Stitch Fix Hopes for Revenue Growth by 2026 as It Implements Transformation Strategy

As Stitch Fix, the online personal styling service, navigates a challenging retail landscape with a transformation strategy designed to revive its financial performance and client engagement, CEO Matt Baer is confident the company will return to revenue growth by the end of fiscal 2026.

During Stitch Fix’s fourth-quarter and full-year fiscal year 2024 results announced Tuesday (Sept. 24), Baer said he was pleased with the company’s execution of its transformation, embedding retail best practices, increasing efficiency of operations, optimizing organizational structure, and expanding gross margins with no debt.

“We expect to continue to drive improvements and return to revenue growth by the end of FY 2026,” Baer said, adding the rationalization phase revealed a strengthening of the company’s foundation, which included exiting its U.K. business and closing two fulfillment centers, resulting in $100 million savings in FY 2024.

“We are squarely in the building phase now,” Baer said.

In Q4 2024, the company reported net revenue of $319.6 million, a decrease of 12.4% year over year. While the decline is significant, Baer noted the results met the high end of their guidance, indicating progress amid restructuring efforts. Full-year revenue reached $1.34 billion, down 16% from the previous year, with active clients dropping to 2.5 million.

Baer, who recently completed his first year as CEO at Stitch Fix after serving as Macy’s chief customer and digital officer and vice president of eCommerce at Walmart.com, emphasized the company is positioned for growth. He is optimistic about the reimagined client experience, underscoring investments in artificial intelligence (AI) and data science to enhance personalization and engagement.

This renewed focus on understanding customer preferences and behaviors is central to Stitch Fix’s plan to increase revenue and improve client retention.

“We know more about our clients on Day 1 than many retailers do over their entire relationship,” Baer said. “That’s a differentiator for us that’s tied to delivering a convenient and personalized experience.”

While Baer is optimistic about the company’s financial footing and strategies, he acknowledged why a transformation plan had to be devised, adding, “As the retail market and client experiences evolved, we didn’t adapt our service or assortment enough.”

In the call, Baer outlined the key changes the company made.

“First, we created a more engaging visual and interactive way for clients to demonstrate their styles and fit,” he said, noting personalized snapshots of client’s style profiles. “Our proprietary AI models enable us to present style files, and we’ve seen a 5% increase in conversions for clients who received a style file. We are launching style files to all existing clients. This will be a valuable tool.”

Second, Stitch Fix is increasing the visibility of its stylists by creating stylist profiles showing each one’s areas of expertise and related interests. Baer noted a 12% increase in conversions for clients who received stylist profiles.

Third, Baer said the company is increasing the flexibility of its model in response to client feedback. Instead of clients receiving five items to try, now they will each receive eight items.

“Revenue is up 50% with clients who have received eight items instead of five,” Baer explained. “We are now well positioned to bring considerable newness and adding thousands of new styles in Q1. So many clients are eager to spend more with us. That is a big part of our strategy going forward is to drive that revenue up per client.”

Baer added, “Transformation takes time. I’m confident in our strategy. I’m encouraged by the progress we’re making on our transformation strategy and energized by the bright future I see for this company.”