SFIX - Earnings call transcript Q2 2022

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Operator

Good day, everyone, and welcome to the Stitch Fix Second Quarter 2022 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Tanny Shelburne. Please go ahead, ma’am.

Tanny Shelburne

Good afternoon, and thank you for joining us on the call today to discuss the results for our second quarter of fiscal 2022.

call Jedda, Spaulding, CFO. today’s Fix; of on Dan and me are CEO Elizabeth Stitch Joining

section from investors.stitchfix.com. We that remind on financial this of on press be results IR our results Form posted today’s Also the today’s to we in obligation our call, have statements which XX-Q complete factors also expect our this which quarter, contemplated forward-looking cause and with required information statements. on risks on for are forward-looking Actual the would well to materially date. of statement, of and indication particular, a quarterly will Form note on considered of not release on second to press We statements conference call today report the the differ, the the any involve could future call release site. our review based disclaim Risk us uncertainties. on that law. forward-looking update filed in as Reported be differ SEC the be be the as performance. discussion the for We available second as by previously to forward-looking link filed everyone with filed for those an our section first tomorrow. quarter Factors to should report A we as and could of any quarter SEC results quarterly our our the can by Please issued XX-Q except XXXX of webcast making website, found the results filings a to our as like

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

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

Elizabeth Spaulding

Tanny. Thanks,

the want we’ve results As acquisitions conversion, midpoint with our we we as not where to pass on we which our second will fiscal client acknowledge be delivered we expected, yet and outlook. new weigh quarter of are though year,

in guidance As for you release, as quarter the the well saw have full revenue. year press our we provided as for third

discuss we our However, have year later. time, EBITDA withdrawn at will which guidance full this Dan

why results, to are Fix’s Before shopping. we set I Stitch go our success into to We styling challenges. are be global despite confident our on in in in leader of journey the details we and level I steps right confident want to personalized and become we remain continue currently and the where the near-term recent taking long-term

declined a of revenue and margins to client two onboarding Top me were quarter and our quarter our targeting for experience. the adjusted the elaborate new further. conversion, these from challenges million, continuing not we million in and is points Active ended and of clients, overall clients EBITDA. not Freestyle active it clients. changes and us presenting line XX.X% historically on want X% to at X let We to There influenced grew quarter-over-quarter. iOS factors with a grew second RPAC revenue X% how that impacted I’ll that, journey we call largely results improve last given discussed to QX We as client are adds: a enhance that and First, market be; one. that our effectively evolve in where With linear have on turn is second, and million gross Fix effective high XX, factors along channels quarter new for of marketing approximately ago. been year-over-year year-over-year. that increase are performance. each visitors Freestyle $XX nearly our We year XX% record $XXX serving conversion $XXX X% an gross reached the in of our of

result, the higher as additions quarter and back X.X% the our a client for quarter. to we the net clients We to lower period opted experienced quarter. marketing contributed lower spend last same second also in for X.X% pull sales of year. gross However, to relative active invested second in Also, the dormancies

high the In we path. coming It to last QX friction, the of Freestyle launch experience first, an we to which in primary from provide to Freestyle, for to conversion onboarding direct As some we to visitors insight. about and promote clear of mitigate friction year, in to ended that Freestyle the stitchfix.com I the note a Fix traffic interested we stitchfix.com is to Fix. point those experience. lapping Therefore, QX created to had stitchfix.com I the are XXXX. want for In towards reminder, important due higher direct dollar earlier customers dormancies Fix. mentioned in chose easy page touch and further this on of to landing speaking in referrals efforts effort leading to is ordering beginning a inadvertently clients and we our

as time. to taken in which not vision long-term We should This change this larger to new be daily is styling TAM our client expect much onboarding boost change a Fix a and in inspiration. through Freestyle, shopping, over unlock for conversion flow

alone. times potential we’ve As than the times TAM Fix in X X believe business prior larger the to shared is we calls,

clients product that channels We’re Freestyle We’ve Freestyle and clients do ads us still to prior primarily listing Freestyle. were launching marketing to learning have First Freestyle we that through experience. First and onboard to the coming work to not available other how recognize are best learned on

these channels. learn to continue test, will We iterate on to use best and how new marketing

to visitors the that we so more and active expect the We to convert we also it to be. recognize have growth clients client improve make Freestyle we do can work to experience Freestyle engine

a checkout while a changes experience, to multiple out. enable made to shopping already items ability and better the including We bag logged-out logged have to add

understand will we buying. first be nature in when outlook to as Fix the and conversions, marketing spend year which half impacted and Ultimately, and ramp the prepared plan there we but to efforts we number coming the also to lower our revenue client back introduce quarters. a client driving we help of our the experienced The that revised adds for We the of due of clients functionality, new are add Freestyle get have the client will net fewer right. discussed, in compounding around experience have Freestyle features improved new we I’ve we drive both search to to necessary are basic need believe such the half

new the the second However, are steps from future strategy, seeing to my We of long-term the XX% XX% grew today. we business call, improving and of to Freestyle purchasing business. is we Freestyle our comments revenue our over from via from women’s business, we as and existing a that year we’re base. ago, fiscal a reinforce the of which ecosystem provided a of the in observe steadily of by client the the well XX% and and are XXXX RPAC our combination values clients record as our taking start incrementality our year-over-year with X% our of Freestyle up existing confident believe result the from as penetration the signals for Fix right Fix Fix up clear in behaviors quarter, the order Fix $XXX future reached our demonstrates of higher are of clients. potential quarter second average in Freestyle

month more on within is revenue XX% average X% are more Additionally, by the clients XX-day us more same average holistically XXXX or in quarter RPAC, in spending XX% cohorts our recently the up XXXX. year-over-year. over over with quarterly Freestyle clients of comparable purchases than combined than in and divided engaging acquired made measure that on Fix and more customer one The in a net acquired

believe we of you in our peers, continue after needs the the guidance and shopping. are of share Fix to discovery The at which fit detail. less we better Freestyle, rates why some able half meet With perform with through goes underscore Dan direction. see of consumer in I we combination results in search-based to we are than and final will than e-commerce and confident return thoughts Freestyle, more our our

