Q2 2026 Stitch Fix Inc Earnings Call

March 11, 2026

Speaker #1: Six earnings call after today's prepared remarks , we will host a question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

Operator 2: Earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star one again. I will now hand the call over to Cheryl Valenzuela, Head of Investor Relations. Please go ahead.

Operator: Earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star one again. I will now hand the call over to Cheryl Valenzuela, Head of Investor Relations. Please go ahead.

Speaker #1: To withdraw your question , please press star one . Again , I will now hand the call over to Cherryl Valenzuela , Head of Investor Relations .

Speaker #1: Please go ahead

Speaker #2: Good afternoon , and thank you for joining us today for the Stitch Fix second quarter fiscal 2026 earnings Call . With me on the call are Matt Baer , Chief Executive Officer , and David Ousterhout , chief financial officer .

Cherryl Valenzuela: Good afternoon, and thank you for joining us today for the Stitch Fix Q2 fiscal 2026 earnings call. With me on the call are Matt Baer, Chief Executive Officer, and David Aufderhaar, Chief Financial Officer. We have posted complete Q2 2026 financial results in a press release on the quarterly results section of our website, investors.stitchfix.com. We would like to remind everyone that we will be making forward-looking statements on this call, which involve risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance.

Speaker #2: We have posted a complete second quarter 2020 financial results in a press release on the quarterly results section of our website , investors If we would like to remind everyone that we will be making forward looking statements on this call , which involve risks and uncertainties Actual results could differ materially from those contemplated by our forward looking statements Reported results should not be considered as an indication of future performance .

Speaker #2: Please review our filings with the SEC for a discussion of the factors that could cause the results to differ. In particular, our press release issued and filed today, as well as our Annual Report on Form 10-K for fiscal 2025 and subsequent periodic reports filed with the SEC.

Cherryl Valenzuela: Please review our filings with the SEC for a discussion of the factors that could cause the results to differ, in particular, our press release issued and filed today, as well as our annual report on Form 10-K for fiscal 2025 and subsequent periodic reports filed with the SEC. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statements except as required by law. Please note that fiscal 2024 was a 53-week year due to an extra week in Q4. As such, references to consecutive quarters of year-over-year revenue growth rates on this call are based on an adjusted 52-week basis, removing the impact of the extra week to provide a comparison that we believe more accurately reflects our performance.

Speaker #2: Also note that the forward looking statements on this call are based on information available to us as of today's date . We disclaim any obligation to update any forward looking statements except as required by law Please note that fiscal 2024 was a 53 week year due to an extra week in the fourth quarter .

Speaker #2: As such . References to consecutive quarters of year over year revenue growth rates on this call are based on an adjusted 52 week basis , removing the impact of the extra week to provide a comparison that we believe more accurately reflects our performance during this call , we will discuss certain non-GAAP financial measures , reconciliations to the most directly comparable GAAP financial measures are provided in the press release on our Investor Relations website .

Cherryl Valenzuela: During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the press release on our investor relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being webcast on our investor relations website, and a replay of the call will be available on the website shortly. Now let me turn the call over to Matt.

Speaker #2: These non-GAAP measures are not intended to be a substitute for our GAAP results Finally , this call in its entirety is being webcast on our Investor Relations website and a replay of the call will be available on the website shortly .

Speaker #2: And now let me turn the call over to Matt .

Speaker #3: Thanks , Sheryl , and good afternoon , everyone . Q2 was another strong quarter marked by our fourth consecutive quarter of year over year revenue growth .

Matt Baer: Thanks, Cherryl, and good afternoon, everyone. Q2 was another strong quarter, marked by our fourth consecutive quarter of year-over-year revenue growth. We continue to successfully execute our transformation strategy and are seeing the cumulative impact of those efforts to both strengthen the foundation of our business and reimagine our client experience. The enhancements we've rolled out over the past 18 months, including greater flexibility, meaningful improvements we've made to the quality and breadth of our assortment, and new AI features are driving increased client engagement and durable revenue growth. As a result, we are solidifying our position in the market and our role as our clients' retailer of choice for apparel, footwear, and accessories.

