Stitch Fix (NASDAQ:SFIX) released fourth-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.

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View the webcast at https://events.q4inc.com/attendee/547153230

Summary

Stitch Fix reported a full-year revenue growth of 6.4% to $1.35 billion in fiscal 2026, with Q4 revenue at $324.4 million, marking the ninth consecutive quarter of revenue growth.

The company improved its client experience by offering larger Fixes and expanding its assortment, which led to record revenue per active client of $592 in Q4.

Stitch Fix continues to invest in AI and technology, launching the Stitch Fix Vision platform to enhance client personalization and improve operational efficiency.

The company plans to increase advertising spend to 10-11% of revenue in fiscal 2027 to drive client acquisition despite higher customer acquisition costs.

For fiscal 2027, Stitch Fix expects revenue between $1.31 billion and $1.36 billion and adjusted EBITDA between $27 million and $42 million, reflecting a more challenging consumer environment.

Full Transcript

OPERATOR

Hello everyone. Thank you for joining us, and welcome to the Stitch Fix fourth quarter fiscal year 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Cheryl Valenzuela, Head of Investor Relations. Please go ahead.

Cheryl Valenzuela, Head of Investor Relations

Good afternoon, and thank you for joining us today for the Stitch Fix fourth quarter and full fiscal year 2026 earnings call. With me on the call are Matt Baer, Chief Executive Officer, and David Aufderhaar, Chief Financial Officer. We have posted complete fourth quarter and full fiscal year 2026 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'd 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, and in particular our press release issued and filed today, as well as our Annual Report on Form 10-K for fiscal 2026, which we expect to file 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. Please note that fiscal 2024 was a 53-week year due to an extra week in the fourth quarter. As such, references to consecutive quarters of year-over-year revenue growth rates on this call are based on an adjusted 52-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 results 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.

Matt Baer, Chief Executive Officer

Thank you, Cheryl, and good afternoon, everyone. Fiscal 2026 was a pivotal year for Stitch Fix. We advanced our strategy and closed the year as a stronger, healthier business with a more resilient operating foundation and a reimagined client experience. Full-year revenue grew 6.4% to $1.35 billion. Active client trends continued to improve, with Q4 marking our ninth consecutive quarter of year-over-year improvement in the growth rate. Contribution margin remained above 30% for the full year, while disciplined execution across the business drove adjusted EBITDA and adjusted EBITDA margin above our expectations.

Q4 revenue was $324.4 million, representing 4.2% year-over-year growth—our sixth consecutive quarter of positive revenue comps. Stitch Fix again outperformed the total U.S. apparel, footwear, and accessories market, which, according to the latest Circana data, was approximately flat over the same period. Full-year revenue also outperformed the total U.S. market with growth of 6.4% compared to 1% for the market. Revenue per active client, or RPAC, set another record for the third consecutive quarter, reaching $592 in Q4.

Q4 adjusted EBITDA was also better than expected at $10.8 million, or a 3.3% margin. As a result of our transformation, we have significantly evolved our client experience with a focus on creating new engagement opportunities, deepening client and stylist relationships, introducing enhanced Fix flexibility, and strengthening our assortment. The enhanced flexibility—particularly the larger Fixes we now offer—and our broader, more relevant assortment were key drivers of the performance we have delivered over that period.

Together, larger Fixes and our improved assortment have supported eight consecutive quarters of growth in both items per Fix and average unit retail, or AUR. Larger Fixes enable clients to address more of their styling needs in a single Fix, while our more trend-right assortment across market and private brands, including expanded categories, drove AUR growth through a favorable mix shift instead of broad-based price increases. These sustained gains translated into strong Fix AOV in Q4, which was the primary driver of revenue growth.

Both our women’s and men’s Fix businesses grew year over year during the quarter, with men’s delivering double-digit growth for the fifth consecutive quarter. Our multi-brand portfolio combines differentiated private brands with a curated selection of market brands. Together they give us the ability to serve a broad range of wardrobe needs. In Q4, our private brands continued to resonate with our clients. In women’s, Market & Spruce, 41 Hawthorne, and Montgomery Post were our top three brands by revenue for the second consecutive quarter.

