separately, of the in be both between margins the as if am at part on you will is growth business of before questions Is are rollout. ramp kind comment the lapping took And out the look about Thanks. direct think business kind or that on we believe mean, buy rates we buy continues sitting start subscription the Can apart direct a quarter two I it? Just should drag gross this what business, margin, to just possible break to it direct P&L will just the direct versus buy of the be

Dan Jedda

that. take I can

Elizabeth Spaulding

Hi.

Dan Jedda

will buy There very buy said, growth reiterate are don’t customer, so or talk direct what the buy what we direct does about buy incrementality now I like can buy. are don’t for but break and are not. I styling point direct Elizabeth financials. and different the economics is an couple we to. structure being Fix a breaking in has the again different fixed out is Fix of component, areas the really not And from to direct We but standpoint. for -- right direct we our seeing versus business the out -- the margin there positive we additive That factors Obviously, buy -- of both. the direct Fix said, a that

Elizabeth Spaulding

kind rates seen the first women, would add out one with of kids what well a of as really trends we growth the I have outperforming. Fix as our just Maybe in quick Yeah. we break side point Fix just on just thing strong on But things, is growth of the incredibly don’t two. to particular Dan’s

I think overtime makes we so. do will sense figure out if to it

we seeing gates are we out it to will anticipate the available of we set portion accelerate momentum well, to of and we more ahead. call mentioned quarters as but be feature able think to share the make would positive growth to new I clients just that on of our the expand in base as right and start greater we client participating as the

Operator

And we move Janet Research Kloppenburg. from to JJK Associates, will

Janet Kloppenburg

Good evening, everyone.

also which in the putting are to on about invest follow. terms then direct along the profitability couple as to up residual the I then lot think of at new now, I to view of should men’s life buy because generally come assume of of see and in a we business thought of expanding in your which think terms et projects, a cetera. the strong they terms associated et what including markdown and in of the quite I how the that questions that being from I assortments. pilot Stitch pressure cetera, direct some investments of or am point wondering you was something about your you you you And And that new the new now merchandised me, continuing should have thought, to these lot as might and lead But way, coming wondering in seasonality pressure, maybe margin? are new are a on customers, on Just not right styling soon. going buy product learning and think will just first expansion we just Fix. customers how pick the we learnings driving clearly with assortments

So, priorities just your there how projects? wondering I and think what was are should Thank about you? future we

Elizabeth Spaulding

that… I Janet. Hi, will take Yeah.

Dan Jedda

increase inventory, take you respect Maybe Janet. have selection to is more of I with as attract the of to we yeah, in launch are bring why one one Hi, clients, -- the Janet. But half that. -- potentially Yeah. back on the the this year. non-Fix for possible. I the buy reasons first is I that to of one. to first clients the based to and going the question, you customers inventory, markdown direct will in am and rates direct increasing reserve Thanks take to resulting in going which our ability non-Fixed will clearance buy counter the With the

are so, inventory our watching And we closely.

launch mix areas. categories, customer those very are we the features We that’s to new earlier. expanding cost to right selection very in which show especially intentional, is like the as Elizabeth the discussed important product Having

on. and will along inventory. it’s and to to But that it inventory something we reserve are keeping in with move inventory we very a continue we invest eye closely, we close to So rates will watch do get expect

Janet Kloppenburg

you. Thank Great.

Elizabeth Spaulding

think on been I just of rates online. are on that unprecedented really some I shifting mentioned focused Janet, as we your consumers moment pilots that the And this at Yeah. just see touch question can of on the have we on call. sort on And innovation expansion and as the general our we

As going is are Katrina by really XXXX gearing and that online we this the here be will XX% to that. up the market of of start just belief for and mentioned, notion apparel up opening

platform we the phase discovery. talk the characterized e-commerce into that long-term And personalized the so and experience really And is this view can times be has apparel characterized lot on really today our entering new so, in a been of vision call, most we and just by are about But Fixes will with direct search buy. we world. shopping and by browse a

shopping experiences And of so curated off that feed. our styling hinge just that model and a

the we primary destination of that shopping think become those choice and the destination of really our areas for are All clients. could we

have things are is so we that testing. we excited And that about the what been

to We are launched Fix we that quickly that client ago can really only scale active pretty XXXX. and even base February proving was buy like year we a Preview our direct it

excited we just that what new overall just think, about tailwind. together are services, the are the these is seeing I adoption of with we So, market

will we to testing things. continue So be

optimistic not will can we our the the have work, continue are expansion seen we For everything of of seeing sure very to-date that model. we adoption but

Janet Kloppenburg

Okay.