Speaker #3: We continue to successfully execute our transformation strategy and are seeing the cumulative impact of those efforts to both strengthen the foundation of our business and reimagine our client experience.

Speaker #3: The enhancements we've rolled out over the past 18 months, including greater flexibility, meaningful improvements we've made to the quality and breadth of our assortment, and new AI features, are driving increased client engagement and durable revenue growth.

Speaker #3: As a result , we are solidifying our position in the market and our role as our clients . Retailer of choice for apparel , footwear and accessories .

Speaker #3: Getting into the specific numbers revenue exceeded our outlook and grew 9.4% year over year to $341.3 million , supported by broad based demand that remained resilient across all income cohorts Revenue per active client reached $577 in Q2 , our highest revenue per active client .

Matt Baer: Getting into the specific numbers, revenue exceeded our outlook and grew 9.4% year-over-year to $341.3 million, supported by broad-based demand that remained resilient across all income cohorts. Revenue per active client reached $577 in Q2, our highest revenue per active client as a public company. We achieved this growth while driving leverage in our business. Q2 was our eighth consecutive quarter with a contribution margin greater than 30%. Adjusted EBITDA also exceeded our outlook and was $15.9 million or 4.7% of revenue. We also continued to gain market share and significantly outperformed the broader US apparel and accessories market during the quarter, highlighting the strength of our value proposition.

Speaker #3: As a public company, we achieved this growth while driving leverage in our business. Q2 was our eighth consecutive quarter with a contribution margin greater than 30%.

Speaker #3: Adjusted EBITDA also exceeded our outlook and was $15.9 million, or 4.7% of revenue. We also continued to gain market share and significantly outperform the broader US apparel and accessories market.

Speaker #3: During the quarter , highlighting the strength of our value proposition , our 9.4% year over year revenue growth in Q2 contrasts with the 0.5% contraction .

Matt Baer: Our 9.4% year-over-year revenue growth in Q2 contrasts with the 0.5% contraction the total US apparel, footwear, and accessories market sustained in the same period, according to the latest Circana data. Our growth this quarter was anchored by the Fix channel. By leveraging our unique curation capabilities and expert stylists, we've leaned into head-to-toe outfitting and strategic category expansion. This high touch approach is resonating deeply. Both our women's and men's Fix businesses grew double digits, contributing to a nearly 10% year-over-year increase in Fix average order value, our 10th consecutive quarter of growth. A key driver of this performance is the increased flexibility we've integrated into our service. Adoption of our larger Fixes, which offer up to eight items in a Fix versus the original five, continues to grow.

Speaker #3: The total US apparel , footwear and accessories market sustained in the same period , according to the latest Circrna data . Our growth this quarter was anchored by the fixed channel .

Speaker #3: By leveraging our unique curation and expert stylists , we've leaned into head to toe outfitting and strategic category expansion . This high touch approach is resonating deeply , both our women's and men's fixed businesses grew double digits , contributing to a nearly 10% year over year increase in fixed average order value .

Speaker #3: Our 10th consecutive quarter of growth , a key driver of this performance is the increased flexibility we've integrated into our service . Adoption of our larger fixes , which offer up to eight items in a fix versus the original five , continues to grow .

Speaker #3: We are also seeing high resonance with other newer formats, such as themed Fixes and Fixes built around a specific Freestyle item of a client's choosing.

Matt Baer: We are also seeing high resonance with other newer formats, such as themed fixes and fixes built around a specific Freestyle item of a client's choosing. The average order value for these fixes are, in aggregate, nearly double that of a traditional 5-item fix. We have also fundamentally improved the selection of items within each fix. The growth in fix average order value was driven by higher average unit retail, which grew 7.7% year-over-year, our sixth consecutive quarter of growth. The increase was largely fueled by a more compelling assortment and favorable mix. External pricing factors, including tariffs, were not a significant driver of the change. In Q2, we successfully captured seasonal winter demand for warm layers, with outerwear, a top growth category in both our women's and men's businesses, up 26% combined. We also saw strong demand for denim, up 17%.

Speaker #3: The average order value for these fixes is, in aggregate, nearly double that of a traditional five-item Fix. We have also fundamentally improved the selection of items within each Fix.