In men’s, three of our top five brands in the quarter were private brands—specifically 01.ALGO, Hawker Rye, and Alesbury. We continue to invest in these brands and are regularly launching collections to meet individual client segment needs. For example, in August we launched a 41 Hawthorne capsule collection for teachers, informed by the thousands of teaching-related requests we have received from clients. We are also focused on bringing clients a portfolio of brands that is best in the industry—by offering market brands clients covet and introducing others we believe they’ll be excited to discover.

Since the start of fiscal 2026, we have added more than 80 new brands, including Rhone, Birkenstock, Outdoor Voices, and Malbon Golf. More recent additions include Farm Rio, Baggu, Merrell, Jordan Brand, Nike Golf, and Mitchell & Ness NFL-licensed apparel. Within our market brand assortment, we launched exclusive back-to-school collaborations with Favorite Daughter, Alex Mill, and Z Supply in early August. The collections were designed for moms who have told us that they often feel overlooked during the season, and early performance across all three launches has been encouraging.

Category expansion remains a significant opportunity for Stitch Fix, and we continue to build our assortment in areas where we have traditionally been underpenetrated, including activewear and athleisure, footwear, and accessories. These categories support our ambition to meet all of our clients’ wardrobe needs, and we’re seeing strong growth. For example, across women’s and men’s, activewear and athleisure grew 21% year over year and footwear grew 14% in Q4.

Turning to active clients, we ended the quarter with 2.277 million active clients. New clients and men’s active clients grew year over year in FY26, while the trajectory of women’s active clients also improved year over year. Client retention rate improved sequentially for the eighth consecutive quarter, and Q4 marked our third straight high in nearly four years. These trends reflect the strength and resilience of our current client base, our disciplined focus on acquiring higher LTV clients, and organic growth through Family Accounts, which helps us serve the entire household.

Another element of our strategy is reaching client segments with highly specific styling needs that we are uniquely positioned to serve. One example is clients navigating the body and sizing changes associated with GLP-1 medications. All of our stylists are trained to support clients going through body transformation journeys, and we now offer a themed Fix with styles for every stage of the transformation. The opportunity is evident both in the broader market and in what we are hearing from new Stitch Fix clients.

Twenty percent of our new clients recently told us during onboarding that they are seeking styling guidance as their bodies change—nearly double the penetration of the U.S. population on GLP-1 medications, according to a recent Gallup poll—which underscores the particular relevance of Stitch Fix for this need. As always, technology remains at the core of our ability to serve our clients. AI is a powerful accelerator of our strategy, and our 15 years of applying proprietary data and algorithms paired with the expertise of our stylists gives us a differentiated foundation for incorporating AI across both the client experience and our operations.

Stitch Fix Vision is one client-facing example. We have integrated our style visualization platform more broadly throughout the client experience and are building toward a future where clients can see themselves reflected at every step of their shopping journey. By combining AI with our deep understanding of each client’s preferences, Vision provides personalized style inspiration. We continue to see a significant lift in 90-day Freestyle spend from clients who engage with it.

AI is also helping us operate more efficiently. In styling, we are using generative AI tools to support stylists in the item recommendations for Fixes so they can focus more of their time on client service. In our fulfillment centers, AI improves daily labor planning and real-time staff scheduling. In customer service, AI agents handle more routine requests, helping us resolve inquiries more quickly and enabling our team to focus on outreach that needs a higher touch.

As a result, we have more than doubled the share of chats resolved without requiring additional support. Together, these applications improve productivity and lower our cost to serve. As we continue to advance our transformation strategy and efforts to deliver the most personalized and client-centric shopping experience, we recently welcomed Sri Sridharaj as our Chief Product and Technology Officer. Sri brings extensive product and technology leadership experience, including in AI integration across prominent retail and consumer brands.

We’re thrilled to have him on the team. Looking ahead to fiscal 2027, our outlook reflects a more challenging consumer environment. David will speak in more detail to our outlook, including a reduction in Fix volume that will only impact Q1. While these conditions affect our near-term outlook, they do not change our strategy or the opportunity ahead. When clients are more intentional about what they buy, the value of a personalized service that makes each purchase more relevant becomes even clearer.

Over the past two years, we have built the capabilities to deliver on that promise—a more flexible Fix experience, more compelling assortment, and personalization powered by proprietary client data, AI, and the expertise of our stylists. We are actively addressing near-term headwinds through the levers within our control. While we are encouraged by the early performance of many of our recent innovations, such as Stitch Fix Vision, Family Accounts, and more flexible Fix offerings, there’s still ample runway to increase their impact.

