Why Stitch Fix Stock Was Falling by Double Digits Today

Key Points

• Stitch Fix reported its second straight quarter of revenue growth.

• Management was optimistic that its transformation plan was gaining traction.

• It expects modest revenue growth in fiscal 2026.

• 10 stocks we like better than Stitch Fix ›

Shares of Stitch Fix (NASDAQ: SFIX), the online stylist, were initially higher in after-hours trading last night, but after a closer look at the report, the stock was down by double digits today. Though the e-commerce company topped estimates, investors seemed to focus on the decline in subscribers.

As of 11:07 a.m. ET on Thursday, the stock was down 16.6% on the news.

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Stitch Fix is still stuck

Revenue in the quarter rose 4.4% to $311.2 million (adjusted for the extra week in the quarter a year ago), which beat estimates at $307.2 million. It was the second consecutive quarter of year-over-year growth for the company, but the decline in customers seemed to spoil that momentum for investors.

Active clients fell 7.9% year over year to 2.31 million and were down sequentially as well. Gross margin fell 100 basis points to 43.6%, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) slipped from $9.5 million to $8.7 million.

On the basis of generally accepted accounting principles (GAAP), its loss per share was $0.07, which was better than the consensus for a loss of $0.10 per share.

CEO Matt Baer said: "Fiscal 2025 was a milestone year for Stitch Fix. We finished the year with our second consecutive quarter of year-over-year revenue growth on an adjusted basis, and once again gained share in the U.S. apparel market." He also called out improvements to the client experience and product assortment.

What's next for Stitch Fix

Management's guidance called for similar momentum in the fiscal first quarter, with revenue up in a range of 4.4% to 6%, for $333 million to $338 million, which was much better than estimates at $315.6 million. It also called for adjusted EBITDA of $8 million to $11 million. For the full year, it called for revenue growth of 1% to 5%.

While that forecast is certainly better than a decline, growth in the low to mid-single digits isn't enough to revive the brand. Until it can improve from that level, the stock is likely to continue to struggle.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Stitch Fix. The Motley Fool has a disclosure policy.