Stitch Fix, Inc.

Q2 2023 Earnings Conference Call


spk_0: the day and thank you for standing by welcome to the second quarter fiscal year two thousand and twenty three states faked earnings conference call at this time all participants are now listen only mode after the sweepers presentation there will be a question and answer session ask a question during the session you'll need to press star one one on your telephone you will then you're an automated message advising your hand is raised to withdraw your question please press star one one again please be advised that today's conference is being recorded i would not like the conference over to speaker today hayden blair
spk_1: good afternoon
spk_2: and thank you for joining us today that if got the result british exit second quarter of fiscal year twenty twenty three joining me on the call today i could relate interim feel it's pittsburgh and then jetta the though also joining an unpaid call it david aka we have voted completely second quarter twenty twenty three been a to result in a press release on a quarterly results section of our website investors that ditch fix dot com a link to the webcast a great company called can also be found on our site we would like to remind everyone that we will be making forward looking statements on the call which about the risks and uncertainties actual result could differ materially from those contemplated by forward looking statements reported results should not be considered as an indication of you to performance of you are piling for the advocacy for discussion of the factors that could cause the results to differ in particular or press release issued and by today as well as the risk factors sections of our annual report on one think pay for a fiscal year twenty twenty two previously by with the at the and the quarterly report on content you for a second quarter of fiscal year twenty twenty three weeks back to be bile tomorrow also note that the board looking statements on the call or based on information available to and as of today we did play any i would get into a bit any forward looking statements except as required by law during the call we will discuss certain not get financial measures reconciliation to the most directly comparable gap financial echo measures are provided in the press release on our that and website these not get measures are not intended to be a substitute for our gap result finally it call in it's entirety it being web get on better relations website and a replay of the call will be available on the web that shortly with that elder the golf of it dream
spk_3: thanks hayden twelve years ago i was inspired by a very simple human problem to help people look and feel their back now as i find myself back as interim ceo that simple math and feels more resonant than ever i'm proud of the way that we've made our miss in reality that also motivated by the opportunity ahead we're still in the early days of transforming the industry of apparel and i feel optimistic that the second continue to lead the way and personalization and achieve greater impact and the your second while many companies may be starting to define an ai strategy our company was built on data science from day one have technology and system that leverage the best elements of human stylist combined with machine learning and the billions the proprietary data point that we had around quiet and product and roxanne are rich meaningful dataset that predict outcomes and help us to understand what client need at the same time i realized they haven't met recent expectations driving toward an ambitious vision has resulted in a lot of saga we must now more than ever deliver on the client experience bring focus and our marketing efforts and drivers out for a shareholder we have clarity on our path long term and short term long term i continue to had great conviction that the market opportunity for a more personalized way to buy apparel is large and growing and that we have a significant advantage rooted it our decade of experience and leveraging data to deliver personalization at scale shorter term we also have clarity we need to get back to a position of execution and profitability we have a history of achieving both in the past and i'm confident we'll get there again there were two major event and fiscal second quarter and senator help repossessing and refocus the company to set ourselves up to optimize for liquidity and profitability and a short term and maximize our long term growth potential first we restructured are operating model and they the difficult decision to reduce or headcount by twenty percent of salary to the thin and to cetera operations and are salt lake city warehouse late last year we began analyzing the team and determined to restructure the organization and an effort to create a leaner operating model it also allows us an opportunity to reorganize and refocus to mourn and we execute these decisions are never easy but we know it was the right decision to achieve our goal of liquidity and profitability and for the overall health as that that and second we are conducting a search for a permanent theo the board and i realized that the macro economic environment competitive landscape and even our own business has he's meaningfully over the past few years and we're excited to find the right leader for the present and future as that thing i'm encouraged by the proper bar and am confident that we can and inspiring person to lead the suspect theme and help reestablish the track record of results were once known for and it is and we shared in our press release this afternoon that dance that i will be stepping down as the fo to pursue a new opportunities the board and i want to thank them for his service system specs and with him well for the future david off to harm or ftp of finance will succeed him the cfl david joined us for years ago with an eye towards the upper succession and working together these many years i have been impressed and inspired by his sack of partnership with a functional leaders that suspect his deep commitment to an understanding of our business and our team is a thoughtful and trusted leader and i'm excited for him to step into the cfl role now onto the finances in the quarter let's go second quarter revenue came in at four hundred and five point one million which was at the lower end of the provided range despite fight this we delivered his either that of three point eight million which was at a high end of our guidance range do effective cause controlled and our corporate restructuring then know dive more into the financials later on that before handing it over i want to touch on topic and marketing and a product that demonstrate how the company is rallying around bringing focus and clarity to better deliver results for clients and shareholder consistent with a broader company or marketing strategy aimed to preserve liquidity and achieve profitability while simultaneously attracting long term customers turret to fuel a return to grow this will be the case as they continue to refine our traditional page channel as well as diversify into under penetrated channeled we have yet to scale we are also continuing to lean into client retention and reengagement strategies and an effort to continue to increase engagement and optimize our cps it's worth highlighting that are cps were down over forty percent from a year ago which showed despite a significant reduction and overall budget we are gaining traction and more effectively deploying our marketing dollars overall we know these up the right things to focus on a when combined with our efforts to maximize the client experience and improve or cousin said maximize our ally in a short term and set the