As we continue to enhance these experiences, build awareness, and drive penetration, we believe they can support stronger organic revenue and client growth. The financial progress we have made underpins our ability to invest behind these growth initiatives. In closing, fiscal 2026 demonstrated the strength of the business we have built. We significantly improved our client experience and assortment, strengthened client economics, and returned to year-over-year revenue growth—all while operating with discipline.

The work now is to scale that stronger model, serving more existing and new clients and turning that foundation into sustainable, profitable, long-term growth. A special thank you to our entire Stitch Fix team for your continued dedication and execution. Now I’ll pass it to David for a discussion of our financial results and outlook.

David Aufderhaar, Chief Financial Officer

Thanks, Matt, and good afternoon, everyone. Fiscal 26 demonstrated significant improvement in our financial model. We expanded adjusted EBITDA margin, maintained contribution margins above 30% in each quarter, generated positive free cash flow, and ended the year with a strong balance sheet. We also resumed our share repurchase program and returned capital to shareholders. Net revenue for the year reached $1.35 billion, up 6.4% year over year. Gross margin was 43.7%, well within our target range of 43% to 44%, as our teams did a great job navigating transportation carrier rate increases and tariffs.

Overall SG&A spend was 45.3% of revenue, over 220 basis points lower than last year. As a result, we exceeded our outlook for adjusted EBITDA and expanded our adjusted EBITDA margin year over year to 4%. Stock-based compensation was 3.4% of revenue compared with 4.5% last year. Our net loss for the year narrowed to $12.6 million, or a loss of $0.09 per share. We generated $19.8 million of free cash flow in fiscal 2026 and ended the year with $220.9 million in cash, cash equivalents and investments, and no debt.

Turning to Q4, revenue reached $324.4 million, up 4.2% year over year. Active clients were down 1.4% both year over year and sequentially. In addition to seasonality, active clients were softer than expected due to higher client acquisition costs that were a headwind to acquiring and re-engaging clients in the quarter. RPAC grew 7.8% to $592, while AOV grew 4.9% year over year. Gross margin was 43.6%, flat year over year. We offset increases in transportation costs and investments in new merchandise categories with strong inventory management.

Advertising was 9.9% of revenue in Q4. Q4 adjusted EBITDA was $10.8 million, or a 3.3% margin, up 50 basis points year over year. It exceeded our guidance largely due to lower fixed operating expenses. We continued our share repurchases in Q4, buying back 2.7 million shares for $11.3 million. For the year, we bought back 7.2 million shares for $26.4 million. This leaves $93.6 million remaining under our existing authorization. Now turning to our outlook for Q1 and fiscal 2027.

For full year FY27, we expect total revenue to be between $1.31 billion and $1.36 billion. We expect total adjusted EBITDA for the year to be between $27 million and $42 million. And for Q1, we expect total revenue to be between $323 million and $328 million. We expect Q1 adjusted EBITDA to be between $3 million and $6 million. We expect full year gross margin to remain between 43% to 44%, and we expect to generate stronger positive free cash flow for FY27 compared to last year.

As Matt noted, our revenue outlook reflects two factors associated with a more challenging consumer environment. First, as I called out earlier, we saw higher client acquisition costs in Q4, and that has continued into Q1. Those higher costs are a headwind to client growth in FY27, which we expect will temper revenue growth. And second, existing clients are being more intentional about discretionary purchases outside of their recurring Fixes. For Q1 specifically, our outlook also reflects lower expected Fix volume from two temporary factors.

First, a decision to adjust the timing of some Fix shipments in the fourth quarter, which shifted Fix volume from the first quarter of fiscal 2027 into the fourth quarter of fiscal 2026. And second, an unintended change made to our post-checkout offer flow in August that limited the number of clients eligible to request another Fix, which has been corrected and will not affect results beyond the first quarter. Lastly, our adjusted EBITDA outlook for fiscal 2027 reflects planned investments in advertising and technology, including AI, to support long-term growth.

We will remain disciplined and judicious in how we make these investments. The stronger foundation we have built through our transformation gives us confidence in our ability to execute against our priorities and invest strategically behind our highest return opportunities. We are proud of our improved cost structure that gives us the optionality to make such investments while still delivering EBITDA profitability, maintaining a strong balance sheet, and generating positive free cash flow.