Dan Jedda

growth. and inputs guidance Today, I’ll as our year. the walk the In well Elizabeth, build the quarter, call. $XXX and represents revenue laid to range quarter you quarterly second our X% that results as out on net share within total you, through Thank the of everyone year-over-year full landed outlook last hello and for QX million we

largely earlier, onboarding noted quarter for conversion as revenue Elizabeth was acquisition iterate and on by impacted new we the As methods. client

continue XX% also and to grew which iterate on Freestyle, We year-over-year. learn

on down our the we XX% the adding on as respectively, both and basis. quarter for Fix in where UK growth, and a our of brands. kids grew client second with and record businesses, inclusive recognized with business a representing nationally third assortment per year-over-year pleased focus business, to women’s was sustained consecutive the Net same men’s active momentum our continue $XXX, of expand quarter RPAC. was we slightly, Our more time, revenue saw we were XX% At and Freestyle,

X% at pace, in ending RPAC is the of a clients the subset continues XX-day clients our year-over-year. take the over assess active related last most a quarter. four As that quarters divided fiscal RPAC, newest rise recent reminder, we on When of number number by to based healthy up net and revenue

challenges since XX% high privacy the on giving advertising as approximately higher ability driven XXX checkouts basis ecosystem. X.X% new by Additionally, dollar confidence and shipping QX. Gross margin higher XXX values lapping actives target leverage ended clients. in XXXX. FYXX, This QX ago, XX.X%, on of advertising gross the average the net are as that experience with primarily path QX the optimizing points by order dormancies that costs customers new million decrease prior to limited to new our the of increased points and basis by of and from margins. We us onboarding quarter clients primarily we client nearly down was due basis margin impacted XX active the referral same year first iOS from face from to from well clients. a were a in right decrease XXX was as QX driven have continue higher revenue, declined per Net measure half also was to for points year sequential $XXX,XXX basis-point reserves. we of a quarter product and once growth inventory enter changes due for representing our subsequent XXX last client quarter-over-quarter, X improved program

As in conversion face with new and in we pulled back our remain to the to on second challenges client advertising efficient mentioned quarter continue previously, therefore, spend.

to spend before, As ensure are ad this adjust on we I’ve to spend. stated return times we several targeted managing our

Net spend marketing as million, XXX revenue channels excluding to in points and The also long-term reflecting increase versus quarter-over-quarter at our of revenue of was net in the XX.X% QX, second marketing to headcount As primarily $XXX new largely quarter we a from SG&A, increase from quarter-over-quarter. quarter. the work to last We’ll XXX may flow. ended based ramp optimize cash $XX including and increase advertising, QX. marketing also lower Adjusted conversion, quarter-over-quarter. and on for the appropriate the in year-over-year basis-point flat our QX test results. these headcount, same inventory continue was was spend year improve by and organizations. net increase quarter to EBITDA testing The million, the increase onboarding into and our period increased sequential in impacted during will product basis essentially was due lower a tech we free channels Other

we While to quarter, the shipping in add throughout experience continue the to due did in we primarily delays global receipts supply delays chain. selection

our for primarily repurchase current authorized X Free our are share business as earlier program. We do of though year-to-date such inventory $XX and capital. our favorable early Directors a a million to mitigation product, working has X-week had believe a impact flow due our efforts Board $XXX In of million, to not cash bookings. material was levels January, this portion our seeing on delays we large given

repurchased authorization. ended quarter We million in million the company cash, $XX no rated million equivalents with securities. During against $XXX cash $XXX the worth and quarter, we stock of debt the highly and

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

into range the in clients This to $XX margin million of to the to lower remain first flat X% EBITDA new X% net $XX half year. the year, in in continued revenue. account the guidance of or revenue half EBITDA of for of adds subsequent down number adjusted negative resulting the weaker quarter-over-quarter. second a net negative that expect negative due takes to of This assumes the of We active fixes lower negative million client slightly

half uncertainty active improvements full December in prior and the softness XXXX the are year the guidance and lowering first in on clients our conversion, we call. of of Given shared timing X, the we revenue

fiscal For the to year, conversion. year-over-year. to assumes This now end for flat optimize continue new through expect are year learn clients down active flat client we the slightly full revenue and full we to year be the as guidance of

We evaluating guidance as are we at and therefore, to withdrawing full year actively spend marketing conversion improvements manage our and these this EBITDA onboarding time. are

disappointed are the for and growth third very we full showing We year. not that are quarter

basis percentage orders. forward. order higher we that leverage our excluding experience Fix the gives believe marketing, will in overall we us margins. However, the versus this When of the is points the profit XX business it on scale positive confidence Once our unit a contribution profitable Freestyle on right economics the provide per combined path very is Freestyle business,

mentioned, expect focus variable on as fixed test our As improves into our to and an cost a we with on marketing take increase we structure productivity. We’ll conversion previously as renewed also marketing we emphasis channels. and cost newer

an demonstrate on in time, to will this and which Freestyle. our leads new forward go growing quarters, it’s next building these look clients through critical that progress active execution efforts We that few and penetration over we you client to we increased experience Our as updating transition. includes take exceptional