Speaker #3: The growth in fixed average order value was driven by higher average unit retail, which grew 7.7% year over year, our sixth consecutive quarter of growth.

Speaker #3: The increase was largely fueled by a more compelling assortment and favorable mix . External pricing factors , including tariffs , were not a significant driver of the change in Q2 .

Speaker #3: We successfully captured seasonal winter demand for warm layers with outerwear , a top growth category in both our women's and men's businesses , up 26% combined .

Speaker #3: We also saw strong demand for denim up 17% . In addition , activewear and athleisure were strong contributors to our performance in the quarter , growing 37% year over year combined .

Matt Baer: In addition, activewear and athleisure were strong contributors to our performance in the quarter, growing 37% year-over-year combined. We also saw strong demand for special occasion and social events or night out styles, which grew 46% this quarter. Of note, we have also been expanding our assortment in strategic categories where we are seeing increased demand, such as footwear and accessories. Footwear grew 33% year-over-year across our men's and women's businesses, with sneakers alone up 46%. Accessories grew 51% year-over-year across both lines of businesses. As we mentioned last quarter, we believe expanding our relevance in activewear, athleisure, footwear, and accessories can unlock a significant wallet share opportunity. We estimate our fair share within our existing client base in these categories represents approximately $1 billion in incremental revenue. We also continue to optimize our brand mix.

Speaker #3: We also saw strong demand for special occasion and social events where night out styles , which grew 46% this quarter . Of note , we have also been expanding our assortment in strategic categories where we are seeing increased demand , such as footwear and accessories .

Speaker #3: Footwear grew 33% year over year across our men's and women's businesses, with sneakers alone up 46%. Accessories grew 51% year over year across both lines of business.

Speaker #3: As we mentioned last quarter, we believe expanding our relevance in activewear, athleisure, footwear, and accessories can unlock a significant wallet share opportunity.

Speaker #3: We estimate our fair share within our existing client base in these categories represents approximately 1 billion in incremental revenue . We also continue to optimize our brand mix .

Speaker #3: We're pairing more of the brands our clients already know and love with private brands that are purpose-built from our data to offer exceptional quality and value within our private brands.

Matt Baer: We're pairing more of the brands clients already know and love with private brands that are purpose-built from our data to offer exceptional quality and value. Within our private brands, we saw strong performance from Market & Spruce, Montgomery Post, 41 Hawthorn, and WeWander, with revenue from each up more than 35% year-over-year. The work we've done to optimize our assortment and brand mix set the stage for a strong holiday performance. This achievement was fueled by a deeper selection of seasonally relevant merchandise and a strategic promotional cadence, which delivered record Freestyle sales during the Black Friday, Cyber Monday period and sustained broader momentum through the end of the calendar year. Importantly, we achieved this growth while maintaining strict discipline within our Fix business, driven primarily by our enhanced Freestyle exclusive promotional capabilities. We continue to be encouraged by our active client trends.

Speaker #3: We saw strong performance from Market and Spruce Montgomery Post 41 , Hawthorne , and we wander with revenue from each up more than 35% year over year .

Speaker #3: The work we've done to optimize our assortment and brand mix set the stage for a strong holiday performance. This achievement was fueled by a deeper selection of seasonally relevant merchandise and a strategic promotional cadence, which delivered record Freestyle sales during the Black Friday, Cyber Monday period and sustained broader momentum through the end of the calendar year.

Speaker #3: Importantly , we achieved this growth while maintaining strict discipline within our fixed business driven primarily by our enhanced freestyle exclusive promotional capabilities We continue to be encouraged by our active client trends .

Speaker #3: This quarter marked our seventh consecutive quarter of improvement in year over year . Active client growth rates , reflecting the disciplined and methodical progress we're making to build a healthier client base .

Matt Baer: This quarter marked our seventh consecutive quarter of improvement in year-over-year active client growth rates, reflecting the disciplined and methodical progress we're making to build a healthier client base. Of note, our men's business, after returning to sequential growth in active clients last quarter, returned to year-over-year growth in Q2. We're also excited by the early results we're seeing from family accounts, which enable a client to manage multiple accounts within a single household. This feature is emerging as a lower cost way to grow family wallet share while unlocking new ways for clients to shop for others and supporting gifting behavior. Our holiday results reinforce our confidence in its potential as an efficient acquisition lever in future key gifting moments. Taking a broader view of our performance, we ended Q2 with active clients of 2.3 million, in line with our expectations. Here are a few highlights.