So group the customers. provide the focus to the services to will be on of expanding grow that you for customer active continue your

Elizabeth Spaulding

what think are of of experience. based and of purchases occasions, based seeing we purchase it’s or Yeah. hence wallet inspiration and the more more scaling our more are That’s participating right. whether share in intent purchase categories more we And I is the

Janet Kloppenburg

All lot and right. luck. a of Thanks best

Elizabeth Spaulding

you. Thank

Operator

Lauren next hear will We Morgan from with Instructions] [Operator Schenk Stanley.

Lauren Schenk

wanted Great. follow up Thanks longer question. to times. taking for my I on the cycle

evident you on then And the been Monday, if quantify follow of early days maybe if extended? those number delays been already, Cyber mid-December wondering have I perspective to up sort have curious seeing Just that on much can a of thought that when how would would you just you are Friday guided quarter, so over the spend really those buy initially out quarterly play or customers lower have to Black number in more to start sort active driven issue, Thanks. customer? a you that And is so and this timing the of revenue that just per direct full ignoring when impact? recognition outlook a variances that does see really then real ‘XX to on of basis, fewer that year lower in is

Dan Jedda

you a question. will in little December. one. up I to February. question. did I January Thank stay to November in that and is creep us bit start that take times the continued surprised the What for Yeah. take December see into they and for cycle -- We can high

QX we down on still will clients do of expect And your us. half Fixes that seen impact QX, most point a we them them our subsequent does and so and throughout believe expect levels. impact potentially, to us, it we Fix. have that as we the down come is come on do to what scheduled because To the -- of for impacting pre-holiday subsequent And back are mentioned, we it timing it, in not

and very to subsequent takes so if fixed the on so to longer it the what and That we a -- launch And half, for all said, back to managing longer, it expecting is guidance well. right the buy are we carrier or that timing client deliver get closely we Fixes it the in point impact we quarter. if of that watching they holds as earlier will as relative be direct half the in back late provided the and the guidance that lower to when for our your were reason last QX a product

Operator

Baird we hear from Altschwager. will Mark from And next

Mark Altschwager

questions Thanks Good Hi. afternoon. guess, taking for question. related two my inventory. to I

what are your months, Thank needed just capacity infrastructure managed. sense might give us additional you as additional a like you of by responsive how First, the what the level buy begin piece? am from impacted there to an much just in of look demand are talk have the bigger longer little of not I But innings a toward and sure just It in how inventory sounds scale you disruptions dropship plans COVID models with be in new especially receipts buy been to you. Can stimulus. the better I guess, investment direct how bit could in planning or I direct can picked really picture, I term? am more beyond curious should technology be might up are exciting and coming accelerate was standpoint hoping stimulus. cycle under you the this to about the we inventory And you that January.

Dan Jedda

your did what demand. take point January of do advantage in would course, stimulus very up growth models. we athleisure that with inventory. going that all, that seen go whether times have are we up rates have, to any buying stimulus the first continue we coming in we January, out ready unclear the patterns, on our we we like for are But and lead Elizabeth want the feel on and rates drove very change good should for very as to. decide receipt half the and to of with said, open inventory. of in position, of positive the Elizabeth, going the of open work question do We growth first the need feel where back you take change well-positioned will on see Hi. economies receipts, part for more − our inventory to at we or second We of bring and feel answer I inventory healthy we very to-date. to checks that? well economies chasing a very, just do to times the are or that of the can given our good go back and inventory And we our position That part forward patterns. if lead with I ability checks drive were inventory we it’s we on let To take were familiar and positioned with for second the we do are we buying year

Elizabeth Spaulding

Mark. Hi, that. on question Yeah. Great

very as dropship, about in are multi-inventory business mentioned, well a inventory. as being gearing so, as able for of participate excited I We also to and up model kind becoming vendor-managed

We up in we also to opportunity patterns. so meet next down demand that flexibility able few have to been widen few the intent to and on as use more will to quarters to being selection our working of that able and last an the the and both scale with create do for to quarters continue but scale come being

enhanced work our about with community well so that for data automation, vendor the forecasting things technology putting place in driven financial And we participate to as been excited has involved capabilities. been our like tools infrastructure the algorithmic given even very lot are that’s as a of

together And But our just so essentially few are mode facing will we can able be more. flywheel. model, a in inventory now next create with those of the the quarters phenomenal those we scale which our right over part of over experience part really beta really on we share and time, consumer course offerings as to

quarters. share over of couple the So to we are coming excited more

Mark Altschwager

Thank you.

Operator

at any turn this Katrina time, And for I’d remarks. to back to like things closing

Katrina Lake

the even joining virtually in person Okay. hopefully Thank coming you forward in you much for to very quarters. all or seeing us. look We

Operator

And that will conclude today. today’s conference. Again, thank you all joining for us

Stitch Fix (SFIX) 9 Mar 212021 Q2 Earnings call transcript