stage for a return to bro moving onto the client experience a complicated macro economic environment and tighter client wallet they get more critical than ever to reexamine and bring bogus to our client experience the emphasis is and we embrace for the past many months has resulted in a client experience that is less focused on our core areas of differentiation and we believe that there is opportunity to drive long term value by being really deliberate and targeted about the role of features and functionality in the suspect ecosystem as an example we recently refined our point of view on tech preview although the highest level of the preview had demonstrated a positive impact on a o be digging into the data with the a more nuanced story they're absolutely our client who significantly benefit from tech preview but there are also clients for whom showing a preview actually increases cancellation acting on this data we found an opportunity to drive better outcome and ltv by experimenting with eliminating the preview for some quiet allowing those clients to enjoy the surprise and delight that we know those client value while allowing other client the benefit from the agency effect preview i share this example of wedding data driver decision and providing more intention and focus and the client experience i anticipate there are many similar opportunities as we dig into the data and the experience and we believe these strategies or drive l t v enable us to optimize cash flow and profitability in the short term while positioning ourselves for an eventual return to grow before turn it over to dan i want to thank the entire team at suspect we talk internally about celebrating that spec script as one of our club are operating senate and i've been inspired by the great at experience day in and day out from the key in the past few months can you to be inspired by the past and i see to deliver value for our client and or business and to make our company a fantastic place to work our continued focus and days driven decision making are paving the way for a bright future for such fact i believe we're on the right track to get there and i look forward to continuing the journey with you all
spk_4: with that i'll turn it over to them
spk_5: betty katrina and hills where one on the call before jumping in i want to pay for trina after the stitch fix board this opportunity and congratulate david on his new role david and i have enjoyed a positive and productive working relationship during my tenure and i'm confident he is the right person to lead the team david i will be working together over the next several weeks to ensure orderly transition on towards you see results qq net revenue decline twenty percent year over year before hundred and twelve point one million to the lower now active clients and fire promotional activity in the quarter net active clients and a quarter declined eleven percent year over year to approximately three point six million as katrina mentioned earlier we continue to diversify our marketing channel while ensuring we realized positive near term ah rely on advertising spend total advertising spend in the quarter with five percent of net revenue and down forty six percent year over year we liked the trends we're seeing and overall cps even with the lower spending advertising we did see positive year over year and growth client as in men in qq and while women and kids got ads were down year over year or rates are improving and both lines of business we do continue to see elevated levels of an active claim and continue to focus on improving this with the right client experience we expect advertising to be sixty seven percent net revenue for the rest of the year the will continue to be opportunistic if we experienced the right are a wide and lean and where appropriate revenue practically decline six percent year over year to five hundred and sixteen dollars while our overall average order value is holding relatively steady year over year daimler to que one our analysis complete the show that all quite a cohort are spending less than in prior years we expect this trend to continue to the rest of f y twenty three you too gross margin came in at forty one percent down four hundred basis points year over year driven primarily by lower part margin to the increased muscle activity and higher protocol the looks as with cops were also up your by year to increase carrier rates the question really gross margin is down approximately one hundred basis points from que one you mostly to increase promotional activity we expect gross margins to be around forty two percent for the remainder the fiscal year and are actively focus on improving cause margin as wifi opportunities to improve product margin transportation efficiency and inventory efficiency overtime q to just anybody i came in at three point eight million fucking are ongoing costs control efforts including a reduction in course and the closure of i felt like city warehouse he just leave without excludes thirty four point seven million of restructuring and one time costs net inventory ended the quarter at one hundred and fifty nine million down twenty percent quarter of a quarter and down thirty percent year over year we pass for for the quarter with positive fifteen point four million our first quarter a positive free cash flow and he won at f by twenty two and we ended the quarter with two hundred and twenty four million in cash cash problems and highly rated security in summary our qa structure with the execution of our restructuring actions and are reduced advertising levels we have now executed against all the options needed to realize one hundred and thirty five million cost reduction targets for f y twenty three additionally we kept our last fixed from the salt lake city distribution center at the end of january and we distributed the inventory across the remaining fulfillment centers in our network we will begin to see cost savings from the closure and que for our goal needs to keep positive the he the that and we cash flow in the short term what could get into position ourselves for profitable growth in the future and we believe we are well on our way to cheat in his goal
spk_6: now one for outlook
spk_5: for the remainder the fiscal year weeks after to keep the faith a challenge and highly promotional operating environment with that said we're leaning into our areas of differentiation and focusing on managing the things within our control we will continue to responsibly manager costs structure with the goal of thing adjusted ebitda and free cash flow positive for the remainder of the year perfect cookie three weeks with a revenue to be between three hundred and eighty five and three hundred ninety five million respect adjusted ebitda for the quarter to be between negative five million and positive five million largely reflecting increase seasonal advertising span as we continue into the spring summer season where cps are generally more efficient for the full year by twenty three we now expect revenue to be became one point six two five billion and one point six or five billion respect adjusted ebitda for the year to be between great even a positive ten know going forward we remain relentlessly focus on the quotidian profitability the presents we have made in our costs structure will allow us to in destiny grow as we continue to focus on improving our client experience and over time we expect the improve my experience will enable us to grow our net active revenue and free cash flow with that attend the call over to the operator with una
spk_0: thank you as a reminder to ask a question please press star one one on your telephone and wait for your name to be announced to withdraw your question please press star one one again our first question goes from uses call you a choice you may proceed
