Gross profit rose to $149.3 million, but gross margin fell to 43.6 percent, 180 basis points, due to higher product costs and promotional activity. Adjusted EBITDA increased to $13.4 million, reflecting a 3.9 percent margin compared to break-even levels seen in previous recovery phases.
Stitch Fix reported a strong first quarter of FY26, with revenue increasing 7.3 percent to $342.1 million and improved adjusted EBITDA of $13.4 million. While active customers decreased, spending per customer increased. The company posted a net loss of $6.4 million but ended up debt-free with positive free cash flow. With growing engagement and an AI-driven strategy, Stitch Fix expects continued growth through FY26.
The company reported a net loss of $6.4 million, nearly unchanged from the $6.26 million loss in the year-earlier quarter, although operating performance improved on an adjusted basis.
Active customers fell 5.2 percent year-on-year to 2.307 million, although revenue per active customer improved 5.3 percent to $559, indicating higher engagement among retained users. Inventory levels increased sharply to $141.5 million from $118.4 million last quarter, aligning with assortment expansion and seasonal purchasing, Stitch Fix said in a news release.
The company closed the quarter with a strengthened balance sheet, with $244.2 million in cash, cash equivalents and investments and remaining debt-free. Operating activities generated $10.9 million in cash and free cash flow turned positive by $5.6 million, marking a key milestone in the restructuring roadmap.
Looking ahead, Stitch Fix forecasts continued growth in the second quarter, projecting revenue between $335 million and $340 million, which equates to 7.3 percent to 8.9 percent annual growth. Adjusted EBITDA is expected to be between $10 million and $13 million with a margin of up to 3.8 percent.
For the full FY26, the company expects revenue between $1.32 billion and $1.35 billion, representing year-over-year growth of 4.2 to 6.5 percent. Adjusted EBITDA guidance is between $38 million and $48 million with a margin of 2.9 percent to 3.6 percent. The company expects full-year gross margin of 43 to 44 percent, advertising expenses will represent 9 to 10 percent of revenue, and positive free cash flow.
As part of its operational restart, Stitch Fix continues to reflect its discontinued U.K. business separately, following its exit in fiscal 2024. The company noted that reconciliations to non-GAAP measures are not available due to uncertainty around restructuring, taxes and other one-time cost fluctuations, but cautioned that these factors could materially impact GAAP results.
With stabilized financials, growing revenue per customer, and accelerated execution of its AI-powered retail model, Stitch Fix showed confidence in maintaining momentum as it moves into fiscal 2026.
“The first quarter was a strong start to the fiscal year: we accelerated year-over-year revenue growth to 7.3% and achieved considerable gains in market share,” he said Matt Baer, CEO of Stitch Fix. “As a result of the successful execution of our transformation strategy, we are increasingly becoming the retailer of choice for our customers' clothing and accessories needs. We do this by leveraging the latest in GenAI technology, the expertise of our human stylists and our range of leading brands to deliver the most personalized and customer-centric shopping experience.”
Fiber2Fashion News Desk (SG)