With that, operator, we can open the line for Q&A.

OPERATOR

We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question for optimum sound quality, and if muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dylan Carden with William Blair.

Your line is open. Please go ahead.

Dylan Carden, Analyst at William Blair

Hi. Thank you. I'm just trying to square the comments on higher CAC and investments this year in advertising. Can you kind of unpack that a little bit? Is that—it sounds like two separate things, or is it just that you are still spending on higher CACs and it's more of a margin drag?

David Aufderhaar, Chief Financial Officer

Yeah, thanks for the question, Dylan. With CACs, I think we called this out on the last call that we'd started seeing some headwinds in client acquisition costs in Q4, and that sort of continued throughout the quarter and into Q1. With regard to incremental advertising spend, even within the CAC-to-LTVs—with CACs going up—we still feel very comfortable that we're within our guardrails from an advertising perspective. And so, with the headwinds that we're seeing from an overall market perspective, we feel pretty comfortable leaning in and still staying within our guardrails and still being able to get the right ROI and bring in healthy, active

Dylan Carden, Analyst at William Blair

Got it. And then any guidance you can give on, kind of between the two drivers, how we should think about the shape of the year, and I guess, you know, some pockets of growth within the active client number, but what's still sort of the lingering drag there? Thanks.

David Aufderhaar, Chief Financial Officer

For the two drivers for FY27? Yeah, there are a couple factors there. First is what we called out that was specific around Q1. I think we touched on this in the prepared remarks, but just to give a little bit more color around what we saw in Q1, there were two main factors there. First, our decision to change shipping dates for some customers ended up increasing Fix volume in Q4 '26 and decreased volume in Q1 '27. What that really is about is, with the longer visibility into lead times for our recurring Fix business, we sometimes move shipments around between weeks for a variety of reasons.

This time, though, the impact occurred across the two quarters and was just a little bit more significant than what we see on average, so we just wanted to call that out. Then on the second factor, there was an unintended change that was made to the client experience during new feature testing, and that disrupted an existing feature. Some clients receive an offer for an immediate Fix after they check out. The unintended change actually reduced the number of clients that received the offer, and that suppressed the number of Fixes that were requested.

In August, our team identified the issue, and we saw demand rebound, and we're confident that that impact was isolated to Q1. We even see that in our monthly comps for Q1, and we expect October comps to be more in line with the implied guide for the rest of the year. So those were the factors that were the drags on Q1. Adjusting for those factors, Q4 '26 revenue comps would have been roughly in the 2% to 3% range, and our Q1 '27 revenue guide would have been a little bit more in line with the implied guide for the rest of the year.

That's really the drag for Q1. Then from an overall perspective, I think we called out in the prepared remarks the other drag for the full year. We have seen increased macro pressures on the consumer: increasing gas prices, higher overall inflation, mortgage rates increasing again, and the incredibly low consumer sentiment all point to a challenged consumer with increased pressure on their discretionary spend. And we're definitely seeing some of those impacts as well.

I think we called that out around active client headwinds that we saw in Q4 that we were just talking about around acquisition costs. We saw that continue in Q1. Those softer clients have a compounding effect on revenue for the full year. And then we're also seeing some impacts to our existing client activity outside of the core recurring Fix business—areas like Freestyle and manual Fix demand. With that said, I think we've called this out before and it's still very true: we do continue to see resilience in our core recurring Fix business.

We know when we get clients into the experience, they see the value, and you can see that in the RPAC metric again sort of at an all-time high. And those are really all of the factors that are included in the guide. I know that was a lot, Dylan, but wanted to make sure we called out what those assumptions were both for Q1 and the full year. And we're actively addressing these growth headwinds through initiatives and investments in technology, merchandising, and marketing.

We're going to continue to focus on driving healthy new clients, engaging our existing clients in new and creative ways, and aggressively capturing market share, especially in the challenging environment we're in.

OPERATOR

Thank you, David. Your next question comes from the line of Owen Rickert with Northland Capital Markets. Your line is open. Please go ahead.

Owen Rickert, Analyst at Northland Capital Markets

Hey, guys, thanks for taking my questions here. Firstly, on the RPAC durability, with active clients declining in the quarter, RPAC, I'm assuming, carried the revenue story. How much of this growth in RPAC is being driven by accessories and footwear penetration versus larger Fix sizes? And do you see a ceiling on RPAC expansion if there are some headwinds in the active client base going forward?