spk_7: great thank you very much i go skull crushers good to hear from you could try again so the first question they before katrina to me to speak at a high level about how you see i mean you talked earlier about you on one hand you had a lot of focus on the other you have clarity on on the path forward one maybe can you just expand little more about what point the the two or three areas where you felt six weeks has had lots it's it's it it's focus and then maybe you know kind of what gives you the confidence that that you are back on on the on the path that should ultimately get you to to growth and then maybe can you double quick little bit on your keep it down margin guide of negate five to positive five inches help but what about how you get there obviously i think you said gross mortgage the around forty two percent which really only leads you know advertisement silver market and she had a at the other component to leave it just provide little more color on where you see those for a second happier than very helpful thank you both
spk_8: break think he is as and gets a bath
spk_3: i'm i'm for a question and then i will have the and weigh in on the second around martha and i'm kind of the focusing clarity i think there is either innumerable example that i could bring i think i'm he get at a very high level a nice thought about expanding the desert and very ambitious way and we took a more getting approach that on that probably tried to bring people into a variety of different customers by men than in a very notably with that marketing dollars i'm trying to bring people into a freestyle first fit experience as an example to that the place where you know not only did we find that that marketing a freestyle first wasn't it the fact is that what we he had done historically infected and but it also actually made it harder for us to be able to the acquiring people into a channel and so on that the i think one example of how that can delay another one is around inventory and here we definitely built up an inventory in anticipation of the presale customer that and it with a different than of inventory then fixes and also more i know the captain really hadn't third before he with that channel we hadn't there before and so he did or more read in inventory and going forward and we can use our tampa hear that historical data to really be able to pilot competent on the inventory side and up another good example of okay i'm in the customer experience with while i mentioned and eat i mentioned as looking at and preview as an example i'm in i think they're still other places where we can really kind of clean up the customer experience that that and were really maximizing value for the client and value for the shareholder the same time i'm in terms of confidence back to grow the think there's a lot of places where i'm getting all the places are areas where you non image worried brian i think we can feel confident looking at what we're doing going ahead from now on and on the marketing bryant i think we have near term result that show that think they're working when i'm damn reference that we thought customer acquisition costs down by forty percent compared to last i fear and to me that you know at the great example of how focuses on his seat your kind of creating value in the business today and i think we feel really confident that it cream volume of isn't long term
spk_5: then you have what you that your how you hooked on the any better guide on the negative vibe to positive vibe again i think we played obviously revenue in growth and gross margin and we also provided at sixty seven percent advertising number for cute three your we're going to be on the higher end of that six to seven percent simply because as we enter our spring summer heat
spk_9: then it's a very efficient quarter for us and we talked her between talked about it and we're very focused on the efficiencies within our marketing channel and we just feel as we exited acute you and go into que three were like what we're seeing am and show think of that huge be at the higher end of that sixty seven percent that leads as the forthwith as june a excluding advertising on a runway basis the after a restructuring add that gets you to that negative five to positive five billion of course if we're not seen efficiencies we won't spend the advertising dollars a week feel pretty good about the guidance and of course that the level of spend that we're now targeting for advertising
spk_10: i just to be clear that thirty four million dollars that i think you mention it in one time restructuring costs and other that hit the
spk_11: the es una and
spk_10: expats line of one eighty seven a teacher
spk_12: it did
spk_13: alcohol or it
spk_7: thank you very much
spk_14: thank you
spk_0: i question cause of simeon sega live below capital markets you may proceed
spk_15: i guess concern on for simulate for taking our question that i i'm just noticing the presses you guys notice i'm going back to more of a stylus focused approach is that kind of a the emphasis maybe a little bit from kind of freestyle because you just mentioned i'm getting inventories right from within the free fall versus the fix business understanding how those are different i'm just curious how you guys are thinking about that this nice going forward and how your plan your i'm kind of hot how to work around some of from a farm from challenged maybe you've had a
spk_3: yeah i think they're to the question and i think what we're at there's no question at brief i'll add value i'm in ways that existed and i think the much better way that we think about that as if he's looking at the assortment it and we've shared and called historically that we're seeing a different assortment being bought in three thousand six said we're seeing more i'm aware huge accessories and though you know that says the as that this is helping to fill a different need for a client and nothing bad by mentioned in the last question i think either with using free now the customer acquisition vehicle as an example that was left the bathtub and so you know what we're really trying to do with the stage where our area the differ yes and and personalization styling are really at the for that especially you think about our kind of competitive positioning relative to other and though their faces that we really need leone i'm and so as we think about what is the customer experience that fast deliver the gun personalization again filing i think reached out to be a component of that i will probably thinking of it more as one ecosystem that had a more clear cut them journey and rather than thinking of it's kind of fabric that yeah
spk_15: but say that can just as a quick hoping i'm just looking at the forty two percent just gross margins the remainder the year ah and in the your your comment on how you know that the difference from want you to qq was about one hundred bits of marked on pressure or are you ever seen kind of a of i return to markdown levels were you you were going back a few quarters i'm just here's how how you're planning about marked on pressure for the for kind of the back half the year and kind of what you see more broadly within your customers and and their believe in and their willingness to shop on current of more of a full price level compared to kind of a discounted one
