Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Stitch Fix first quarter 2026 earnings call. Lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star one. I would now like to turn the conference over to Cherryl Valenzuela, Head of Investor Relations. You may begin.

Good afternoon, and thank you for joining us today for the Stitch Fix First Quarter Fiscal 2026 Earnings Call. With me on the call are Matt Baer, Chief Executive Officer, and David Aufderhaar, Chief Financial Officer. We have posted complete first quarter 2026 financial results in a press release on the quarterly results section of our website investors.stitchfix.com. We would like to remind everyone that we will be making forward-looking statements on this call which involve risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance. Please review our filings with the SEC for a discussion of the factors that could cause the results to differ. In particular, our press release, issued and filed today as well as our annual report on Form 10-Ks for fiscal 2025 and subsequent periodic reports filed with the SEC. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statements except as required by law. Please note fiscal 2024 was a fifty-three-week year due to an extra week in the fourth quarter. As such, references to our year-over-year revenue growth rates and consecutive quarters of revenue growth in our women's and men's businesses on this call are based on an adjusted fifty-two-week basis removing the impact of the extra week to provide a comparison that we believe more accurately reflects our performance. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the press release on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being webcast on our Investor Relations website and a replay of this call will be available on the website shortly. And now let me turn the call over to Matt.

Thank you, Cherryl, and good afternoon, everyone. Q1 was a strong start to the year. Revenue exceeded our outlook, and accelerated 7.3% year over year to $342.1 million. Adjusted EBITDA also exceeded our outlook and was nearly 4% of revenue at $13.4 million. We are increasingly becoming the retailer of choice for more of our clients' apparel and accessories needs. We are doing this by leveraging the latest in generative AI technology, the expertise of our human stylists, and our assortment of leading brands. In service of our aim to deliver the most client-centric and personalized shopping experience. Given our Q1 performance, combined with the robust demand we've seen so far this quarter, we are guiding to a third quarter of accelerating growth in Q2, and raising our full-year guidance. The outperformance is the direct result of the compounding benefits we're seeing from the disciplined execution of our transformation strategy. We've strengthened the foundation of our business by embedding retail best practices and building significantly more leverage into our operating model. We have fundamentally reimagined our client experience. We zeroed in on four areas to deliver a more modern and dynamic Stitch Fix. First, delivering enhanced client engagement features, Second, cultivating deeper client-stylist relationships. Third, offering a best-in-class assortment, And fourth, increasing the flexibility of our business model. For example, our increased flexibility now includes dynamic larger fixes, the ability to turn a freestyle shopping journey into a styled fix, curated theme fixes for specific occasions and use cases, and family accounts, which unlock the Stitch Fix experience for the extended family. This comprehensive and customer-driven approach is clearly resonating with clients. The ninth consecutive quarter Our fixed AOV was up nearly 10% in Q1, AOV has increased year over year. As our larger fixed offerings, and our improved assortment…

Thanks, Matt. Good afternoon, everyone. We delivered a strong first quarter that underscores the success of our strategy and the momentum Matt outlined. We're accelerating growth and gaining market share, while maintaining financial discipline to ensure that growth is profitable and sustainable. FY '26 is about leaning into innovation and the client experience strengthen our competitive advantage. While continuing to identify savings that fuel reinvestment. Now let's turn to the numbers. Revenue was $342.1 million, up 7.3% year over year, exceeding our outlook. Average order value rose 9.6%, driven by more items per fix, and higher AUR. Reflecting strong demand for larger fixes and our improved assortment. We ended Q1 with 2.3 million active clients, at the high end of our expectations. Revenue per active client reached $559. Up 5.3% year over year, marking the seventh consecutive quarter of year-over-year growth. The growth in RPAC confirms that our strategy is effectively leading to increased client engagement and spend, ultimately driving a higher share of wallet from our clients. Gross margin was 43.6%, in line with our FY 2026 range of 43% to 44%. With contribution margins remaining strong above 30% for the seventh straight quarter. Advertising was 9.9% of revenue in Q1, up 50 basis points year over year. Q1 adjusted EBITDA came in at $13.4 million or 3.9% margin, outperforming expectations on strong revenue. We ended Q1 with $2.442 billion in cash and short-term investments and no debt. Giving us flexibility to invest in growth. Inventory, was a $141.5 million, up 18.8% year over year reflecting investments in our larger fixed offer offerings. Turning to our outlook for Q2 and FY 2026. We are increasing our full-year guide to take into account the positive trends we are seeing in the business. For full-year FY '26, we expect total revenue…

