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Stitch Fix (NASDAQ:SFIX), the personal styling service, held its fourth quarter and full fiscal year 2023 earnings call, during which CEO Matt Baer and CFO David Aufderhaar outlined the company's future strategy and financial performance. Despite a 21% decline in net revenue for fiscal 2023, the company reported improvements in adjusted EBITDA and free cash flow, as well as an expansion in gross margin.
Key points from the call include:
- The company's focus on personalization algorithms, artificial intelligence, machine learning, and data science as integral parts of its business model.
- Plans to enhance the client experience, strengthen profitability, and drive growth.
- An anticipated total US revenue for fiscal 2024 between $1.3 billion and $1.37 billion, with adjusted EBITDA between $5 million and $30 million.
- The decision to wind down UK operations and consolidate US warehouse locations from five to three, expecting cost savings of approximately $50 million.
- The company's aim to improve its inventory position, drive profitability, and attract high lifetime value clients.
Baer emphasized the company's commitment to delivering profitable growth and the importance of strong relationships between clients and their stylists. He expressed confidence in the company's long-term vision and the convenience and improved experience that Stitch Fix offers compared to traditional brick-and-mortar and online shopping.
The company reported an improved adjusted EBITDA of approximately $17 million in the last fiscal year, with $39 million in free cash flow. They made progress in improving gross margin and cost structure. Q4 net revenue was $376 million, down 22% YoY, but above expectations due to higher order volume. Gross margin expanded to 43.3% YoY.
Baer and Aufderhaar discussed various aspects of the company's performance and plans during the earnings call. Baer highlighted the focus on improving inventory composition and the shift towards higher-margin products, particularly through private brands. Aufderhaar provided more details on gross margin improvement, transportation efficiencies, cost savings initiatives, and savings from UK and warehouse closures.
In response to a question, Baer mentioned the focus on establishing a healthy foundation for the business and acquiring high lifetime value customers in order to drive long-term profitable growth. They also discussed the marketing strategy, including audience focus, storytelling, budget balance between brand and acquisition campaigns, and retention and reactivation efforts.
The executives acknowledged that some customers churn or become dormant due to life-changing events, but they believe their service can still have value and they are working to reengage those customers. The number of active clients in the UK is expected to decline in Q1 due to the discontinuation of operations there, but the overall outlook for active clients in the US is expected to be better than the previous quarter. The company provided a revenue guidance of a 15-20% decline for the full year but did not provide specific guidance on active clients or revenue per active client.
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