spk_9: yeah you know the way we approach we talked about this in the path and and thanks for the question the way we've approached marked down is really focused on where we think we have access or the wrong inventory and using our freaked out child to new that inventory and we paint success in that as opposed to the option none of them of them are filling it out to at a third party or liquidator and so we think success and that and way we will continue to utilize that although as you can see from our image wait level now we'd come down considerably we feel we've right size or inventory that would you very good about the image
spk_5: or a position that we're now in terms of total dollars we still have been bucket to work through and show we are a weird using the bristol channel for that and in a fictional we're not we're not discounting a lot he simply aren't doing that and clients love with that the styling service that we give them and we have not been need to discount
spk_9: in the fixes this and we don't anticipate doing that going forward
spk_16: great think it it
spk_14: thank you
spk_0: our next question goes from mark or tiger with beg you may proceed
spk_17: hi this is amy pesky on the mark thanks for taking part question i'm on the inventory point you know work down inventoried pull back on your see what is your level of comfort that you now have the right type of inventory ah so how do you think about the composition of your inventory between and driving styles and categories that give
spk_5: yeah they are authentic that one that that's a good question and amy and and thanks for asking had at first of all a we we talked about him and tory in our cue for again and our q one results and how we had a lot of inventory
spk_18: and we simply need to work it down and and and we'd done that and a lot of that of course was at what with getting rid of the excess inventory and were the wrong style
spk_9: ahora or branded inventory were in a much better position now as i mentioned we still have a little bit of work to do on on the inventory that there is going to be short term and that included in our guidance going forward we feel really good about the brain and that we're targeting and with that with it a big focus on our on our excuse
spk_5: the brands which are are trending very well for us in in fact i'll just share that we did notice in january where we were thought on some of our to the brand on our in our customers told us they wanted that and we quickly pivoted in where we were short on inflammatory we we traced back into it and let a great time for us that our customers the law
spk_9: our exclusive and fish are featured only brand that were selling until will continue to focus on that in the very near term as we get into spring summer and then and in it we get back into fall winter
spk_19: a year from now
spk_14: thank you
spk_0: rs washing cars from have you along with i center he may proceed
spk_20: hey thanks your much as we i spent a lot can i guess is the bigger picture myself
spk_21: related how far are so they can you help about this a lot today yeah you think that you're a parent of that mr
spk_22: and then he added that
spk_20: as it is have given me the things change adversely that you like number of at a lot of to rectify likely you'd appreciate that thank you
spk_3: and thank you i think i got your question here fell into the more that competitive gap and you know honestly i i feel really strong about our capabilities and in a we've been able to be in business hand but year that a history of profitability with a history of the you deliver cashflows then and and it i there's not a lot and had it that that are able to claim the same thing and though you know that focused that we've had around identify defiant the focus that we've hired for personal they said i strongly believe that we continue to lead on that front and and and i feel it just as good if not better about that coming back into the law and in terms of things that and i think your fucking i'm at work at like what has adversely chains i think i thought to on a call but i really do think it's okay i do think hindsight is twenty twenty i think we had to really ambitious doesn't that and that we are chasing after and and and with kind of facing an ambitious big they then came out the height of reduction of focused on what i would consider our core differentiator that are really around personalization and the filing an and so you know i think a lot of what we've been talking about internally as at how can we make sure that everything that we are you doing with our valuable resources and time are really focusing again delivering that for our clients and ultimately are shareholder the being able to deliberate experience that the old and person alive and for all of our client and making sure that everything we invested achieve that goal
spk_23: i feel
spk_14: i said
spk_0: thank you
spk_24: or question comes from forever young barclays may proceed
spk_25: it's great thanks first one katrina just on the testing a discontinuing that to fix preview are you getting any sort of signal that keep rates are eroding in those circumstances and then more broadly big picture do you feel like to call spaces in a good place now i'm to set the stage for recovery in some pm future court
spk_3: after we go through and of the reset on you know encore fixes here or is there some work to be done and maybe even some reinvestment to be done on the tech side to get that into a better place just any thoughts on that would be appreciated i think think that i and cover all i think the birth i had ban talk more about the cockpit that and on this preview i mean one way to really think about it is to try to maximize the are allied ltd the given cover and so on as we do some segment us and we can see at a high level that overall we thought ale you go up with the ability to have access to fix preview the ones used again they're going to be done cohorts where we see people more likely to cancel an atheistic preview into what we're really trying to optimize for are those lp the you and and though and we the wedding if you were able to do is define who and i got a little bit more and more and i'd level of where we're going to be to point that preview to be able to maintain that benefit that you mention you and he braided ale the for the population for whom we know that that will occur while at the same time reducing can't believe and and making sure that we are on retaining and engaging client that than all of our cohort by i'm by eliminating that greed from a random do you think will benefit from it on and out they also you know from a customer survey perfect day like one of the things that we here is that one of the real benefit the suspected surprise and delight and though to be able to withstand client and here you can think of it is a lack of agency but you cannot think of it it actually and allowing people to had that surprise and delight
spk_26: you know have said to with i love the code of like as an adult you just don't get a whole lot of good surprises in your life i'm and the that can be one of those and so we know their client to really really value that and actually being able to continue and making up for those clients and is valuable and ltd positive a quiet
spk_9: out the and you animate an answer the question on the coffee yeah year on an hour on the total cost when you look at though where we ended qq and adjusted for restructuring your world we're back to difficult two thousand and nineteen as she in a excluding as b c and we feel very good about that
spk_5: and i'm going forward and and there's still more efficiency the have been in there in my prepared remarks you heard of talk about gross margin in the opportunities that we see their
spk_9: there's also this further opportunity ah no footprints