Elizabeth Spaulding

Thank Dan. you,

we offering we to expand continuing our as styling and Looking creative unique drive shopping, forward, the destination of have while and on to awareness our ahead, data focused and transform Fix know and personalized for of Stitch inspiration, challenges we leveraging remain human science judgment. combination

shopping, what to shopping. Freestyle, most traditional half the of allowing nearly gave we bringing fit, judgment consumers meaningful recently than be is Since continue earlier, of and and XX-plus-year the feedback to needs Fix highlighted in are outfits, the a feedback-based community. value which has with community expectations broader unique and by X.X personalization personalize core. a resulted styling our lift rich and to the Fixes Stitch million getting of stylist-generated points at launch, for advantage fit inspiration differentiator scaled Fix. As and in in critical and engagement ratings fit, which for apparel our stylists Clients actionable have the with a by and Stitch outfit our meet see together, a and we consumer Style extending address aim interaction solve Freestyle experiences search-based us pain less in ability in moments percentage clients By feedback which a to our what discovery, sales. challenges is rates selection Stitch Shuffle powered Freestyle. today’s overall of to by X.X return outfits showcased as building in perform better the On stylists building to Fix’s model e-commerce. model The that Preview date, Fix science and in billion online creative relationships, core have item-level On our noted on-demand us better a meet powers capabilities, I the can of browse Therefore, Freestyle, of boards. part to to created inspiration On Fix higher we provide consumer discovery data of clients relationship. they way, human

patience our continue steps deeply our be as engine and the We we and to positioned execute expect. evolve I believe in vision continue well to further to are to team. we appreciate growth to believe take Freestyle we we strengthen everyone’s it against

new hires our appointment across and a engineering number teams. Dhawan, to of CTO, have of algo’s seasoned Sachin we addition product, recent other made In our the

and on quarters. your I plan that, to map for coming to share more we improve over With client in the progress will to We detail our experience questions. road turn it will the ready you. Operator, are

Operator

We’ll question first from Instructions] [Operator take Youssef Truist. Squali with our

Youssef Squali

very you much. Thank Great.

Truist. Squali, Youssef

clicking figure talked just time. double to we’re we’ve on tests have retention. because it early onboarding the hand, are One, cause client of you able please. to call, me, a root the will then, client take it guys improve seems what for how questions make out gives time, want that been about changed some two exactly issues. reasons about about that conversion conversion, you confidence client over to Have think, it like that last you earnings I still And the is the will So, the issue sure bit. talking talked at I Elizabeth, revert same and just try and on to the -- little that trend you although onboarding kind

first your EBITDA question. the on Dan, the second, that’s And So, guidance. maybe, withdrawing

trying are bottom Thank have revenue, to slightly as the logic to So, guiding XXXX? understand that into takes we you. take line at we are down to what look the you just to and since for I’m account that the puts for flat

Elizabeth Spaulding

Thanks question Youssef. for I on it can on second start onboarding your conversion, then hand Dan to first question. I’ll the

Fix on mentioned, the that focused think to now page, of prior to really when on that coming those First that some created for the we clients we’ve onboarding as So, continued extent call to stitchfix.com Fix. we We to Freestyle and was our flow. the friction redirecting majority the traffic we to for more site intent landing of is have given believe a we learn I introduced

learning expectations We’re those are. right lot what a now about

faster, -- in now now incremental improvements have honestly, where be make And we so, probably are we’re progressive moved realized to testing. now in want but retrospect, we we have and have we could to continuing

other of experience for in even in reverted to to right things to And we was Things Freestyle, an make it Fix. clients introduced to lower that they and were Frustration get bunch and with directly even like a see improved they So, before we’re landing that going make having ways points it we’ve testing like. parallel doing friction many easy then, to newer clients. we confidence price pages. merchandise that that now had our

that just Fix introducing very, So well as what landing to a frankly, on once as very the gives what better expect page experience. simple clear has Stitch offer sense inside it, the testing making of to of and

area from a a require new new parallel just on is Fix’s into call and we on to it then, thing customers yet into of that resell we on And the the be very that incentives. to makes experience. information progressively we mentioned we to what is pretty get testing see over there beginning. We bit think personalize, in prior the that are to that common more mentioned and that I these easy That’s experience really get ways is have of scale. a coming plus we to Another working opportunity continue we progressive onboarding a opening marketing channels the area other up quite call are information then, time. I And new think that with

we intent to to basic there the to stylist. we’re exploration but to landing They’re over experience bags, easily buy the improvements experience clients time, of that make necessary something, categories, but clients ready a making engage Freestyle. So, as shopping are are giving are with these ungating product logged-out very a that the of and lot access that some and of believe well. product high the listing like We’ve begun ad, already ungating

I’ll improve now for consumers. answer working of combination what a and the Dan EBITDA have needs it’s sense good let to a on we’re we things those that And so, question. believe really of

Dan Jedda

we of it testing as now for a have, improves, we Yes. on healthy mentioned, guidance have why more To planned that the giving we question, be allowables marketing reasonably marketing as not budget Youssef. marketing reasons and second QX, one we’re EBITDA is for Hi, QX conversion because we’ll within in also will new your spend we’re improvement channels. that -- as the

as make QX have then, so, and see direct revenue to think much QX the revenue at subsequent is that of then is that the a efficiency and QX be And how and correlation is And channels, to of And get the QX. just active XX% we we lot an the we’ll the has way year we fixes. because advertising. a of similar we marketing when active, look to while quarters on last going decisions the performs continue to approaching marker that and get in predictable in subsequent to more of we’ll conversion of that that

waiting So, reason marketing are the why QX. function really how we in It’s that’s performs the planned that it and a of we for have QX.