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question and you may requeue for any additional questions. Thank you.

Our first question comes from the line of Dylan Carden with William Blair.

Your line is open.

Hi. You guys got me?

Yeah. We do.

Awesome. This is Mark Spalanger on for Dylan Carden. Thank you for taking my question. I was just curious, could you provide a little bit more color on new customer behavior and just your general view on their you know, stickiness. What what metrics are you tracking that inform this view outside of the you know, the thirty-day LTV that you mentioned?

Yeah. Hey, Marcus. Appreciate the question. I'll share some insights. And, David, feel free to add anything additional. When we look at the client behavior that we're seeing across the board, we're extremely enthusiastic in terms of what we've been seeing. We shared in the prepared remarks that we've seen nine consecutive quarters of improving LTV for new client acquisition. New clients have also been were also up last quarter, for both year over year and quarter over quarter, which gives us a lot of confidence that we're gonna continue to see a more health in our overall client base moving forward. Also seeing strength within our reengagement of with our reengaged clients or or formerly dormant clients They continue as they rejoin the service to stay longer and spend more, which again is really encouraging to continue to the overall health of our client base. And then finally, when we're looking at our clients that know, might otherwise go dormant, we just completed a quarter in which we had the lowest number of dormant clients in five years. Some additional signals that show the strength overall in our client base is we shared in our prepared remarks is that our men's business has returned to sequential increases in our overall active clients. And that is one of many things that give us further confidence that we will return to overall sequential active client growth in Q3. So those clients, that we have they're staying longer. They're spending more. The new features that we've launched are driving incremental engagement, and we're also seeing, and and then those new clients that have joined, we're also seeing them stay longer and spend more. So we're really proud of the overall widespread and holistic impact with everything that we've done.

Awesome. Thank you. Our next question comes from the line of Aneesha Sherman with Bernstein. Your line is open.

Thank you so much, and congratulations on the quarter. Matt, you talked about gaining share and you said it's some pretty strong numbers about share gains versus total apparel accessories and footwear sector. Can you talk about where do you think that market share is coming from? I mean, is it from other multi-brand retailers? Is it from trade down? I mean, what are you hearing from the brands that you talked to about where those share gains are coming from? And then on gifting, now I was surprised to hear you say that gifting was so strong. It's typically not a very strong use case for you. Do you think that's changing? And especially as you move more into freestyle is gifting becoming gifting or maybe even holiday use becoming more of an occasion for you? And if I could throw in one more quick follow-up for David, around advertising, Nine to 10%, you know, it sounds like the sales numbers are working. The client numbers are working. How do you think about maybe leaning in on that more to drive more of the top line if needed? Thank you.