Speaker #3: Of note , our men's business , after returning to sequential growth in active clients last quarter returned to year over year growth in Q2 .

Speaker #3: We're also excited by the early results we're seeing from family accounts, which enable a client to manage multiple accounts within a single household.

Speaker #3: This feature is emerging as a lower-cost way to grow family wallet share, while unlocking new ways for clients to shop for others and supporting gifting behavior.

Speaker #3: Our holiday results reinforce our confidence in its potential as an efficient acquisition lever in future key gifting moments . Taking a broader view of our performance , we ended Q2 with active clients of 2.3 million in line with our expectations .

Speaker #3: Here are a few highlights . New clients grew year over year for the second consecutive quarter , three month Ltvs for new clients have now grown year over year for ten consecutive quarters and remain at three year highs .

Matt Baer: New clients grew year-over-year for the second consecutive quarter. Three-month LTVs for new clients have now grown year-over-year for 10 consecutive quarters and remain at three-year highs. Re-engaged clients also grew for the second consecutive quarter, and the number of clients on recurring shipments continued to grow year-over-year. We also just completed a quarter in which we had the highest retention rate in nearly four years. We are encouraged by the early signals from Stylist Connect, our new platform for near real-time client stylist collaboration. While still a recent addition, it is already helping us strengthen relationships between our clients and our stylists.

Speaker #3: We engage clients also grew for the second consecutive quarter , and the number of clients on recurring shipments continued to grow year over year , and we also just completed a quarter in which we had the highest retention rate in nearly four years .

Speaker #3: We are encouraged by the early signals from Stylus Connect , our new platform for near real time client stylist collaboration . While still a recent addition , it is already helping us strengthen relationships between our clients and our stylists clients who engage in the feature are significantly more likely to request the same stylist for their next fix .

Matt Baer: Clients who engage in the feature are significantly more likely to request the same stylist for their next fix. We believe these positive trends confirm the improved quality of our new and returning client cohorts and will lead to greater client retention, higher revenue predictability, and improved profitability over the long term. We remain on track to deliver positive sequential net adds in Q3. A key driver of our performance is how we are leveraging technology and innovation, and AI specifically. Technology and innovation has been at the core of Stitch Fix's business since day one. Since our founding, Stitch Fix has capitalized on the latest technology advancements, as well as data science and proprietary algorithms to provide a superior retail experience. Our proprietary data and algorithms remain a competitive advantage.

Speaker #3: We believe these positive trends confirm the improved quality of our new and returning client cohorts, and will lead to greater client retention, higher revenue predictability, and improved profitability over the long term.

Speaker #3: We remain on track to deliver positive sequential net adds in Q3. A key driver of our performance is how we are leveraging technology and innovation.

Speaker #3: An AI specifically technology and innovation , has been at the core of Stitch Fix Inc business since day one . Since our founding , Stitch Fix has capitalized on the latest technology advancements as well as data science and proprietary algorithms to provide a superior retail experience .

Speaker #3: Our proprietary data and algorithms remain a competitive advantage . We know more about our clients , their fit , their budget , and their style preferences .

Matt Baer: We know more about our clients, their fit, their budget, and their style preferences prior to them ever receiving a Fix. We also have a continuous loop of both direct and indirect data from our clients, as well as nuanced insight on our merchandise assortment on how specific items fit. We have billions of data points to leverage. Because we know our clients so well, we are able to leverage AI to deliver incomparable client experiences. One way we are putting this data to work is through our AI style assistant, which empowers our stylists by helping clients better articulate what they're looking for. This tool captures richer signals that enable our stylists to curate Fixes that better meet each client's specific needs. We are also leveraging AI to inspire clients and help them discover the styles they will love.

Speaker #3: Prior to them ever receiving a Fix. We also have a continuous loop of both direct and indirect data from our clients, as well as nuanced insight on our merchandise assortment, on how specific items fit.