spk_25: to to better up monotype that as we as we reduce or or corporate office space we have variable efficiency project that are ongoing so yes i feel the cop structures in very good faith in a in a very good place and i think there's tremendous opportunity to improve it going forward to we weren't weren't good place from a cough and point in a illiquidity standpoint
spk_14: great thank you both and best of luck them
spk_0: thank you
spk_27: thank you honest question goes from david villa druid rocco can you may proceed
spk_3: hey rhonda actual question other on the cost for acquisition being down forty percent in a quarter how much it as internally drive into some type of chow mix shift in it and know are wired were that getting better for some have called the external factors at play within the broader apparel category yeah i think so fascinated i can start and and might benefit from some have the and playing and here and but you know the honestly lot of that is really more from a perfect you have focused and does he think about where we were last year we were doing more and freestyle for marketing we were driving people to an immediate purchases experiences that of driving people into i'm a daily experience through and through taxes and the and and of very simply put that freestyle first marketing was not as efficient as our core sex experience and so i think just treated to be able to have the marketing messages the more clear around the benefits of for
spk_9: and old a sudden failing and to be really focused on driving people through one channel the conversion and has been driving that efficiency and here we definitely are always looking at diversifying our channels and so we had our tried and true channels that we know perform on and don't have performed well as the is kind of hard and the numbers i'm into the same time or always experimenting to make sure that we're getting an all the emerging channels and to make sure that we're kind of exercising that muscles and acquiring to bring clients i'm in in all the new places that we see our clients and kind of planning time on
spk_18: data give anything to add to that yet the only provide a one hundred percent agree with would between a certain i think i would simply add that part of the our experiences where we really a hardened the funnel really helped with conversion of traffic in there for the efficiency of the marketing spend in addition to just being very focused on the next dollars spent
spk_27: within the channels and and is that inhibitions band and in i think the marking team and than a tremendously good job the adverse find the channels but then focusing on the efficiency and making sure we're bringing in the right clients which we feel very good about and i think we've talked about that in in the earlier remarks breaking thanks for that is one are followed by i think you mentioned and have a key chasing inventoried it sounds like you're more comfortable with the assortment of so what's the next step if with a bigger picture here and and getting your customers back and spending again is is there some type of refreshed needed on top of that on
spk_3: the inventory sided or is there more than technology connectivity issue you need with your poor customer and get them back again yeah i mean i can take that and i think to declare like we we are seeing what we're seeing that customer performing a pretty healthy way any we're seeing our a oh these be pretty consistent on the inventory sides you know it's of course then gradually over the last few months of kind of evolving into the inventory next that we want the we feel really good about where we are
spk_27: i'm tory perspective and that being said like there's definitely opportunity i think in a we we see a down and said we're seeing some cohort weakness and there's no by send their son macro had when but i'm not willing to accept that it's all natural i think they're still opportunities for us improve the customer journey for us to improve the way that were starving our clients for that they could have a bath
spk_0: possible experience that then leaves the l t v at least a shareholder value on and so you know i definitely still think that there's a lot of opportunity but you know we kind of the again and look at our fixes doing how are people feeling in their actual transactions roughly thing goodness there and i think he knows it's on us now to be able to deliver more goodness to the rough the customer experience great thank you
spk_28: thank you
spk_9: honest question goes wrong i broke bercow it was fargo you may proceed hi everyone this is jesse saw this and on for ike ah it looks like take down a majority was a major source of cash this quarter so on the liquidity frank i'm just curious how much cast you guys need to run the business and what shouldn't buzzers expect regarding cat for generations rapturously or yeah of physics for the question and so yes we did have a three cash company or are immature position which which we implied was going to happen last quarter asia as we better as a mentor a down and and go for but your how much cast we need to envision that from the from a liquidity standpoint point in a very good position your three hundred and twenty three million two hundred twenty twenty three million of cash cash equivalents and we have a credit facility which we don't plan to use in show going forward as we guided to a positive hq adjusted ebitda
spk_29: we talk we talked about pb guys a great proxy for cash flow for us as simply because we do not have a lot of callback than we do not anticipate a lot of cap expand over the next several quarters and so we feel that both are a bigger and and cash lowered are trending positive for each to
spk_14: you and you know will get more guidance on of y twenty four at a later date but overall view we feel very good a bottle of the liquidity position that when and the cash flow that we've generated in those are qq and for each to as we go forward
spk_0: great like it
spk_30: thank you
spk_24: or as question concerning blake anything with jeffries you may proceed
spk_3: i picture taken a question i wanted revisit be free freestyle topic and how the town is kinda maybe change a little bit on that this is more the philosophical one but should we expect any strategic changes to that business before a new ceos announced just one or katrina i'm how much influence we can have on our business in the short term thank you i'm yeah things are having like that if i send an email i mean we're always evolving experience and so at a very high level like i really don't see a big foundational said in a strategy i think the strategy of focusing on personalization of focusing on styling and focusing on the areas that we know are valuable areas the differentiation for
spk_30: our clients and you know i think the i think it's it's hard to imagine that we were deviate from that i'm betting felt like we are always lead pheromones we're always doing a be tasked to better understand what are we doing that it to what what we be doing differently or better in order to optimize that clients or any to drive ltd to drive value for a client
spk_25: profitability and long term growth and so i'm either were always making changes and so hopefully what i can say is like you can probably think the exact to see some small changes in terms of the way that that the customer journey evolved over time but you know i honestly i wouldn't see them like fundamental big changes i think we know that free cell add value we know that their leader which ways in which had add value and so in a really it's about how do we make sure taylor and target the right customer experience for that clients are getting the most value out of their experience with effects and that we are getting the most value our client that we acquire
spk_5: appropriate you have and they don't good but if to talk about