Operator

from question We’ll with take next Mark ISI. our Mahaney

Mark Mahaney

Thanks. Okay.

two would more So, retention of off help try was Freestyle me more questions. -- with of use had we one thoughts boost rates? Let to that the maybe retention I What’s prop, happening cases. think start existing customers, value with

just And is challenges, retention? you with And about to how the to there’s back that obviously identifiable happening like this now. based you’ll an prior are marketing XX -- on That’s this -- think of to -- an what’s what’s effective thought there then on were work is campaigns iOS information. get And, run issue. you your confident before, secondly, were available very industry So, industry-wide that. kind that some how That do where a you not around. personally was

And Thanks how that get solved, come it do or those does gets solved? partially a solutions will where So, lot. think from? you does only

Elizabeth Spaulding

Dan the what and I’ll on Mark. then really the to start retention, we rates. can retention for like Thanks, second hand it I we’re on Yes. seeing Yes, one.

and both being client we Fix’s -- the spending call average in higher mentioned up cohorts, I Freestyle. the our year-on-year XX% both think participating in per newer with

though retention with after we’ve year-on-year. thing very believe, an and we are also higher combination look first our both with on of actually their that us, our north auto benefiting on retention the XX% other improvements meaningful those, at of, sticking absolutely seven-day seen with Preview maintaining of from, rates. And ship auto Fix. from ship, together then programs look Fix the clients churn, The at And we we’re we Freestyle

experience our feel retention. we so, the And good higher made very are that client we’ve driving that in improvements

those we acquiring we’re things high-dollar We past. that about like very referrals in high-quality talked clients, removing credit very also the confident feel that

client then that us, driving XX, of we that mix marketing categories think on and never privacy very, combination a have of within we opening Freestyle. different participated iOS comment that know channels ton categories I the frankly, a On by I’ll healthy are very where very just, product we changes. there. to that more and to the have in I’ll up with product we less So, hand are spending it there’s ecosystem that Dan, are now clients think their our do one share in hand iOS let make, those, are just But, that more for very, are up me us impacted the it early to Dan to also

Dan Jedda

us. in for -- testing I and Yes. on impact the are channels optimizing will in privacy other us channels available to impactful Elizabeth we that on do to be that channel. we touched think Mark, suspect to is That that. creatives that the continue more that, short said, a help different continue find around ways additional we have the until way important term be But the point

some that, mainly to of the positive And to SEM-based we find site. very traffic be channels,

want those in on the will conversion, more some improve channels. to continue be lot of Elizabeth call selection of we a the on. and shared and but features, that improve again, coming feel on we’re a of experience, conversion term. we And Freestyle that where we those on spend in as isn’t conversion lot more optimizations near Now, we we lot added medium earlier a have working the to will

issue. a on It’s improve that conversion. a is that to really focused traffic client-facing not we’re So, issue very

-- we other think to improve, several can So, potential our we different that’s continue for with are significant organic experiencing be drivers others others several active and including just the that one that and channel. that on are social There marketing traffic to and channels we’re there clients.

Operator

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

Ross Sandler

think follow I and retention? nicely. growing Mark’s kids on growing nicely and So, UK Can I question on are is Freestyle you said up Okay.

as do in program. of women’s -- Fix that Fix the know Any inventory business? you’re trying referral do looking that’s your would you the comp. selection just And tough kind Thanks that, selection, talk the of a out When at context can And then, on Freestyle through men’s that was feel core what in helpful. So kind there? of seeing about and core fully that high-dollar context -- you’re position and about the us, building I that? to your Dan, peaking how women’s business, revitalize lot. you Is that creating like be last just that we a when lap remind year? retention

Elizabeth Spaulding

than really on terms the then to are easier adds growth the sleepwear QX seeing given of enter we’d we period them layers, what we improving I the footwear, feel through our Ross. which experience that business. are new like seeing part channels. the a both making it I That drives feel of both, really here men’s started our as like the see marketing spend to of first is in of and women’s think lot overall how rate can to to good introduce second and really those experience, our of terms take performing, in other as and in RPAC to things insight Freestyle, efficacy numbers, good some that’s of to of all we’re retention. where growth continue lower by we the in just conversation categories that the well largest being be, we driven trying new a get and part stitchfix.com of Thanks, and women’s client great new one, and landing about. you’re that function we’re What all on about Obviously, there being

is into feel are good clients the about about So, average foremost improving. retention team. the We net driving first rates, new the and It’s we spend. the those for as feel something priority good about ecosystem, really which

on high finish incentive the that do Dan, to we that one you when of dollar lapping On want lapping? referrals, the take

Dan Jedda

program ended February. in Yes, late that will. We I

we referrals. enter brands. So, we high that wasn’t finished on the we want dollar March I some to a and But are on we go also QX and do your through just we It forward. up follow have just month did have up as it But question lapping. men’s did of the impactful now QX. as as

I brands, men’s I added and and we think that on because is women’s an area the mentioned specifically some -- national earlier where on. recognized it

We Levis, have brands were Champion added, have more the UGGs with added planned and that some year. for of Nike, we very we’re happy and the back prominent half Vans,

nationally-recognized we brands are moving more business. men’s forward the So, with bringing for