Yeah. I hey. Hey, Aneesha. It's Matt. I'll I'll answer the first two on on market share and holiday performance. As you noted, David can can chime in on on the advertising and any additional commentary. First, appreciation for the recognition. The team deserves it. They're doing a phenomenal job in order deliver, these incredibly impressive results and market share gains. Speaking of those market share gains, it's a great question. And, the work that the team has done to improve the client experience is clearly resonating. The work that we've done to continue to improve the trends overall in our active client growth rates, continue to demonstrate that as well. And with regards to who we're taking market share from, what we are what we're doing is we're focused on delivering the most client-centric and personalized shopping experience. And in doing so, we're picking up share from where other retailers aren't delivering. And we're taking that share from a wide range retailers who don't and cannot offer the personalization consumers want and expect, which is so core to our business. And as you noted, we're hearing loud and clear from the brands that we work with that we are delivering outsized growth relative to others that they might be working with. In terms of our holiday performance, as I noted in the prepared remarks, we really entered this holiday season with the most seasonally relevant assortment, competitive pricing, really compelling promotions. And a lot of new ways for our consumers to engage with us and to shop For example, themed fixes or fixes built around a freestyle item. Also, a significant improvement in terms of some of the engagement experiences, like Citrix Vision and Stylus Connect. Specifically in terms of gifting, the more recent launch of Family Accounts has delivered results that have exceeded our expectations. With family accounts, we heard loud and clear from our clients that they were looking to bring the Citrix experience to their entire family. They loved the service that we provided, and they wanted to make sure that they were able to use it for spouse, partners, children, and any other loved ones as well. In fact, 92% of our women's clients shop on behalf of a spouse or partner, when we created the ability to launch family accounts, we saw phenomenal engagement right out of the gate. And that was really the entryway for us in order to start to deliver a gifting business over the holiday season. Addition to the gifting, though, as you well know, a lot of the purchases that happen over this time period aren't gifts for others. They're gifts for self. And that's where we have really led the way, and that's what helped us deliver record-breaking sales over the Black Friday to Cyber Monday time period.

And then, Aneesha, on the on the advertising, you know, this quarter, we did lean in a little bit on on advertising. We ended up at the high end of that nine to 10% range, at 9.9%. I think it goes back to what we've talked about in the past about that methodical approach to to advertising and really holding ourselves accountable to those CAC to LTV ratios. And because of that, we we tend to see some seasonality in our marketing spend. And so we leaned in in Q1 Q1 and Q3 tend to be our stronger quarters. So you'll probably see us spending more at the lower end of that range in Q2. And all of that is just to make sure that we are really focused on not just adding clients to add clients, but but really making sure to Matt's point that we're bringing in really clients and sort of what he highlighted earlier that that new client LTV is something that we really an eye on. And this last quarter, it was up, you know, almost 17% year over year. And that's really just a a very clear indication that you know, that the marketing efforts are working and we're bringing in clients that truly engage with the service and see value in the service. And and we'll continue with that methodical approach. And where we do find opportunity, like, we're very comfortable leaning in.

Thank you. Really helpful. Next question comes from the line of David Bellinger with Mizuho. Your line is open.

Hey, everyone. Thanks for the question. I wanna ask about the consumer-facing AI and and visualization tools. Any read on the early adoption there? Any any numbers you could share with us or you know, when you in what ways are consumers using and and engaging in these tools early on?

Yeah. Great question. And we're really excited about this this truly innovative, feature that that we've created, Citrix Vision. Where clients can upload a couple of pictures on themselves and see a generative AI image vision visualization, of themselves, of their likeness, dressed head to toe in Stitch Fix apparel. That experience is completely shoppable. And fully shareable across all social media platforms. And we're seeing engagement from our clients at far exceeded our expectations when we rolled out the beta, just a couple of months ago. And we're seeing clients use it in many different ways. We're seeing clients that are using their Vision images and sharing it back with their stylist to help inform what they're looking for in their next fix. We're seeing clients, purchase directly from the Stitch Fix vision, image at

itself.

And we're also seeing a lot of what we call Stitch Fix vision in the wild, where clients are actually sharing it across their social platforms. They're sharing it with friends and family, and it's creating a bit of a virality and and organic growth for us from a client acquisition standpoint as well. So we're really encouraged by the early adoption that we're seeing across the board. And, we're even more excited about how we're leaning into it into the future, with additional applications.