spk_9: college friends by month throughout the corner and any any comments are you guys can provide the quarter to date on specially how bad
spk_18: ah the budget shoppers holding up thanks so much
spk_9: yeah i i i can take that so the we we did not provide trends by quarter for our q q i will say that you know that february has largely been as expected for us a we are again with the game that we gave of course that takes into account by we february
spk_30: and we're not seeing anything that is out of the ordinary where we see to change and factory to the negative to we continue to see our or keep rates trending it positively
spk_14: are there might be some or frequency with the cohorts analysis that we talked about for due to see that trend continued we haven't looked at that yet que three but we will but no real a trend update
spk_31: beyond what we've provided in in the for the guidance for que three and and the comet you gave on you tube
spk_32: great they get that the block
spk_28: you
spk_33: thank you
spk_34: or next question goes on public nicholls with
spk_35: lead with securities you may proceed
spk_34: i have a second question damn quick quick one for you'd have five hundred you actually say what the lucky plan for months and
spk_28: q to
spk_34: as either and dollars on the percentage of really we did five percent
spk_28: gotta have it up and for and cap
spk_33: welcome back to the alfio rolling are in in an interim basis but ah
spk_3: when we think about the all the permanent you'll feel role or you know that the successor what what are you looking for with skillset are you looking for like what are you know optimal ie you know woot woot was what what attributes would your ideal candidate have for the opponent tlc thanks yeah think fun and he has a with you with kids officers we've gaze at the start from and we've been having conversations a candidate quite a few conversations candidate and you to overall i feel excited about domestic about handed of the quality of people that were meeting and and you know the highest level like are very simply like i really do think it's
spk_28: i'm having a history of delivering results of executing a business that are that are businesses fairly complex and so yeah i think somebody who had experience in a business
spk_36: that has similar complexity two hours and have it kind of history of delivering result said of course first and foremost important and then relayed ugly we have a large we have a large company that has a lot of people and and different types of rules and so on that leadership and someone who had the natural leadership and somebody who's gonna be a
spk_14: well to be successful and leading a diverse organization is really important and so you know the highest level i think those are two things that i'm that we're really looking for but he does is kind of talking as we had a lot of conversations with have a lot of candidates who have firsthand experience with that spoke to an know the business while and feel really connected to the business
spk_0: the customer and and and i think you're worried we're excited about the people were meeting so and so optimistic i'm good
spk_37: cover the for luck in the outfield search under the opposite thank you
spk_9: thank you our next or single song could all a car will give you may proceed
spk_38: i thank for taking the question of one of one more housekeeping and then ah one more hour long term so on the housekeeping sorry can you help us understand the opium active plans has been down as been declining for the past five quarters now how should we kind of thing cause the trend for a gm active clients have been going forward
spk_39: i ended up every night you talk about the eventual return to growth are and he also talked about having a lot of more for visibility ah of on on the business of can you help us understand
spk_9: in your mind how you're taking of growth are going into into twenty twenty four and maybe to twenty twenty five when are we going to get to brought up there and part of the reason it is impossible for your this year that is going to be a for been repeated i'd rather than a could be so have been other guy does not it's viral on of on for grunts
spk_38: thank you
spk_0: to of take the of an ar pack question and you are pack the trailing metric it's thrilling twelve month of metric on active and so there is a lot of map that goes into the mix of our pack into and i know you your models take into account are pack but i think the best way we can say that it will
spk_40: we are seeing some cohort degradation in terms of spend which will impact our pack mix is a bigger
spk_3: impact of are pack mix of the tenure of our clients we mentioned in the past that are older clients spend less or new clients and more of your closets gets to get filled up and so will continue to talk about our pack from an actual basis but we're not guiding the future are packed that being said i think it's that say to say that you know where we might see and cohort degradation on spend and for mix we're not expecting big reduction in our pack and you know are on i'll go forward basis that we will probably be some of that because of the spending cohort on a your rear but we don't think it's going to be material
spk_0: our client do continue to spend with as they do could you to stay with us the new clients that we're bringing in as we look at them are cash flow positive clients that we talked about the near term our ally all that will have the effect eventually of stabilizing that are pack and and and an ultimately bringing it up
spk_41: and what that's going to happen over time
spk_42: thank you sorry good i think we want to get their part to the party was more around like how my thinking about them eventually return to growth is that
spk_41: yeah i think i mean damn as as a goal every the i totally agree with everything the damn and send it out of the and i'll just add also that i'm you know in our business so much of our business is serving client and that are returning and that's a great part of our business with and generate a lot of revenue from our existing customer base until all on
spk_3: the benefits that we all the things that we are able to do to be able to make that quiet more valuable until all the ways in which we can reengage that client all the way in which we can offer those clients readers the comeback also add and so you know raleigh thinking about new clients are also thinking about how do we make sure that our existing basis healthy and and in i think we we we've seen some five that if they know that we've been excited about an on and feel really confident that we're doing the right things and a think we need to be doing right now thank you are next question goes on jan it uses kloppenberg with jk research associate you never see hi to china has down on either swan to follow up on that question now it seems to me that and and creed color in one long that you're gonna be i mean your investment or more spending will shift to a higher degree of with investing in fact and load agree and we style and that that's a up your i'm often customer participation and and your sales but i think that's what you're saying
spk_9: and that no use freestyle as is as to some extent of a liquidation channel or facts are that the investment spending will go back towards the personalization fix business and at that should help to improve the the performance of the company as well and does that mean that maybe the advertising life can they do in a below seventy percent as we as we go for the or you know is that something that needs to be tested and we find thank you driving i that answer at a high level in the and can kind of way and on more this effect on