Matt Baer, Chief Executive Officer

Hey, Owen, appreciate the question. It's Matt. As we initiated this transformation about three years ago and we worked to really ensure that we were strengthening the foundation of our business and then rebuilding such that we could deliver profitable and sustainable growth, we saw a very real opportunity in order to increase the revenue per active client that we have—or to acquire more wallet share with our existing clients. We had an opportunity to do a better job outfitting them head to toe to meet or exceed their expectations for all of the different use cases in which they came to us.

Larger Fixes plays a critical role for us in meeting or exceeding our clients' expectations there. We also heard loud and clear from our clients that they wanted to be outfitted head to toe, which required us to really intentionally move into categories that were underpenetrated for us, namely athletic wear and athleisure, footwear, and accessories. And if you looked at what our market share was in tops and bottoms at that time and applied that same market share across those other three categories, we saw a billion-dollar fair-share opportunity, and we do continue to drive outsized gains or outsized growth in those categories.

As we shared in our prepared remarks, athletic wear and athleisure were up 21% for us in the quarter. Footwear was up 14% for us in the quarter. Accessories also outperformed the overall revenue comp for us in the quarter. Our merchants have done a phenomenal job assorting into those categories, adding leading brands as well as developing our private brands into them. And we've done a great job both in terms of our algorithmic recommendations as well as our stylist training to make sure that we're delivering those items to clients' homes. Ultimately, from a ceiling perspective, what gives us extreme confidence in our business overall is that opportunity remains a huge one for us.

When you look at the Circana data that tells us our implied wallet share for our clients, we have roughly twice the amount of wallet share as the next retailer for our clients, but still an opportunity to increase that client spend with us up to three to four times before we've capped out what that opportunity is. It's why we've been able to deliver, it's one of the reasons why we've been able to deliver six consecutive quarters of revenue growth.

But we're before we inflect a positive active client growth and we remain confident in that as one of the perpetual growth drivers that we have at our disposal for years to come. And we intend to continue to lean into that meaningfully going forward.

Owen Rickert, Analyst at Northland Capital Markets

Got it, got it. Super helpful. And then secondly for me, Stitch Fix Vision was a big topic on the last call. It sounded like active users were spending, you know, 100% plus or more on Freestyle following their first use. I guess. Can you just share since last week like last quarter, how broadly Vision has been adopted across the active client base? You know what, maybe what percentage of Freestyle revenue is out now influenced by Vision interactions?

And what's the roadmap? What's that looking like for further capability expansion throughout fiscal 27?

Matt Baer, Chief Executive Officer

Vision remains a critical priority for us. When we launched Vision initially, we always intended not just for that to be the final client experience, but that to actually become a platform upon which we continue to build an end-to-end client journey whereby the client can see themselves realized head to toe in Stitch Fix apparel and accessories all the way from onboarding to Fix Preview to when they're shopping within Freestyle into the post-purchase or checkout experience as well.

And we continue to build more and more of these experiences and bring them to life. Since we spoke most recently, we've launched what we call See it on Me, which is now an opportunity for clients as they're browsing our outfit inspirations to actually click on any of them and see those outfits come to life on their likeness. The adoption of Vision continues to exceed our expectations. Candidly, the launch of See it on Me helped considerably in terms of further expansion.

The increase in Freestyle spend that we are seeing from those clients that have interacted with Vision continues to remain consistent, which is really encouraging and maybe I'll share with you at this point now, since we've launched, we've shared over 22 million Vision images with our client base. So a lot more to come, a lot more development in the works. But we're really encouraged by what we've seen so far.

Owen Rickert, Analyst at Northland Capital Markets

Awesome. Thanks for taking my questions guys.

Matt Baer, Chief Executive Officer

Of course. Thanks, Owen. Of course.

OPERATOR

Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Your line is open. Please go ahead.

Dana Telsey, Analyst at Telsey Advisory Group

Hi, good afternoon everyone. As you think about the current consumer landscape and the cadence shift from this from last quarter to this quarter, was it in categories? Was it in regions? Besides how you're thinking about the upcoming first quarter and with the mix shifts that you talked about, can you expand on that and what that means? And just lastly, with the CAC costs, any different cadence throughout this upcoming fiscal year in terms of how you're thinking about the CAC?