Operator

to Markets. next from Siegel move with We’ll BMO Simeon on our question Capital

Simeon Siegel

do you actual I metric. just that’s a SG&A full Thanks. number that guess, that. then, forward? have the can be on year, a might Dan, on metric. growth metric client giving there And for color plan type Do in that gross is giving about you helpful a you of non-marketing conversation the mouthful, similar you marketing It or Thanks and to then, but you going dollar addition give RPAC margin the Do any think to the XX-day rate. And as color, speak active XX-day growth XQ any to? want

Dan Jedda

Yes.

to And mix waiting impact Freestyle We active active active there. just There on looks and we’re the the might are that different side. XX-day is like. on on understand looking at on metrics what be what

It’s we actually until better. out it’s question, actually on to it, want so, doing. to something can that and we number it a we’re at see so great And hesitant trend we the give look explain

engage to So, and come more we just Fix in the Freestyle. at little bit a those clients in versus who come as who Freestyle look then with we in need directly time

And some there. on so, going there’s in mix

And that we explain can sure adequately. want to make that so, we

is to And line we margins, structure. starting then, in is We the that for and And to earlier question we that. revenue, the QX. again, of on as see do just XX% on going be pressure for tuned hit margins right with that that where it QX, into marketing, to it’s given some for which be wanted expect going mark potential stay are don’t think more in that’s in the them I your meaningful although to point to and to the I clarify, QX just that. generally on something have marketing now past, around So, have said it’s where to insight we cost be we with yet,

said year, still last that quarter that the that on margins for expect and we we we’re So, XX%, to trend. full gross

Simeon Siegel

mentioned And that margins higher? holistically, then helps. just you. to makes So Do about want the Thank you as just of talk higher maybe what scale it’s Freestyle, through margins you maybe Freestyle Great. you why?

Dan Jedda

great Yes. question. It’s a

puts so, is the gross and But styling margin small the impact line. on Freestyle in there biggest are different And takes relatively the component.

when So, Freestyle it experience. whole across do Freestyle, we styling for the scales

And do on across Freestyle, experience. within whole we features scales the so, other and but it working stylists outfits have actively

And see so, contribution improvement in significant profit. we a

values order industry, not just mentioned, the I see versus the as side in returns. that in very other that the and average normal helps and Freestyle that very think, they’re and our are of healthy, AOVs, we low of AOV are -- rates is relatively strong the return net Elizabeth

costs have of return we because so, shipping lower that. And

primary referenced So, improvement those call. are the factors the I that in which two in profit, that marketing that is earlier contribution drive excluding

Operator

We’ll take our next Baird. from question with Altschwager Mark

Sarah Goldberg

questions. our Thanks for afternoon. Mark. This Hi. taking Goldberg on for is Sarah Good

in recovery seeing to and brands you more in occasion-driven mix out a work is strength inventory hearing retailers categories? And We’re and positioned your advantage of same? these take the categories. Are call

Elizabeth Spaulding

the engaging of the us gives for Freestyle a get on Sarah, the notes, quite and a it’s whether lot question. within whether ability the adapt. from we it’s signal Thanks, of our can they’re benefit depending I answer of in of lot lot a what clients, actually month to see Yes. request We that. fluctuation,

see our clients. some we and QX we did add an as our holiday Fix uptick pre-January. of there in the So, saw see in actually month the occasion QX, in spikes the to the for merchandise on casual see to women’s, in that both we begin the have seen in often of January, COVID. a and front, versus part workwear growth increases then, for to season we at team we more But a we’ve did for during And seen uptick investments saw We beginning social we increased in as relative quarter. And QX, because in reduction trend an the wear Freestyle.

driver of And questioning might a been think the it. have was to so, Omicron return some a work. with variant, bit that we of That big the

And so, month. in during athleisure that gains we bigger saw

of adapt in we the ago, of a believe and than categories work look and also I of that driver, last we athleisure those trend that year if good a our especially mix occasions did the going and really with bit signal arc growth So, and quality in and been we client the comfortable think down. the strength to seen we big will of and about over we merchandising mean I have our higher and continue be but lot We that it’s have out to experience. we just months, capture the spotting see notes we a the little six-plus in between use ability up hybrid work. overall to continue a lot a feel more

Operator

question next We’ll Wedbush Bank. our Tom Nikic from with Investment take

Tom Nikic

I but Fix Fix, customers. to some bit that First Freestyle much about -- opportunity I silly, follow as onboarding bigger economics. sound for kind people This of on of and a the and causing kind given Fix Freestyle favorable on may first the guess, want you up TAM I to the a friction mean, than conflict the directing little order mentioned just has the

I’m You but Freestyle maybe are less of a Freestyle of maybe would would make of oriented why onboarding, maybe thing, down of on kind like the Freestyle prospects and of Fix go time? kind bad and Freestyle near Freestyle more be friction in or like much of a of less all-in of some that’s you economics the towards not that for kind can the sort of sort I maybe not seems become kind and the more the let as to more necessarily hindrance. grew It trying aggressive favorable. term, that Freestyle have think kind dwindle having case over guess, and

Elizabeth Spaulding

question. the Tom, for Thanks,

unique, I we to said, going consumers styling Freestyle where the value. Freestyle. how things. outfits time, for many Fix, we to is get the style And value-added the demonstrate is really ecosystem buy think dressed wear noise growth perfect styling wear think, all might we item, ways demonstrating the results those the of absolutely in that’s that removing want actually plus demand. of are we’re what And so Stitch item Fix what of We preference a touch as equals tremendous know believe just in takes best for things we the the all and Freestyle. things see which That to parts Freestyle [ph] today, in does even how see and and helping It their just of them on of potential ecosystem on advice see at the to all though with one it. we see in really love together we

would experience. overall in They a Our a way. clients advice that the love Fix best value-added get in and being both we they over community around plus more time duality really that to the guidance very participating the And are part the inspiration rich experience. of imagine and

