Stitch Fix warns of a sales slowdown, and shareholders send its stock down 17.4%

Stitch Fix has told investors that its fiscal 2027 could bring outright sales declines, a year after the personal styling service returned to growth. The company forecast revenues of between $1.31 billion and $1.36 billion, a range spanning a 2.8 percent drop and a 0.9 percent gain.

Wall Street reacted fast. Shareholders traded the stock down 17.4 percent to $2.33 in after-hours trading on Wednesday, wiping out much of the goodwill built up over a fiscal year in which the company's turnaround appeared to be working.

That turnaround had looked real. Revenues for the fiscal year ended 1 August rose 6.4 percent to $1.35 billion, returning the top line to growth a year ahead of the schedule chief executive Matt Baer had set when he took over a business badly in need of repair.

Baer had inherited a company that pioneered personalised styling by mail but had struggled to convert its tech-forward positioning into steady growth. His approach since taking the top job has centred on sharpening the core business and giving clients more flexibility in how they shop.

What is dragging on the new outlook

Stitch Fix pointed to two factors it says will weigh on fix volume in the first quarter. One is a timing change that pulled some fixes forward into the fourth quarter of the year just ended, borrowing sales from the period ahead.

The other is what the company called an unintended change to the post checkout offer flow in August, which limited the number of clients eligible to request another fix. Stitch Fix says that change has since been corrected.

Baer told WWD both problems are behind the company now. "Those two factors are time bound and they are behind us," he said. "We're now focused on returning to revenue growth and sustaining that revenue growth going forward and confident in our ability to do so."

He was less able to wave away the wider backdrop. "The other thing to take into consideration is a continually more challenging macro environment and consumer headwinds that are impacting all discretionary spend and all of retail," Baer said, adding that for Stitch Fix the effect shows up mainly in the cost of acquiring new clients.

What the fourth quarter actually showed

The most recent quarter itself was mixed rather than weak. Revenues rose 4.2 percent to $324.4 million even as active clients slipped 1.4 percent year over year to 2.3 million, continuing a longer contraction in the customer base.

Net losses came to $2.1 million for the quarter. But the per-customer arithmetic moved the other way: revenue per active client climbed 7.8 percent to $592, which the company says is the highest figure in its history.

Baer credited that jump to several changes to how the service works: larger fixes sent to each client, an option letting a client turn a self-directed online purchase into a styled fix, new accounts covering whole families, and a broadened assortment leaning further into activewear, athleisure, footwear and accessories.

"Our core client remains resilient despite the tougher macro environment," Baer said. "If you look at our business with our current clients and you look at our business across all income cohorts, it actually remains quite strong for us."

He pushed back on reading the outlook as a reversal of the turnaround itself. "The headline is the awesome progress that we made, that's demonstrated by our overall fiscal results in 2026," Baer said, pointing to an improving trend in active client count.

"We continue to outperform the total U.S. apparel footwear and accessories market," he said, arguing the company is strengthening its position as clients' retailer of choice even as the industry around it slows.

Where this leaves the wider apparel sector

Stitch Fix's caution echoes a mixed pattern across apparel retail this year, where some chains have raised guidance on strong results while others have pulled it back on softer demand and rising costs.

Signet Jewelers lifted its full-year earnings guidance by 10 percent after swinging back to profit, and Macy's and Vince both raised their full-year outlooks after a strong second quarter, while Lululemon saw leggings sales fall 20 percent under a downgraded outlook from its new chief executive.

Stitch Fix has not said when it next expects to update investors on progress against the new range, leaving the first quarter of fiscal 2027 as the point at which Baer's assurance that the drag is behind the company will be tested.

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Image: Stitch Fix