Speaker #3: We have billions of data points to leverage because we know our clients so well. We are able to leverage AI to deliver incomparable client experiences.

Speaker #3: One way we are putting this data to work is through our AI Style Assistant, which empowers our stylists by helping clients better articulate what they're looking for.

Speaker #3: This tool captures richer signals that enable our stylist to curate fixes that better meet each client's specific needs. We are also leveraging AI to inspire clients and help them discover the styles they will love.

Speaker #3: A clear example is Stitch Fix Vision . Our AI powered styling platform that provides clients with personalized imagery of them in a wide array of shoppable head to toe outfit recommendations based on their own style , profile and the latest fashion trends .

Matt Baer: A clear example is Stitch Fix Vision, our AI-powered styling platform that provides clients with personalized imagery of them in a wide array of shoppable head-to-toe outfit recommendations based on their own style profile and the latest fashion trends. Clients who have engaged with Vision use it on a consistent basis, with 75% returning to use it again in subsequent months. That engagement has translated into increased sales. We saw an over 100% lift in Freestyle spend over a 90-day period for clients who used the feature. As we further execute our strategy, we're confident in our ability to maintain a balance between growth and profitability. Our unique data-driven model, which combines personalized styling expertise, AI-powered recommendations, and a compelling assortment across Fix and Freestyle, enable us to meet clients where they are while driving both engagement and spend.

Speaker #3: Clients who have engaged with vision use it on a consistent basis , with 75% returning to use it again in subsequent months , and that engagement has translated into increased sales .

Speaker #3: We saw an over 100% lift in freestyle spend over a 90 day period . For clients who used the feature . As we further execute our strategy , we're confident in our ability to maintain a balance between growth and profitability .

Speaker #3: Our unique data driven model , which combines personalized styling expertise , AI powered recommendations , and a compelling assortment across fixed and freestyle , enable us to meet clients where they are while driving both engagement and spend .

Speaker #3: This integrated approach creates a powerful feedback loop between human insight and technology, strengthening client relationships and improving unit economics over time. The investments we're making in our client experience, AI capabilities, and merchandise mix are designed to drive durable revenue growth while preserving margin integrity.

Matt Baer: This integrated approach creates a powerful feedback loop between human insight and technology, strengthening client relationships and improving unit economics over time. The investments we're making in our client experience, AI capabilities, and merchandise mix are designed to drive durable revenue growth while preserving margin integrity. These strategic drivers are performing in line with our expectations, supporting our improved full-year revenue guidance as we remain focused on finishing the year strong. As the business continues to scale, we believe we will be able to generate increasing leverage and deliver consistent, sustainable profitability over time. I want to thank our team for their focus and execution, and our clients, partners, and shareholders for their support. With that, I'll turn it over to David to discuss our financial results and outlook in more detail.

Speaker #3: These strategic drivers are performing in line with our expectations, supporting our improved full-year revenue guidance. As we remain focused on finishing the year strong and as the business continues to scale, we believe we will be able to generate increasing leverage and deliver consistent, sustainable profitability over time.

Speaker #3: I want to thank our team for their focus and execution and our clients , partners and shareholders for their support . With that , I'll turn it over to David to discuss our financial results and in more detail .

Speaker #3: Thanks , Matt , and . good afternoon , everyone . Our second quarter results reflect continued progress against our strategy and the momentum we're building across the business .

David Aufderhaar: Thanks, Matt, and good afternoon, everyone. Our second quarter results reflect continued progress against our strategy and the momentum we're building across the business. We delivered strong revenue growth and disciplined expense management while continuing to invest in the client experience and innovation. These results underscore the benefits of our methodical approach to strengthening the business and positioning Stitch Fix for consistent and sustainable performance over time. Now let's turn to the numbers. Revenue was $341.3 million, up 9.4% year-over-year, exceeding our outlook. Fix average order value rose 9.8%, driven by more items per Fix and higher AUR, reflecting strong demand for larger Fixes and our improved assortment. We ended Q2 with 2.3 million active clients, in line with our expectations.