K. Thanks for that. If if I can just get one other one in. Sure. Question on the gross margin performance for for David. I know it's down a 180 basis points versus last year, still within your full-year range or so. But could you just help us bridge that decline and anything we should expect for the Q2 period?

Yeah, David. I can I can give you more color on that? I think we might have highlighted a little bit on the on the last earnings call. But the decline from a year-over-year perspective is three factors. First is transportation expenses. Our transportation teams have done a great job over the last three or four years of really driving leverage in our transportation costs. Through carrier diversification, negotiations, even last mile carriers, And in FY 2025, it was probably the lowest percent of revenue we've seen in a very, very long time. And this year, it's more around those general rate increases that you're seeing. You know, USPS is is a big part of that, and seeing those general rate increases. And so that's part of the gross margin decline. And then the second part is really investing in in different categories from merchandising perspective, which we really consider it, you know, a great investment and a great ROI, really leaning into some of those categories we feel like, you know, we have market share opportunity, like footwear is a great example where they just have lower margins. But, you know, we're able to outfit a client entirely and I think that will really drive, you know, a higher LTV from a full client perspective. And so we're we're really happy with that investment as well. Then the third and honestly, the smallest of the three is tariffs. There was a small impact to tariffs, but again, our teams have done a very good job negotiating and and really minimizing that impact from tariffs. So I'd say that was probably the smallest of the three. And and the other thing I'd highlight is it's another reason why we've been calling out contribution margins. Over the past few quarters is we've done a lot of work in making sure that we're driving efficiency within our warehouse and stylist teams And because of that, you know, having contribution margins that are still well over 30%, they were 32 and a half percent, this last quarter. We feel really confident that we can continue to drive leverage in the business. And for Q2, I would expect margins to be in similar place than they were this quarter. You know, we pretty much right in the middle of of where our guidance, our full-year guidance range is.

Very good. Thank you both.

Thanks, Dave. Next question comes from the line of Jay Sole with UBS. Line is open.

Great. Thank you so much. I have a couple of questions. Matt, can you just first of break down just for us the the opportunity with different brands? Because you mentioned you're bringing in some great brands. You're having success. Is it what is it that's attracting brands, or is it really you just going out reaching for more brands now that, you know, you can sell them? Just explain to us how the the quality of the the third-party brand profile is improving. You know, could you talk about how the the private label's improving? And then just on net revenue per active client, I think it was up 5% year over year. Think that's the seventh quarter in a row you had growth Can you just kind of break down the drivers of it? And then just on active clients, you did touch on this. I think it was down 5%, but it it continues to improve. I guess, what are the drivers there? And just give us any any color on of the demographics and some of the newer customers that you bring in, you know, what the demographics of those newer customers are? Thank you.

Yeah. Absolutely. Happy to answer that. I'll start with the brands question. David, if you want to start with RPAC and then active clients and I'll add some additional insight probably after that as well. The Stitch Fix service is an incredibly attractive value proposition for third-party brands to work with. We create a phenomenal experience for our clients, and in turn, that creates a really positive experience for the brands themselves. As a closed ecosystem, brands that work with us, they don't have to worry about seeing their product on deep discounts fully visible to the entire market and all consumers. They don't have to worry about the adjacency of of seeing their product hanging on racks or on digital shelves next to products of inferior quality. Everything that we do is personalized to the individual. When their product shows up either on our site or delivered to their home and it fixed, it's with other brands that they'd be proud to see from an adjacency standpoint. And we treat the brands with respect throughout the process. We also do a phenomenal job in terms of based on everything that we know about our clients to ensure that we're getting price, style, and budget right. When we deliver product to a client, you know, it's product that they're gonna have a high level of resonance with. It's product that they're gonna be excited to get and that they're gonna keep at a really high rate. And that experience that we provide for brands becomes really attractive and is part of the reason why they're so eager, to work with us. And then when they do, why they have such an exceptional experience, as a partner of ours. It's also why so many coveted brands, we are the largest or one of the largest, retail partners that they have and also watch some of the brands. We are their exclusive retail partner other than their direct-to-consumer platform. As we continue to expand that brand portfolio, our clients are are absolutely recognizing it, and it's part of the reason that they continue to engage more. And it's part of what's continued to drive up our average order values as well as our overall client LTVs. So it's just a a really great experience we provide and a really good partnership that we offer each of them.

