Stitch Fix (SFIX)

Personalized clothing company Stitch Fix (NASDAQ:SFIX) reported Q2 CY2025 results exceeding the market’s revenue expectations, but sales fell by 2.6% year on year to $311.2 million. On top of that, next quarter’s revenue guidance ($335.5 million at the midpoint) was surprisingly good and 13.1% above what analysts were expecting. Its GAAP loss of $0.07 per share was 29% above analysts’ consensus estimates.

Company Overview

One of the original subscription box companies, Stitch Fix (NASDAQ:SFIX) is an online personal styling and fashion service that curates personalized clothing selections for customers.

Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Stitch Fix’s competitors are Trunk Club (owned by Nordstrom, NYSE:JWN), Amazon Prime Wardrobe (NASDAQ:AMZN), and private companies Wantable and Le Tote.

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Stitch Fix’s demand was weak and its revenue declined by 5.8% per year. This was below our standards and suggests it’s a low quality business.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Stitch Fix’s recent performance shows its demand remained suppressed as its revenue has declined by 10.8% annually over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its number of active clients, which reached 2.31 million in the latest quarter. Over the last two years, Stitch Fix’s active clients averaged 15.5% year-on-year declines. Because this number is lower than its revenue growth during the same period, we can see the company’s monetization has risen.

This quarter, Stitch Fix’s revenue fell by 2.6% year on year to $311.2 million but beat Wall Street’s estimates by 2.4%. Company management is currently guiding for a 5.2% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 2% over the next 12 months. Although this projection is better than its two-year trend, it’s hard to get excited about a company that is struggling with demand.

Stitch Fix’s operating margin has been trending up over the last 12 months, but it still averaged negative 6.6% over the last two years. This is due to its large expense base and inefficient cost structure.

In Q2, Stitch Fix generated a negative 3.6% operating margin. The company's consistent lack of profits raise a flag.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Stitch Fix’s full-year earnings are still negative, it reduced its losses and improved its EPS by 19.1% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

In Q2, Stitch Fix reported EPS of negative $0.07, up from negative $0.30 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Stitch Fix to perform poorly. Analysts forecast its full-year EPS of negative $0.23 will tumble to negative $0.35.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Stitch Fix broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

Stitch Fix broke even from a free cash flow perspective in Q2. This cash profitability was in line with the comparable period last year and its two-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Stitch Fix’s five-year average ROIC was negative 53.5%, meaning management lost money while trying to expand the business. Its returns were among the worst in the consumer discretionary sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Stitch Fix’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Stitch Fix is a well-capitalized company with $234.9 million of cash and $93.51 million of debt on its balance sheet. This $141.3 million net cash position is 19.8% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Stitch Fix blew past analysts’ EBITDA expectations this quarter. We were also glad its revenue guidance for next quarter trumped Wall Street’s estimates. On the other hand, its full-year EBITDA guidance missed. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 12.8% to $6.36 immediately after reporting.

Updated: November 13, 2025 at 9:35 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Stitch Fix.

We cheer for all companies serving everyday consumers, but in the case of Stitch Fix, we’ll be cheering from the sidelines. To kick things off, its revenue has declined over the last five years. And while its Forecasted free cash flow margin suggests the company will have more capital to invest or return to shareholders next year, the downside is its number of active clients has disappointed. On top of that, its projected EPS for the next year is lacking.

Stitch Fix’s EV-to-EBITDA ratio based on the next 12 months is 15.9x. This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $5.25 on the company (compared to the current share price of $4.28).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.