spk_18: i mean i think at a high level the way to think about it is that and that we are really focusing the business around personalization and finally and yet sex is a very big part of that and having a more focused messaging from a marketing perspective also says dr marketing efficiency having a more focused point of view around who the client as as a
spk_9: one of the challenges with acquire trying to acquire freestyle first clients was that you know we were definitely deviating from our historical client and trying to kind of the that and trying to have many different messages isn't actually have an assortment that back that and so simplifying on the inventory side also adding delivers efficiency and any debris
spk_43: i'll definitely still has a role to play in order to be able to help our client fill in their closet to be able to engage in between sexes and i'm and so we we definitely are going to continue to have an to be thinking about how to three now add value to that client experience and that you know i would say that the investing is more around thinking more holistic lay around what is the fact that what is the
spk_14: the ecosystem and had all the pieces built and together in order to drive the best ltd and experience for our clients on but then also intercourse delivering result for shareholder
spk_0: so maybe up and and the annual have little bit about the marketing side you're on a madrid died again a new york to mention we're not marketing a freestyle first experience which we've had done in the past and that along with a lot of the product of the product that got the client extreme improvements we've made a just as
spk_44: allowed us to focus on that fixed of first client in a very efficient way and show well the advertising drop your were your seemed a large when you look at the the clients that we're bringing in we're seeing very efficient spend and that was the point where we talked about men's guy actually being up on a gross add basis and women in kids improving will still down your we're improving from current trends that's with that forty six percent reduction in marketing and advertising so we do anticipate to stay on this trend of lower advertising spend the focus
spk_3: thing on the right client the fixed first quiet and then having freestyle be a very important incremental or opportunity once the client is in the door and engage in the fix business it it still is a material part of our business and and will continue to be freestyle eyes thanks so much thank you or a question goes i'm gonna tells he was he advisory group you may proceed five good afternoon everyone cat welcome back to the interim period as you think about the near term in a long time on the near term how are you thinking about the core customer what they're spending on pricing how you're thinking a brand and how do you think about the differentiation between the freestyle nothing in terms of whether it's a you are captivating the customer and then on the long term obviously new process is it sounds like a being put in place right now what do you see is the most incremental driver to return to growth under the hood in terms of operations a logistics of processes thank you
spk_45: think the and i'm let's see phil on the first far it as you think about what kind of what do we thing on the customer side of it we get we have their think it was seeing ale these whole pretty strong or thing a you are was pretty strong on you know i think in terms of other customers looking for i think was really differentiated of our our channel
spk_0: relative to other on is not necessarily price it's not necessarily nieto kind of finding the brand that you love it is actually around fit it's about at it's about fit it's about style it's about finding things that you love it in some cases financing thing that you love that are surprising to you i'm and not something that really only our channel can deliver on and so on you have that kind of how are thinking about who the poor customer it than either the good news is i think there's a lot of that for customer and you know their son stated that we had that you don't like the that meant more most man and you know even half of women and would characterize themselves as you know not loving to shop and on there's not a lot of other retailer that are focusing on
spk_5: on that customer and enough this fixes one that really makes shopping on more accountable and makes it easier it on help people it'll look their best without spending a lot of effort to do it and and those are really differentiate differentiating quality is in our customer that and that we can build the right assortment to be able to deliver on and hum hunter what most influential under the hood i mean up a good question but i mean really for me i think the broad umbrella of it really is bogus and it really is around for get focusing those marketing messages focusing that conversion final focusing on the inventory side as a just really being able to on to focus on the thing that we already know that we are able to deliver on that we have a business that ten plus years old that have a history of profitability delivering on this did that to be able to focus back on on a thing that we know window that we can deliver his on is a kind of the core these s and i would say either it rather than having one big thing it's probably a lot of little things like the ones that i mentioned around marketing and inventory
spk_9: the and i couldn't call a little thing that really meaningful and i think you could see that in the marketing numbers on that we shared on about you know i feel optimistic by kind of what we've been able to see if we dig into the business and on an innovative be able to take deliver more on and the quarter of the come thank you
spk_46: thank you
spk_3: or as question goes from work when he was a require i saw you may proceed okay thanks to questions please could you talk about the diversification into new were channels that have yet to scale you prefer new color onlookers new were channels could the and in second when in fact the just as your comment on sort of macro trump's my real realize use a lot of other factors going on your you got your be around new declines pretty consistent to two to three kids you want you to few three to four so my sense is that may be overall macro trends are soft good kind of consistently saw third kind of riding along at the bottom but it is common with you effect macro trends in that consumer backward consumer the man trends are at the margin
spk_47: or further softening stabilizing or possibly recovering and of his lot of other factors going on but i wanted you to suggest that question thank you great think park ah
spk_9: it's over there are on marketing towards the case and i think and you know it's it's probably some of the obvious that you we've done some experimenting with kicked off that i think have some comments we've done fun experimenting and you tube and trying to think about how did you tube that into i'm kind of our overall conversion final i'm and then actually returned her organic is definitely a big
spk_38: place to i think i'm you know we've seen and being able to use influence are both as think well known implants or is that offer more of what you would call like micro influencers on the effective and i'm that definitely that a part of the history of the sexes and you know some of the very early years of growth of suspects were driven by that on by that kind of at the time was more bloggers that more
spk_9: the micro once or categories and so in a that's another played that were making sure we rebuild the muscle in on and the and from a macro and i mean i wish i had a crystal ball and that i could tell you what's happening