And then, Jay, on the on the RPAC side, you know, really definitely encouraged with what we're seeing there. It was up 5% year over year this last quarter and I think we highlighted that it was the seventh your seventh quarter in a row that we we improved a year-over-year perspective. A big part of that is what we're calling out those new client LTVs. That when you see that it's it's really a big part of of what you're seeing because as those new clients become a larger share of of the base, that's really starting to impact our pack. And I think the other thing that highlights that really well is average order value. Is average order value was up, you know, almost 10% year over year and it was the the ninth consecutive quarter that it's been up. So so definitely something that, you know, is is driving a lot of strength. And within average order value, there are probably two things I'd call out Excuse me. One of those is just, you know, a higher average number of items sent in in 3% year over year, and that was that was really more about that mix shift into some of these newer categories that we've been leaning And so definitely seeing it encourage signs signs across all of those metrics that are coming through in that revenue per active clients. On the active client side, we were really encouraged with what we saw this last quarter. We ended at the high end of our expectations. Really just slightly down for the quarter. And and what we're seeing, I think Matt highlighted a little bit of this earlier, but really across all three of the views of active clients where, you know, new client acquisition was was up year over year, and we continue to see strength there. Reengaged clients is is an area where we've we've really seen some great strength. Reengage clients were up 8% year over year this last quarter. And so definitely an area that we're leaning into and really bringing some of those clients back into a a really new experience and experience with, you know, a very different level of assortment. And so seeing strength there. And then dormancy, know, our client retention continues to get better. And so just playing forward those three lines is really how we have the confidence in being able to continue to say that in in Q3, expect a quarter over quarter inflection. There is definitely seasonality to our active clients. There's also seasonality to our our marketing spend as well. And so know, in in Q2, it's it's tends to be you know, a seasonally slower quarter for us from a client acquisition perspective. And so probably expect active clients to be slightly down from a quarter over quarter perspective. But then still very confident that in Q3, we expect a quarter over quarter increase.

A couple of other points that I think are relevant I'll call out here that impact both are relevant for both RPAC and active clients overall. First, we're just incredibly encouraged that we are seeing strength across all income segments from our client base. And that gives us a lot of additional confidence in terms of that increased guide within both Q2 and our full year. As, you know, the service that we offer is one that serves well clients no matter what the macroeconomic environment is. Because of the deep and enduring relationship that clients have with their stylists. And the ability for us to tailor each of those experiences to their budget at any given time. Then the second, is that the growth that we have that's being driven by both increased client engagement as well as increased unit sales. It's not being driven by inflation. So the growth that we're delivering is that healthy growth that's gonna lead sustainable and profitable overall enterprise growth.

Got it. Okay. Thank you. Very helpful.

And, again, if you would like to ask a question, press star then the number one on your telephone keypad. There are no further questions at this time. I would like to turn the call back over to our CEO, Matt Baer.

Thanks. To close, I'd like to recognize the entire Stitch Fix team for their exceptional execution this quarter. I'm proud of how we're increasingly establishing Stitch Fix as our client's retailer of choice. For more of their apparel and accessories needs, and that's evidenced by the revenue growth in the quarter and the considerable market share gains we captured, which we discussed. Our results this quarter, they're a testament to the superior retail experience we provide. We believe we offer a higher level of convenience personalization, service, inspiration, and innovation anyone else in the market. I appreciate your interest in our business. And we believe the continued execution of our strategy will further fuel the momentum we have in our business and drive long-term sustainable profitable growth, and I look forward to sharing our continued progress.

Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.