Thank you.

Matt Baer, Chief Executive Officer

Hey Dana, I'll take a stab at the first question and keep me honest. If I understood the thesis of the question correctly, in terms of, you know, what we saw in the two factors that David walked us through. Those two factors are time-bound and both of those two factors are behind us. And what we see is building on the success of the transformation that we had and the strong results that we were able to deliver in our fiscal 26 with over 6% revenue growth and capping the year with six consecutive quarters of revenue growth, improved profitability through our business, the reimagined client experience and an overhauled assortment of both our private brands and market brand portfolios that we believe will position us to be best in class in the industry overall. And all of those factors is ultimately what has enabled us to deliver a record revenue per active client for a third consecutive quarter at nearly $600 with an opportunity to drive that even further. And as we're operating within the last quarter of Q4 and our current quarter of Q1, our focus is returning to that revenue growth and we remain confident in our ability to deliver revenue growth over the balance of the year and into the future.

So that's where the focus remains and how we're thinking about the business overall from a CAC perspective and the cadence in which we're seeing that. You know, just to reiterate what David answered previously, as we were operating in real time in Q4 and into the first quarter of fiscal 27, as we saw elevated media impression and customer acquisition costs that we believe to be impacting the industry in aggregate, a macro effect of a tougher consumer environment, we continued with our methodical approach to customer acquisition.

But what we've also realized to be true is that because of the success of the clients that we bring into the experience, the high revenue per active client, the high customer lifetime value that we continue to deliver, and because of the improvements in the experience and the improvements in the assortment, that gives us the license to go out and be a little bit more aggressive in terms of our advertising spend and to ensure that we're capturing kind of that fair share of consumer demand to bring them into our experience.

And tangentially, something that has continued to work exceptionally well for us as an example is our focus on consumers on a GLP-1 medication. I believe that we were early to market in terms of seeing what that opportunity was. We leaned into it from a marketing and customer acquisition perspective. We leaned into it in terms of building dedicated experiences for them. And now we have a little bit more proof points to back that up as our onboarding more definitively is able to identify when a client comes in in the midst of a body transformation.

And it's an optional component of onboarding. But even though it's optional, we're still seeing about 20% of all new clients likely on a GLP-1 medication. That's nearly double what we understand to be the overall US population of people on the GLP-1 medication. So we believe that's another great opportunity for us to continue to lean into, to continue to invest because of the superiority of our service and our ability to uniquely serve those clients as their bodies are changing.

David Aufderhaar, Chief Financial Officer

And I think related to that spend, Dana, I think because of what Matt called out and I think we called this out in some of our prepared remarks as well, that we are leaning in a little bit to marketing. Just from a size perspective, if we're thinking about FY27, we're probably going to be spending a little bit more in the 10% to 11% range versus the 9% to 10% range that we had in FY26. And from a quarterly spend perspective, we will have similar seasonality where Q1 and Q3 tend to be stronger acquisition quarters for us and we lean into marketing spend then.

But we're definitely going to be more opportunistic of leaning in in the positive times that we see it and pulling back when we might see headwinds.

Dana Telsey, Analyst at Telsey Advisory Group

Thank you.

OPERATOR

Your next question comes from the line of Jay Sole with UBS. Your line is open. Please go ahead.

Jay Sole, Analyst at UBS

Great. Thank you so much. Can you just help us with the first quarter revenue bridge? You called out two discrete impacts to Q1, the Fix volume shifting to Q4 due to shipment timing and the August post-checkout issue that limited repeat Fix requests. Can you quantify the revenue impact from each and clarify the underlying Q1 growth rate excluding both?

David Aufderhaar, Chief Financial Officer

Yeah. Thanks, Jay. You know, for the two different items we had talked about a little bit earlier, when you adjust for those factors, Q4 26 revenue comp would have been roughly in the 2% to 3% range and the Q1 27 revenue guide would have been a little bit more in line with the implied guide for the rest of the year. And so that should really help you back into specific numbers there.

Jay Sole, Analyst at UBS

Got it. Okay. And then maybe just to elaborate a little bit on the fiscal 27 EBITDA guidance. The forecast is sort of stepping down from where you were in 26. How much of that reflects deliberate investment versus some of the underlying cost pressures that you're talking about?

