Stitch Fix Sees Revenue Rebound and Higher Client Spending, But Margins Remain Tight
Strong Revenue Growth and Improved Client Engagement Mark Q1 2026
Stitch Fix’s first quarter of fiscal 2026 brought a return to top-line growth, with net revenue rising 7.3% year-over-year to $342.1 million. This was a clear sign that the company's transformation strategy—blending advanced AI technology with human stylists—has begun to bear fruit. CEO Matt Baer highlighted the company’s improved ability to capture market share and provide a personalized, client-centric experience. Net revenue per active client grew by 5.3% to $559, the strongest reading in at least a year.
Active Clients Hold Steady, Spending Per Client Rises
Despite this momentum, the number of active clients remained almost flat quarter-over-quarter at 2.307 million and fell 5.2% from the prior year, signaling challenges in expanding the customer base. Still, existing clients spent more on average—a critical indicator of increasing engagement and brand loyalty.
| Quarter | Active Clients (in thousands) | Net Revenue per Active Client ($) |
|---|---|---|
| Q1 2026 | 2,307 | 559 |
| Q4 2025 | 2,309 | 549 |
| Q1 2025 | 2,434 | 531 |
Margins Under Pressure Amid Growth Investments
While revenue grew, profitability metrics painted a mixed picture. Gross profit increased 3.1% to $149.3 million, but the gross margin dipped by 180 basis points to 43.6%. Stitch Fix posted an adjusted EBITDA of $13.4 million, equating to a margin of 3.9%, while still reporting a small net loss of $6.4 million (loss margin: 1.9%). Cash generation remained positive, with $10.9 million in net cash from operating activities and free cash flow of $5.6 million.
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Net Revenue ($M) | 342.1 | 318.8 |
| Gross Margin (%) | 43.6 | 45.4 |
| Adjusted EBITDA ($M) | 13.4 | 13.5 |
| Adjusted EBITDA Margin (%) | 3.9 | 4.2 |
| Net Loss ($M) | 6.4 | 6.3 |
Balance Sheet Shows Liquidity and No Debt
Stitch Fix entered the quarter with a solid liquidity profile, holding $244.2 million in cash, cash equivalents, and short-term investments. Importantly, the company carries no debt, giving it the flexibility to continue investing in technology and new client experiences. Inventory also increased from $118.4 million to $141.5 million sequentially, reflecting expectations for continued demand.
Outlook Suggests Continued Cautious Optimism
Management projects second quarter net revenue between $335 and $340 million, representing 7.3% to 8.9% growth year-over-year. Full-year fiscal 2026 guidance anticipates revenue between $1.32 billion and $1.35 billion (up 4.2% to 6.5%), with gross margin holding between 43% and 44%. The company also expects to maintain positive free cash flow for the year, a significant target amid the ongoing shift to profitability.
| Guidance Metric | Q2 2026 Range | Full Year 2026 Range |
|---|---|---|
| Net Revenue ($M) | 335 - 340 | 1,320 - 1,350 |
| YoY Revenue Growth (%) | 7.3 - 8.9 | 4.2 - 6.5 |
| Adjusted EBITDA ($M) | 10 - 13 | 38 - 48 |
| Adjusted EBITDA Margin (%) | 3.0 - 3.8 | 2.9 - 3.6 |
| Gross Margin (%) | - | 43 - 44 |
Takeaway: Strategy Shows Progress, but Margin Challenges Persist
Stitch Fix’s transformation plan is clearly gaining traction, as seen in higher revenue, growing client spend, and a strong liquidity profile. Still, margin compression and a plateauing client base present real hurdles to sustained profitability. The next few quarters will be telling: can the company reignite client growth and defend its margin while doubling down on innovation and new categories? For investors and observers, watching revenue per client and margin trends will be key signals of whether Stitch Fix’s pivot to personalized AI-driven styling will deliver durable returns.
Contact Information:
If you have feedback or concerns about the content, please feel free to reach out to us via email at support@marketchameleon.com.
About the Publisher - Marketchameleon.com:
Marketchameleon is a comprehensive financial research and analysis website specializing in stock and options markets. We leverage extensive data, models, and analytics to provide valuable insights into these markets. Our primary goal is to assist traders in identifying potential market developments and assessing potential risks and rewards.
NOTE: Stock and option trading involves risk that may not be suitable for all investors. Examples contained within this report are simulated and may have limitations. Average returns and occurrences are calculated from snapshots of market mid-point prices and were not actually executed, so they do not reflect actual trades, fees, or execution costs. This report is for informational purposes only, and is not intended to be a recommendation to buy or sell any security. Neither Market Chameleon nor any other party makes warranties regarding results from its usage. Past performance does not guarantee future results. Please consult a financial advisor before executing any trades. You can read more about option risks and characteristics at theocc.com.
The information is provided for informational purposes only and should not be construed as investment advice. All stock price information is provided and transmitted as received from independent third-party data sources. The Information should only be used as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments and trading strategies. The Company does not guarantee the accuracy, completeness or timeliness of the Information.
Disclosure: This article was generated with the assistance of AI