• by Sarah Mahoney  @mahoney_sarah, December 6, 2023

At first glance, Stitch Fix’s first-quarter financial results aren’t exactly dressed to impress. Revenue continued to decline, falling 18% to $364.8 million, from $443.7 million in the fiscal first quarter of last year.

The customer base also dwindled, with active clients slipping to 2.9 million from 3.1 million in the comparable period. So did per-customer spending, sliding to $501 from $541. And it posted a net loss of $35.5 million, down from $55.9 million a year ago.

But there’s also evidence that the San Francisco-based company’s transformative efforts are taking hold. Earnings before income tax came in at $8.6 million, higher than many observers expected.

In a conference call webcast for investors, Matt Baer, who took over as chief executive officer five months ago, said that while he believes the company’s mission is as relevant as ever, the brand needs to take the promise of personalization to the next level. “To ensure that we continue to fully realize our vision into the future, we must think differently, work differently, and approach our business differently,” he said.

Baer had been Macy’s chief customer and digital officer.

Those tactics include strengthening retail best practices, targeting higher-value clients to build a healthier base, and developing new strategies.

That includes relying more on private brands, which now account for about 50% of sales, up from a third over the last few years. Those generate higher profit margins. He said the company is also reducing the number of brands it works with, creating more efficiencies and deeper brand relationships.

Stitch Fix is also sharpening its marketing strategy, rebalancing spending between upper funnel, brand-driven messaging to create awareness, and lower funnel tactics for customers already familiar with the Fix approach.

While noting that Stitch Fix is “executing on necessary block-and-tackling,” writes Mark R. Altschwager, an analyst who follows the company for Baird, “the broader operating environment remains difficult, and we expect it will take time for strategic initiatives to yield clearer signs of improvement.”

He's encouraged by the quarterly results. Even as the platform continues to contract, management prioritizes customer experience and a return to profitability by leaning into its core competencies. But the outlook is still pretty murky.

“Amid cross currents from strategic changes, new leadership, and a tough macroeconomic backdrop,” he writes, “visibility towards profitable growth remains difficult.”