David Aufderhaar, Chief Financial Officer

Yeah, thanks, Jay. It really is about the conscious decision to reinvest in the business. I think we called out the two things. The larger of the two is the advertising spend that we just talked about. If you think about the midpoint of that 10% to 11% range, that's still almost 100 basis points more than we spent this year. And that is absolutely something that we feel very comfortable leaning into. Then we also called out that there are some incremental AI investments to help drive growth.

Those were two conscious decisions we made to invest some of our EBITDA in growth. If you exclude those additional investments, the EBITDA margin guide would have been much more consistent with last year's margin at the 4% range.

Jay Sole, Analyst at UBS

Got it. All right, thank you so much.

David Aufderhaar, Chief Financial Officer

Yeah, thanks, Jay.

OPERATOR

Your next question comes from the line of Jessica Chenyi Tian from AB Bernstein. Your line is open. Please go ahead.

Jessica Chenyi Tian, Analyst at AB Bernstein

Thanks for taking my question. I have two. So the first one is, last quarter you reiterated your goal of returning to year over year active client growth in fiscal 2027. Today you've described higher acquisition costs as a headwind to client growth and referenced a lower active client starting point in the 2027 outlook. Has your confidence in returning to year over year active client growth during the year changed at all? And what would need to happen for you to achieve that objective? Thanks.

Matt Baer, Chief Executive Officer

Yeah. Hey, Jessica, appreciate the question. As David shared previously, you know, one of the things that we have called out is that the macroeconomic pressures that are a challenge that our consumers are facing, I spoke to that as well in the Q&A. And for us, you know, one of the primary influences of that is actually in our ability to acquire new clients. And we actually believe that, you know, had those consumer headwinds not continued to elevate over the course of the last six months, we would have already returned to active client growth.

So we remain equally convicted in terms of our ability to return to active client growth. We're going to continue to stay focused on everything within our control in order to ensure that we're most cost effectively acquiring as many new clients as we can. And we are continuing to, you know, as David just noted as well, we're continuing to invest because of the high LTVs that we're able to see from those clients that we bring in. As we also shared in our prepared remarks, our existing client retention continues to perform exceptionally well for us.

So we feel really good about the overall health of our active clients and we remain confident in terms of our ability to return to active client growth in the future.

Jessica Chenyi Tian, Analyst at AB Bernstein

Thank you. And then one more for me. Can you walk us through how underlying demand progressed through the quarter and also the exit rate coming out of the quarter, excluding the shipment timing shift and also post-checkout offer issue? Are Q1 to date revenues currently tracking in line with the 2027 sales guide, or is there some conservatism baked into the outlook?

Matt Baer, Chief Executive Officer

I think that. Hey Jessica, maybe to answer that with brevity, the easiest way to think about Q1 performance, as David noted, is that if you look at the quarter, we anticipate our October revenue comp being much more closely aligned to what the implied revenue comp is in Q2 to Q4. And as noted as well, the two factors that David walked through, those are time-bound and they're behind us, so they're no longer impacting performance in the quarter.

OPERATOR

Your next question comes from the line of David Bellinger with Mizuho. Your line is open. Please go ahead.

David Bellinger, Analyst at Mizuho

Hey everyone, thanks for the questions. I want to unpack the more challenged consumer commentary a little bit more. It seems a bit more pronounced than the last few quarters. Could you just tell us when you started to see that turn happen, sort of that roll in consumer spending, and even going forward if you pull out some of these transitory timing issues. Can you talk about the underlying engagement from the active client base, whether that's in terms of the website, the app, just anything that could help us look for any type of rebound into Q1 and the rest of the year?

David Aufderhaar, Chief Financial Officer

Yeah, I can start with the first part of that, Dave, and then I'm sure Matt can jump in as well. We definitely started to see this in Q4. It's actually something that we called out on the earnings call last time that we had started to see some headwinds from a client acquisition standpoint, and that was impacting new client acquisition and re-engagement. And we really saw that through Q4 and then continuing into Q1. And then late in Q4 we started to see some of the other impacts that I had called out that are in those areas that are a little bit more susceptible to macro like Freestyle or someone asking for a Fix outside of the recurring Fix cycle.

