Stitch Fix, Inc.

Good day and thank you for standing by. Welcome to the Q3 FY25 Stitch Fix earnings conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to hand the conference over to your speaker today, Cheryl Valenzuela, Head of Investor Relations.

Thank you for joining us today for the Stitch Fix third quarter fiscal 2025 earnings call. With me on the call are Matt Baer, Chief Executive Officer, and David Afterhart, Chief Financial Officer. We have posted third quarter 2025 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. On today's call, Matt and David will share their prepared remarks. We will then move to Q&A before concluding with Matt's closing remarks. Before we begin, 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. For discussion of the factors that could cause our results to differ, Please review our press release issued and filed today, as well as the risk factor sections of our most recent quarterly report on Form 10-Q 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. 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.

Thank you, Cheryl, and good afternoon, everyone. I'm proud to share the strong results we've achieved this quarter, highlighted by a return to year-over-year revenue growth. Q3 revenue was $325 million, and adjusted EBITDA was $11 million. In the quarter, our women's business and overall fixed channel returned to revenue growth, For the second consecutive quarter, our men's business and freestyle channel revenue grew. In addition, AOV grew 10% with items per fix, keep rate, and AUR all up year over year for the second straight quarter. Based on this strong performance and our ongoing momentum, we are increasing our annual guidance for the current year, which David will detail shortly. These results reflect the strength of Stitch Fix's value proposition and the disciplined execution of our three-phased transformation strategy. Over the last two years, we have worked through the first two phases of our strategy, rationalize and build, and fundamentally reshaped how we operate. We've strengthened the foundation of our business, incorporating retail best practices in strategic areas such as pricing, warehouse optimization, and inventory management that enable us to operate more efficiently. We've also brought to life a more modern and dynamic Stitch Fix through our refreshed brand identity and the progress we have made reimagining our client experience. The improvements to our client experience include four areas of focus, enhancing client engagement features, deepening client-stylist relationships, introducing increased flexibility to our service, and offering a stronger assortment with more fresh and new styles. The latter two, in particular, contributed to our strong results in the quarter. First, our clients are responding positively to the increased flexibility we provide, larger fixes, which offer up to eight items have helped our existing clients better refresh their closets seasonally, explore current trends, and update their wardrobes for big and small life moments. Larger fixes have directly contributed to our AOV growth. We are now testing larger fixes with first-time clients to help us more quickly understand their preferences and serve them better from the start. We're also testing theme fixes which provide clients with selections curated for specific occasions or trends, from summer vacations to workwear refreshes. Additionally, we're rolling out a new feature that allows clients to start a fix around an item they discover on Freestyle. This enables clients to take advantage of the discovery on Freestyle, but still leverage our team of expert stylists to complete a look around their chosen item. Second, In merchandising, we have strengthened our assortment by offering increased variety in on-trend styles, which are contributing to higher fixed AOVs, as well as driving growth in our freestyle channel. This quarter, athleisure was a notable highlight for our women's and men's clients alike, up over 30% year over year. In addition, our women's business saw strength in wide-leg denim and spring transitional sweaters. whereas our men's business saw demand for fleece and knit tops. We've also further expanded our assortment within adjacent categories, such as footwear, accessories, and jewelry, and we are offering more complete outfitting solutions that are resonating with our clients. As an example, we continue to see increased demand for footwear across all lines of business, with sneakers up 35% year over year. These efforts to improve the client experience, coupled with our retail therapy brand platform, which demonstrates how Stitch Fix is the solution to the frustrations of traditional apparel shopping, are leading to stronger client metrics. In terms of overall active clients, Q3 marked our lowest quarter of sequential declines in three years. And the number of active clients on recurring shipments has grown for three straight quarters. With regards to new clients, we've achieved two straight quarters of year-over-year new client growth. We continue to see new clients spend more as evidenced by 90-day LTVs, which are among the highest in three years. This demonstrates that we are successfully acquiring higher value clients for whom our service resonates. As we move from the build phase into the growth phase of our transformation, We're focused on cementing ourselves as the retailer of choice for apparel and accessories by delivering the most client-centric and personalized shopping experience. We believe we are well positioned to do this because of the unique value our service provides. We pride ourselves on sending every client a fix as unique as they are. We do this by leveraging our team of expert stylists as well as our best-in-class AI and recommendation algorithms built from the billions of insights we've gathered on style and fit. This differentiation is key to us gaining market share, and based on year-to-date insights from Circana, we are growing faster than the overall apparel market. We are successfully transforming our business in fundamental ways. At the same time, we are navigating significant external challenges, a dynamic macroeconomic environment, a shifting tariff landscape, and ongoing pressure on consumers' discretionary spending. Against this backdrop, we remain focused on what we can control, and we have strong conviction in our path forward. Our team is actively working to mitigate tariff-related risks and prepare for broader macro shifts. As we look further ahead, we believe the current tariff structure could have a greater impact on FY26, which for us begins in August. However, consistent with our view last quarter, we don't expect any significant cost impact from tariffs for the remainder of our fourth quarter. In closing, we're proud of our accelerated return to revenue growth. We believe our results demonstrate that we have the right strategy, the right team, and the right operational rigor to continue gaining share. By staying relentlessly focused on our clients, investing where it matters, and executing with discipline, we believe we will not only successfully navigate this uncertain environment, we will emerge as an even stronger company. Thank you to the entire Stitch Fix team for your dedication to our clients and our mission which is driving our business forward. I'd also like to thank our clients, partners, and long-term shareholders for their support. And with that, I'll turn it over to David.