Stitch Fix, Inc.

Good afternoon and thank you for standing by. Welcome to the fourth quarter fiscal year 2024 Stitch Fix earnings call. At this time, all participants will be in a listen-only mode. After the speaker's presentation, you will be invited to participate in a question and answer session. To ask a question during the session, please press star 1-1 on your telephone. You will then hear an automated message indicating your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the call over to Hayden Blair.

Good afternoon, and thank you for joining us today for the Stitch Fix Fourth Quarter Fiscal 2024 Earnings Call. With me on the call are Matt Baer, Chief Executive Officer, and David Alkerhar, Chief Financial Officer. We have posted complete fourth quarter 2024 financial results in a press release on the quarterly results section of our website, investors.stitchfix.com. A link to the webcast of today's conference call can also be found on our site. 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 discussion of the factors that could cause the results to differ. In particular, our press release issued and filed today, as well as the risk factors sections of our annual report on Form 10-K for fiscal 2023, previously filed with the SEC, and the annual report on Form 10-K for fiscal 2024, which we expect to be filed later this week. 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. 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. In the first quarter of fiscal 2024, we began to report our UK business as a discontinued operation. Accordingly, all metrics discussed on today's call represent our continuing operations. 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. Good afternoon.

Thanks for joining us. I recently completed my first year as CEO at Stitch Fix, and I'm encouraged by the significant progress our team has made. I'm also pleased that in the fourth quarter, we delivered results at the high end of our guidance on both the top and bottom line. We continue to execute our transformation strategy. We are successfully strengthening the foundation of our business by embedding retail best practices, increasing the efficiency of our operations, and optimizing our organizational structure. We have also begun to reimagine how we engage with our clients from the assortment we offer to how we bring those styles to them. Through these efforts, we delivered expanded gross margins in FY24 and positive adjusted EBITDA for the last seven quarters. We have $247 million of cash, cash equivalent, and investments with no debt. Looking ahead, we expect to continue to drive improvements this fiscal year, and we expect to return to revenue growth by the end of FY26. Since I joined Stitch Fix, we have been hard at work formalizing and executing our transformation strategy, which includes three distinct phases, a rationalization phase, a build phase, and a growth phase. Our rationalization phase, which took place over the past year, was a period of critical assessment. It was during this phase that we began to strengthen the foundation of our business and ensure we had the right priorities in place to improve our financial position and enable us to operate as a more nimble and efficient organization. As part of this, we exited the UK, closed two fulfillment centers, right-sized our corporate headcount, and continued our cost discipline management. These actions, among others, resulted in over $100 million of SG&A savings in FY24. Today, we are squarely in the build phase of our transformation strategy, which includes our foundational work as well as our efforts to reimagine the client experience. Of note, as we execute our transformation, we are continuing to invest in AI and data science, which have been core to our model since day one. Over the last several calls, we've shared a few examples of how we are strengthening our foundation. This includes how we've optimized our pricing architecture, made enhancements to our AI inventory buying tool, leveraged our advanced algorithms to reduce underperforming shipments, streamlined our merchandise assortment, and improved our CRM capabilities. We continue to advance these efforts, among many others, across the business. Now, I am proud to share our progress on how we are reimagining our client experience. We recently announced the first in a series of changes we are making to bring to life a more modern and dynamic Stitch Fix. One of our key differentiators is how well we know our clients. Our success has always been tied to our ability to deliver a convenient and personalized experience that helps clients discover the styles they will love. However, over the past several years, as the retail market and our clients' expectations evolved, we did not adapt our service and assortment quickly enough. We've spent the past year working to better understand our clients' evolving needs and I'm excited about the changes we have made to better serve them today and into the future. First, we have created a more engaging, visual, and interactive way for clients to communicate their style, fit, and budget preferences when they begin their relationship with us. To demonstrate to our clients that we get their style, we are presenting them with their style file, a personalized snapshot that shares their individual style personality and the specific elements that contribute to it. Our proprietary AI models, which leverage the style and fit insights we have collected for more than 100 million fixes, enable us to present a style file that reflects each client's unique preferences. In our early testing, we saw a 5% uplift in conversion from clients who received a style file. While first introduced to new clients when they sign up for the service, as of today, we are launching Style File to all existing men's and women's clients. We believe this will be a valuable tool that will drive meaningful engagement and demonstrate how we understand our clients' style preferences. Second, We are increasing the visibility of our stylists so they can build deeper relationships with clients. One of the ways we are doing this is by creating stylist profiles, which will showcase each stylist's unique expertise and work portfolio, as well as their related interests. As a first step, this quarter we began presenting stylist photos to clients. These photos are also shared with clients on the recently launched digital style cards. which accompany each fix and include outfit ideas and personalized notes stylists write to clients. When the note was written by a stylist with a photo, we saw a 12% increase in engagement. We plan to introduce additional opportunities to further deepen these relationships in the future. Third, we are increasing the flexibility of our fixed model. This includes expanding beyond the traditional five items in a box. In response to client feedback, we are opening up the opportunity for clients to receive up to eight items. This enhances our ability to better help our clients both explore current trends as well as update their wardrobes for major life events, like starting a new job, moving to a new city, or body transformations. When offering the ability for clients to receive more than five items, we are seeing positive results with revenue upwards of 50% greater when compared to our traditional fixed offering. We also recognize our customers' outfitting needs are constantly evolving and have added additional flexibility by making it more seamless for our clients to adjust their fixed cadence. This change yielded an impressive 14% reduction in clients turning off recurring shipments. Fourth, for any retail business to be successful, it must have the right brands, styles, and price points. After the extensive work we completed during our rationalization phase to streamline our assortment and brand matrix in FY24, we are now well positioned to bring considerable newness into our assortment We are adding thousands of new styles in Q1 and expect to triple the amount of newness as a percentage of our broader assortment by the end of this fiscal year. As part of this, we are beginning to launch two new private brands, Montgomery Post, which offers contemporary workwear to women, and the Commons, offering modern, sophisticated, and trend-right styles in both our women and men's business. In addition, We are extending some of our most popular private brands, Market and Spruce, WeWander, and O1 Algo, to now offer styles for kids. We look forward to how these styles will help us better meet the trend needs of our current clients, as well as successfully extend the Stitch Fix experience to new client segments. We also recently introduced a refreshed brand identity. the first significant update to our brand in more than a decade. The new look and feel is bold, it is modern, and it is designed to help us further deepen connections with our clients. In addition, we continue to execute our marketing strategy, which includes targeting professional segments that value the convenience our service provides. As an example, we conducted a dedicated campaign targeting teachers during Teacher Appreciation Week in Q4. The campaign yielded a new client conversion rate more than double our average. And moving forward, as part of our broader marketing program, we will continue to target specific segments for which we know our service resonates. To support Stitch Fix during this transformative time, We also recently announced the addition of two highly accomplished retail leaders to our board of directors. Tim Baxter, who brings extensive experience in apparel retail and merchandising, and Fiona Tan, who brings deep expertise in retail technology. I look forward to partnering with both of them. Now, as I've shared previously, transformations take time. And while there is still a lot to do, I am confident in our strategy and encouraged by our initial results. We are taking a disciplined approach to change the trajectory of our business, which began with our rationalization phase, so we can now build and then look ahead to growth in FY26. Now, I'll turn the call over to David to share our financial results and future outlook.