And so those are some of the headwinds we started to see at the end of the quarter and they continued into Q1. And both of those are sort of included in our full year FY27 outlook.

Matt Baer, Chief Executive Officer

What I'd add to that too, and we've talked about this previously, is the Stitch Fix service is one that positions us really well to outperform when the consumer environment gets tough. At the same time, we're not immune when the consumer environment gets exceptionally tough. The reason why our service performs so well is because of the deep and enduring relationship that our clients have with their stylists. It gives them the opportunity to have frank discussions about what changes there might be in their budget.

They have the ability to change the cadence of their Fix shipments and we're able to meet them where they are at any given time. We obviously stay exceptionally close to our clients and we hear loud and clear from them that times are getting tougher. But encouragingly, they're actually signaling a desire to spend even more of their wallets with us going forward. It's why we see that resilience. It's why our core client does remain exceptionally resilient.

It's why our core sales channel does remain resilient. And encouragingly, that resilience remains for all household income segments that we're able to track within our business. It's also the reason why, for six consecutive quarters, we've outperformed the overall market and continue to gain market share. And we're confident that going forward, we'll continue to serve those clients exceptionally well and gain market share along the way.

David Bellinger, Analyst at Mizuho

Got it. Thanks for all that. And then the second question, maybe on a longer term horizon, I know you've talked about some of these artificial intelligence investments. Talking about Stitch Fix Vision, how should we think about the positioning of the business with things like the rise of Meta's Muse app and just a different consumer discoverability going forward? How do we think about Stitch Fix's positioning? Whether that's good, bad or neutral?

Just with things like Meta's Muse coming out. Thank you very much.

Matt Baer, Chief Executive Officer

Yeah, David, we believe that we're really well positioned to continue to lead within this environment. In the DNA of Stitch Fix is innovation, is our ability to lean into AI, is the quality, depth, and breadth of the data that we have. At the end of the day, an AI experience, generative or agentic, the quality of that output is premised on the quality of the data that you put into it. What we know about our clients and what we know about the overall market continues to be a competitive advantage for us.

So as we're building our proprietary experiences, we're able to uniquely serve clients and serve them in ways that's superior to what others are able to because of how well we know them. Stitch Fix Vision, and as we continue to expand it, are great examples of that. We're also confident in our ability to participate appropriately. With the rise of agentic shoppers as well, we'll have the ability, whether it's a human client or an agentic shopper, to serve them equally well.

That being said, we also continue to believe that there are certain categories where agentic shopping are probably better served. If I want to ensure my pantry is perpetually replenished with paper towels, that's something I would happily outsource to my agentic shopper. If I want to ensure that I'm dressing in style and trend-appropriate with clothes that fit me, that align to my budget, and that will give me confidence when I walk out the door, there's a lot more nuance in that, and that's where our human stylists give us a competitive advantage.

That's where the ability to build those deep and enduring relationships we think will continue to be a competitive moat for us going forward. And as more and more interactions for all consumers generally are taking place by AI, actually human connection becomes the scarce resource. And we are the only retailer out there that has continued to invest in this human connection in a meaningful way such that we can serve our clients uniquely. And we believe that will become an even greater competitive advantage for us in the future.

OPERATOR

There are no further questions at this time. I will now turn the call back to Matt Baer for closing remarks.

Matt Baer, Chief Executive Officer

Thank you all for taking the time to join us today. As we look back on fiscal 26, just want to reiterate how proud I am of what the team has accomplished. Growing revenue each quarter and revenue up 6.4% for the entirety of the year, expanding our adjusted EBITDA margin and generating positive free cash flow while also continuing to outperform the broader U.S. apparel, footwear and accessories market. The structural improvements that we've made through our transformation have created a more resilient business model than we had two years ago.

And as we discussed, and while our FY27 guidance reflects a more challenging consumer backdrop, our strategy and our conviction in the opportunity ahead remains unchanged. As I mentioned earlier, our focus for the year ahead is clear: it's to strengthen our position in the market by growing our active clients. It's to capture a greater share of our clients' spend. And it's to invest in the long-term growth with our continued financial discipline.

And we remain confident in our ability to navigate near-term headwinds and build on the capabilities that we've established to deliver sustainable, profitable growth over the long term. And we look forward to updating you on our progress next quarter. Thank you so much.

OPERATOR

This concludes today's call. Thank you for attending. You may now disconnect.

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