Fix-focused shop. them. all would consumers And terms love just to Freestyle, They for in be it’s then, that lot do will valuable as really consumers. really a of that us to customers. that we the all needs for so, purchaser work love probably of who know the And consumers very some there’s see And for in ecosystem of we going are after meeting there these

segment, us and segment really capture enjoy In more that’s we better does consumer on-demand that the the their a forward. fact, leaning wallet. think is what think of And what experience shopping segment, is spends sort highest most, that fashion-forward Women’s of giving share value and the to we ability who Freestyle

of it’s intent better exceptional in search-based Dan better really and high us. and our and And an channels and minds that more mentioned. for through than and experience, customer or are better so, nascent at Those allowing landing still getting an an

channels coming participated channels. we those, is traffic We SEM, SEO, have healthy whether it’s do all, to the in historically item-based we’re we XX% XX% that. advertising. players, e-commerce And still many not haven’t really at while to marketing For that in starting participated of their from those to just haven’t see traffic from scaled

believe that’s is right Xx dotcom And personalized the the imagine we making out not traffic your of it yet, in of think I those for along. to lot immediately. even is so, would we’re testing time, of for what Fix’s the core sure today. it them to which getting into where over the a the really Fix Xx future. that very gate, point, fully core plus what coming And is right let’s is our from. a shopping of but But make And to we think where converting That’s Freestyle and we’re see we mode access still TAM, Fix in unlocking we easy combination the business clients dotcom of terms

Operator

I’ll Kunal take with our Madhukar UBS. next question from

Kunal Madhukar

other A couple, side if Freestyle. one Fix I could. core the One and the on on

referral ever What come quarter core side, as were interested core like potentially maybe of add to of much number look future? you would in a like so, side. XX,XXX high was way in the like that understood kind that have gross Does hit the adds And anyone out there kind much, on of are in point I now at was aggregate. you already in at was the much Fix looking lower. saturation means subscription, to you’ve like terms the and lower That’s Fix gross this that the XXX,XXX dollar this which you lost customers in XXX,XXX, so

the On open, online market Freestyle, with like up, of kind from more retailers, off-line, the opened Omicron lot you at as the omnichannel work. look you whole competition gone, are mobility a facing

if you the telling is exactly where thing the data future, the a to all we if algo a kind going you follow-up styling so be, And like want? think for associated economics search, So that going and intensity using as Freestyle just that Freestyle institute think experience the right of does customer? with present search-based competition I are higher? then into work for I’m just right quick would much you’re like with the higher that what to customers, is we a marketing to How because of of then, should the

Elizabeth Spaulding

good to Thanks, questions don’t then Dan, in. start chime feel free I of Kunal. there. Lots and Why

marketing conversion lot our in your prior think and lapping think answered I the questions of the that’s question and And core first health around Fix spend. of acquisition I was a around of been given referrals.

I the of be us still to with able feel funnel a the think into there’s driver reductions to that really bring business. marketing conversion is to there point together need saturation make improvements Given Fix’s. continue to clients spend, we that versus headroom confident in hitting We that

Your impacted by up, be that opening omnichannel. and second back stores question around will how Freestyle

address I discovery fit, are think relationships. we we to believe highly frankly, the our as well which ability differentiated is as even, in-store e-commerce in challenges faces apparel, try-on that and that of biggest human

walking that a even store you what them finding if it push relevant, we -- think finding store, you’re items that going fit that frustrations a and match consumer things physical what boundaries, and the is and of and not they’re that their as lot in a of to into their love So, style seeing best. of that’s that are around have XX% do consumers and

deliver. find particular they an be maybe showing I in consumers will features in marketing, how already On to it a version but what And intend and for the more a believe so, add mood of only are continue particular suited your we to showing that all laydown uniquely experiential category firmly launch we look point convenience-based that’s And feature And item. brand. size, on shopping, to for most -- as we that still an kind be of a consumers believe in on shopping, ways to learning are think we’ll with want we make evolves. we’re like it your it migrate and but these to Freestyle really as channels, Fix We’ll that you surfacing for might time, is, soon, outfit-based could wanting how are clients also that’s is closet. very highest of be higher trying new that Stitch wear to search-based does of what per do time their that items that feature alpha in to might Freestyle, love then, early best. what over what within unique be and items They over your that even very and remain that do seen last existing in days we

to way a of Stitch importance use experience so, fix further over version to of better. time, overall see uniquely enhance the And we search experience. we the Fix-based a But Freestyle intend search just be we to table make the

Dan Jedda

differentiated. I’ll our Yes. point in experience. the is add widget, in outfits-based middle have highly personalized, on is And data comment that, or of purchases from you we which just question bar Again, to a we’re search is our just coming relative Freestyle the how give to talked which on different search XX% do being more others. going widget one shows our a experience Elizabeth Freestyle to about a nearly that. just

there’s point given to our It’s very with do wanted And out just there. data that throw technology happy can very so to that. see It’s more I So much meaningful. something that and stylists. just we we’re our

Kunal Madhukar

we of in that live, of humongous follow-up with is heard that kind through Thank question -- people you. that you a target of on and the that Freestyle. has could list front? you the How the been customers been And if still have a on number you if one all response Fix quick I’m one have things don’t past mind Stitch like of had that

Elizabeth Spaulding

think back still to come But million We we several Fix. point, Yes. there. We dormancy really to we to like Stitch think clients nascent. question. love have it’s stage your we’re actually a that have seeing That’s great what who entered would that