spk_18: from are you know what's happening in our business i'm here we see a you are and ale the actually been be pretty stable on and so you know i think the places where he would expect to see macro headwinds would be an would be probably around more cumbersome and customer acquisition i'm you know you we meet we've seen some six
spk_30: after as we shared in the fourth quarter but i think that the place that you could anticipate you know that we that there could be some had when i'm and then i think i'm any other places probably around up in a longer term like this frequency or purchase frequency and and yeah i think the answer that we had we've seen some software cohorts and i'm in idea
spk_14: i think we do believe that families added macro by a as i said i do i'm not willing to accept that it's all nakuru i do think that there are things that we can be doing that are you on be able to deliver on about apply an experience that delivers more ltd on and so you know i utter no doubt if you are if you have any pontification to add that on you know i wish i could give us
spk_0: all it answer on what what take that
spk_48: i don't i don't have anything that i completely agree with all that specifically you know or on on on some of the macro we we talked about how we like the trends we're seeing on gross ads on the improvement i think that's a positive but we are still few from elevated in actors and that something that we're very focused on fixing with improvements in the client
spk_49: and we do believe a lot of that of course is macro really
spk_3: okay thanks katrina makes them mark thank you rx question goes lineages sherman with person you may proceed yeah thank you for taking the question and so concealing on the a theme of the locker and the consumer demand behavior friend last quarter you talked about the consumer being more judicious with their spending and frequency declines othello you've seen that again
spk_9: if the next shift or higher demand for own brands of a national brands you think that it's part of a thing as the are you seeing the consumer sort of trade down a little bit lower price points rather than the national brand and if so does that how does that does that change your national brand size you that you've been talking about for the last few quarters on you know that increasing your mix of national brands and can you offer talk about how that impacts gross margin is i understand that your own brands are more profitable does that change your martin make kind of looking into next year thanks
spk_50: great thing as a great question in it i'll all i'll enter the for a car and i know dennis chomping at the better answer the growth margin part
spk_14: but yeah i mean if i don't know i would say that it's necessarily mixture threatened except that driven by matter of but i would say like historically a very interesting and our channel historically national brand do not perform very well infected on and i do think you know fixes are a place where you are your ear that the herald kind of the most stripped down version of itself
spk_0: and people are really looking at those fixes to say does it is if my style does this fit me well and brand is like a very tertiary leto kind of consideration beyond those and so historically we've actually it's not the national brand performed very well in texas and so a lot of the intention around bringing national brands into the portfolio recently has been of
spk_25: better brief our experience and and so you know as we've and we're and eleven candidly like those brand haven't performed as well and in the freestyle experience on although better than and the fix experience but we in i think longer term on the national brands will probably be a smaller part of our portfolio going forward as the way that they were historically with fixated on and and i would actually really position that if a positive of being really a testament to our personal they said and at the end of the daily even if it's not a brand of somebody recognizes if it were if you know you're if you're delivering the that fit someone someone going to buy them to dank can the more to that of the gross margin side yard or just a follow on to years fucking
spk_9: point on that question what would carry thing this idea that who you focus more on exclusive brands and be tighter on with the with national brand having having less of that that level of course we think it's the right client experience and and also with the doses of course lead to higher margin we because the private label and exclusive brand have higher or product margins when i mentioned earlier in the call that we've the opportunity and gross margin the first comment i made his was in product margins that is a big driver a product margins as well as we get tighter with that we do expect margins
spk_25: it's positively impact margins with us national brands that were so we're aiming toy that we're still working through although it's not a huge number and and we'll get through that and we feel very good of the impact our our our focus will be on prague margins it will also have the impact of making him into a more efficient which is a huge positive cash flow so
spk_51: we feel good about that strategy and how little impact financial
spk_3: thank you honest question comes from know as as kid with keeping capital markets you may proceed i think for my question kind of along the lines of the macro question the maybe i'll ask it slightly differently with stitch fix traditionally being ill for christ's business how how would you kind of framer or how do you kind of think about parsing out the impact on the broader commercial environment in a uptown and when what that out on stage with a little a couple quarters and with others in the space talking about inventory beginning to be right size or least having line of sight to more right size inventory positions you know how are you thinking about potential upside and the models should the promotional environment
spk_9: begin to normalize of next couple of quarters thanks
spk_39: thanks not yeah it's a good question i mean as good as this week so thin
spk_9: i would say kind of oddly resilient to i'm into promotional period and and you know i think we see some marginal impact but not really as much as you'd expect and i'm you know what we see is like me in the thanks experience like a a burst of all i don't think people are coming to suspect in order to find a deal on the i thought the primary intention of course we needed to right price all the time there's no question about that but i would say that like people aren't coming to our channel in order to get a deal and so what that means of people actually coming to our channel because they want clothes that fit them because they want to repress their wardrobe because they want things that are their style and so i'm as a result i would say that you know we
spk_52: the like are your views and are you are the kind of held how pretty strong and so i would say is that we see maybe less as of what you would expect i'm in terms of like the highly promotional an environment right now but you're out in my high pop up hypothesis is that it probably impact immersion more aware you know that they're probably going to be fewer people that are
spk_0: they're looking at you know their better than as are looking at where are they going to spend on few dollars of they might have in a bank account that like you know refreshing a wardrobe might not be as high priority as it might have been ten months ago and so you know i would say our hypothesis is that you know our existing clients that are in this ecosystem you know are relatively stable

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