QX activation clients. a And ago, of historic a So, an up had channel and Freestyle. are plus we within always that once is over Freestyle channels over actually year What reactivations activate we’ve Fix. CRM for a XX%, as little ago have obviously year-on-year our a that our always-on kind was through introduced is increase entirety the of that all clients. seen available We activation year we historical some to to our

attention that able channel largely to that a And those clients. that of in reach way new us an way So the Freestyle a the back clients which Fix’s is of to gives were of reactivate terms of that lot I to whole about part right is do think meet email in. today. by out and was but exciting reactivations, flat finding being of clients, optimism bring We

to and we’ve are continue especially explore clients marketing lot And as with a about, new ways channels maybe we excitement to ecosystem. talking historic expanding and our again, us at love better reignite been of that these what those as us before we’re the might loved so, get

Operator

next with take We’ll question our Cory Carpenter JP Morgan. from

Unidentified Analyst

Hi. ran Cory. it Can if learned? Stitch for strategy on doing This promotional what in you the ever you consider noticed Thanks Would talk lessons is discuss more you broadly? [ph] January. taking again? its Katy can for questions. your We just first Fix sale And about any

Elizabeth Spaulding

that Thanks, I’ll one. Dan Yes. take Katy. let

Dan Jedda

also way saw. out just said the I a Yes. well that thought better event. under financially. as It we went and promotional X% small. was event, event looking as it. inventory think our We benefit in in for us did us that clients run clearance just I’ll it as we’ve was it probably is a It clearance a run of participated And very well. can a that -- really We’ve viewed our very you inventory test we clearing and or as some And at say that

of of we some more events get we’ll And X some orders. promotional do at programmatic the very also different was then, X albeit that way. have dollars that so, a And potentially successful. run future, And as probably well, in

basis to Our in a programmatic those way continue clients but well, way. a we’ll do engage programs in and on like as a run us to that. for again, And it’s them, thoughtful

Elizabeth Spaulding

are great X up like us time opportunities [ph], for that I thing personalized thing is, Fix’s. clients I to Freestyle, one moments more their or with would periods. And been with now with maybe even Katy within for has at is discount to think consumer clients our own end-of-season offers And value One sentiment are Freestyle, into Yes. different a special the add stores. buy always our there there play opening

a differentiating ways opening to Freestyle Fix’s. as providing are fit, as areas were opportunity value of through discovery up So, to relationships both see be to we our great of and via that us do lot harder on well in these clients to that

Operator

with Boruchow Fargo. We’ll take question our next Ike from Wells

Ike Boruchow

issues for are a a can to guys is, Are maybe you subs take back when just base? take look largest to kind just color reassess questions. your for -- I further Hey, ready but profitable step to QX just my X of run had little and adjusted lot I A you you expecting gave a kind a and you question be in the of I think like million more is, business? ask to a you to think biggest quick active kind up take you go. higher sub would then, mean, be of level kind what helpful. a guys but -- curious, thoughts EBITDA I margin marketing operated explicitly? some Dan. color, mean, it Dan, there. your operating over one guess, would cut see. base more focus and does that’s to maybe my on what smaller And where to need you you I customers. I’m Two negative? higher can would not and you. try guys. there guys you sounds I I OpEx saying margin you in smaller figure things when a And question Elizabeth, growth, But at what more level it it are bigger reramp I’m of of of growth it you for for some guess, to kind out. customer just -- your the

Elizabeth Spaulding

and I on. initial can his on start he EBITDA don’t the the second can maybe with add and Why Yes. thoughts give Dan one

Dan Jedda

acquire take for On Yes. it EBITDA, again, ecosystem. them to does our in actives, because as time we spend

we didn’t the and what to see we to well QX of is in reasons as is conversion. one spend wanted marketing continue guidance how is efficient because understand So, our progress why we in give as

expect specific time. would be So, I to we’re this EBITDA not again, giving guidance negative QX. But at in

Elizabeth Spaulding

were just asking customers? to we you rather Ike, question. wasn’t to sure And second you’re have Is you’re I on what growth on what asking, your that the make quite want I higher-quality fewer what asking clarify, second would question. question, sure

Ike Boruchow

high-level focused And have the word And a this think subs loyal I’m smaller level, over be customers a and then, the multiyear -- it’s at ever period. as and again, just talking about OpEx have gone we’re basically margins a business looking would more active think maybe profitable, better up, and whatever question. active to margin just new more high the of trying the customers acquire -- to more -- on that again, spend your And have if Yes. about very down. a about when It’s are come reaccelerating it’s growth you it’s is, more do maybe CAC. lower you a successful, and subgroup looking

Just trying that think to maybe you cause understand lieu in about how that think about to growth? would you and what of

Elizabeth Spaulding

it. Got

year think, we’ve about kind longer, year we than this profitability the the basis, customers more good a are on before. acquiring. spending I year been feel with really us And staying last customers our of or actually

model Fix actually value we’re we Preview. customer things can things Fix with the add the services, through like together Freestyle. time intend and do Other over enhancing there by with we think So, value improving to experience styling

we’re with think more So, we finding to client. value ways drive each

even both see, better and like with really we We Fix’s the point, Freestyle. with Dan’s unit on to also what economics,

cost is part so, it profitability part of of question, And I and think a the structure. question a Fix is marketing

And a time. be profitable But to alluded scale to side. over we so, business, believe can some the this very as on that we business continue anticipate making we Dan that improvements that

to scaling influencer participating we untapped in like funnel We participating in participating been been of things the for some then, like the more expensive past on in the much argue lot time. that affiliate going in that reasonably even and And that of are of marketing, as the are have channels drives marketing into phase. just our I like has And really marketing, that belief marketing business evolution top in in be the funnel model and that the wider future. got SEO, other still Fix. front, on things like a we would Stitch things well a And somewhat as over lower more efficiency portfolio expanding channels Freestyle, relying

than bigger know, wanted think business I narrowing I the add if don’t presents rather customer Dan, actually base. to any... So, we more a believe you opportunity

Dan Jedda

of to again, even better I we total comment -- margin. was -- think maintained out, gotten I I soon. terms just slightly think the excludes And I margin the and contribution on to want get side, that get hope which No, we in expect we to think Again, do as better. made reiterate, we marketing, mix have

while point those, in -- Elizabeth’s channels will really performance-based mean, to feel Freestyle whether about many question like our generate Fix do into know we in some the goal the plus into the is really marketing. new or Fix, have it’s Freestyle, that we’ve that’s channels hopefully, and the seen actives, So, seen and I we Fix here. And in there Freestyle, other challenges are

we actives over as corner the leverage I So, improvements again. the leverage I go and on margins think earlier believe that have Fix we’ll on still growing forward we said as time. we that. start that the and will and provide And turn we cost see side,

Operator

MKM Meyer Partners. question from next We’ll take with our Roxanne

Roxanne Meyer

for question environment Thanks is I across pricing. afternoon. Good the have with a many prices. obviously few. taking first question. industry inflationary industry more The actually raising on my is in My a

with So, the up I your AOV thoughts X%. units, much I forward? for Fix’s your you pricing guess, and that quarter, to due what’s was in curious up on took How going pricing was versus

Dan Jedda

to Yes. it None Hi, Roxanne. due pricing. was that I’ll of take one.

It prices. within to keep We significantly rate primarily Fix’s. was have raised not due

of ecosystem, Freestyle the plus mix And a the positive. contributing lapping of favorably. you which Fix RPAC you’re the plus it’s We’re previews, had our in impact, cycle has generated side, Once have then very experience. algorithm full the positive on our

go tweak not about see And suspect in methodical as going our the going product forward, wasn’t and come I our going don’t to pricing. may analytical fact, the of at it we wasn’t do our what’s significant cost taking just I continuing to So, any And EV and think -- and terms looking be expect think pricing, look to that on it’s We it at in like pretty on at pricing, of then, our pricing. marketplace. and we we’re up, of national could we’re down hard on in brands, especially possibly brand. we’re look a with increases.

Roxanne Meyer

revised year. XX% for your client And quarters. your on the just reconcile that Okay, the this quarter. great. active the revenue you growth, full your it increase When guidance to expectations for account then, healthy And back assumes of trying past falls flat per take two into sequentially in customer next that comes an

what’s So, the your for and on to with dynamics trying revenue client? per understand going just expectations

Dan Jedda

just a that function adds part Yes, I’ll spend a HX And the to that lower tenured-base the more one. clients clients. that -- good question. newer net of take is That’s relative of just in

growth really is A and of we when it So we course, impact, and cohort positive and we mentioned, when XX-day we on a see at it, as of do a at look it year-over-year mix like-for-like look -- cohort a lot XX-day basis. we impact.

that So, a is see positive, but drop. we might

and simply because You’re the improve that out mixing we we’re new right actives. gave revenue actives to guidance on

add go we reverse forward. as will we that and as conversion itself improved actives, Now

Roxanne Meyer

client think preferences I actives that you would for a algorithm you so Okay. questions by in she’s out a itself match And manifest offering spend. there Thanks to with do versus trying just then, far and guess, your how as the that that the by customer to pure spend had And a think actually the dictated about lot. Freestyle last, your presented. about Freestyle customer. ability then Fix about And just wondering average

Elizabeth Spaulding

majority cohorts, Yes. still. it’s I Fix of given Dan just early that up. We seeing on admittedly what Roxanne our like weigh small that it. opened we’re the are I Freestyle by with clients, can but still First and that, mean, fact the the new can recently start of we nature in clients these very in on

this to so, point, I think RPAC. related there to Dan’s an And on was earlier question

more longitudinal and sharing As we more have more data we’re data, we’ll feel seeing. what comfortable

Freestyle back. those customers have seen We coming

I seen I really think that. more gather relevance, extent, We data some we have actually them your understand a to but to we opting question on Fix’s think And feel then, have to into kind demand. of to outfits. good relevant the very is on It We basis, shopping as of experience. a To start it styling be think XX% Dan’s to through cold inventory. sales point, show new on of are style-based of able

of shop reference of of a have features else make on ways it customers we us baseline you we of to if to they don’t some it work would highly differentiated. that’s easier to Anything spend need And some point front So, know, these other in you what add? Dan, a I add making Freestyle. add. in in average anything addition have can that the for or to lot

Dan Jedda

said. will I we completely Fix and Freestyle, I do Freestyle their that with in I -- do customers see do Fix up. add engage think agree Elizabeth when just No, everything I their go both,

have back that’s just data point together And experience how from an really we’ll in a in Elizabeth and on only. right, looks is that, two need come eventually, to the we more like who and what time share that the over gathering on And but work first first like whose are overall purchase so, is those data standpoint. really just we the tandem client gather Freestyle collectively of for Freestyle to intent And time. to

Elizabeth Spaulding

today. you updating look next quarter. you progress all us on to forward our Thank joining for We

Operator

conference. today’s participation, We now thank and that you. for you conclude disconnect. does you Thank may your And all

Stitch Fix (SFIX) 9 Mar 222022 Q2 Earnings call transcript