Speaker #3: We delivered strong revenue growth and disciplined expense management while continuing to invest in the client experience and innovation . These results underscore the benefits of our methodical approach to strengthening the business and positioning Stitch Fix Inc for consistent and sustainable performance over time Now let's turn to the numbers .

Speaker #3: Revenue was $341.3 million , up 9.4% year over year , exceeding our outlook fixed average order value rose 9.8% , driven by more items per fix and higher order , reflecting strong demand for larger fixes and our improved assortment .

Speaker #3: We ended Q2 with 2.3 million active clients , in line with our expectations . Revenue per active client was $577 , up 7.4% year over year , marking the eighth consecutive quarter of year over year growth and the highest rpac we've reported as a public company .

David Aufderhaar: Revenue per active client was $577, up 7.4% year-over-year, marking the eighth consecutive quarter of year-over-year growth and the highest RPAC we've reported as a public company. The growth in RPAC confirms that our strategy is effectively leading to increased client engagement and spend, ultimately driving a higher share of wallet from our clients. Gross margin was 43.6%, slightly above the midpoint of our FY26 range of 43% to 44%, with contribution margins remaining strong above 30% for the eighth straight quarter. Advertising was 8.5% of revenue in Q2, slightly below our expected range of 9% to 10%. As we've discussed, we are being deliberate in how we invest, prioritizing efficiency and long-term client quality over near-term volume.

Speaker #3: The growth in RPAC confirms that our strategy is effectively leading to increased client engagement and spend, ultimately driving a higher share of wallet from our clients.

Speaker #3: Gross margin was 43.6% , slightly above the midpoint of our FY 26 range of 43 to 44% , with contribution margins remaining strong above 30% for the eighth straight quarter .

Speaker #3: Advertising was 8.5% of revenue in Q2 , slightly below our expected range of 9 to 10% . As we've discussed , we are being deliberate in how we invest , prioritizing efficiency and long term client quality over near-term volume Q2 adjusted EBITDA came in at $15.9 million , or 4.7% margin , outperforming expectations on strong revenue and disciplined expense management .

David Aufderhaar: Q2 adjusted EBITDA came in at $15.9 million, or 4.7% margin, outperforming expectations on strong revenue and disciplined expense management. We ended Q2 with $240.5 million in cash and investments and no debt. Inventory was $122.1 million, up 11.4% year-over-year, reflecting investments in our client experience and increased demand. Turning to our outlook for Q3 and FY26. For full year FY26, we expect total revenue to be between $1.33 and $1.35 billion. We expect total adjusted EBITDA for the year to be between $42 and $50 million, and we continue to expect to be free cash flow positive for the full year.

Speaker #3: We ended Q2 with $240.5 million in cash and investments and no debt inventory was $122.1 million , up 11.4% year over year , reflecting investments in our client experience and increased demand .

Speaker #3: Turning to our outlook for Q3 and FY 26 . For full year FY 26 , we expect total revenue to be between 1.33 and $1.35 billion .

Speaker #3: We expect total adjusted EBITDA for the year to be between $42 and $50 million, and we continue to expect to be free cash flow positive for the full year. For Q3, we expect total revenue to be between $330 and $335 million.

David Aufderhaar: For Q3, we expect total revenue to be between $330 and $335 million. We expect Q3 adjusted EBITDA to be between $7 and $10 million. For the second half of the year, we're tightening our revenue guidance range, reflecting greater confidence in the underlying momentum we're seeing, while continuing to be thoughtful and realistic about the environment ahead. While we expect growth rates to moderate as we lap a strong two-year AOV stack, we believe there remains opportunity to continue driving steady AOV improvement. Ongoing enhancements to our client experience, including a stronger, more relevant assortment, continued category expansion, increased Fix flexibility, and the use of AI to support more dynamic client engagement, provide a durable foundation for that progress. At the same time, we believe our methodical approach to rebuilding our active client base is working.

Speaker #3: We expect Q3 adjusted EBITDA to be between 7 and $10 million . For the second half of the year . We're tightening our revenue guidance range , reflecting the greater in the .

Speaker #3: Underlying momentum we're seeing while continuing to be thoughtful and realistic about the environment ahead . While we expect growth rates to moderate as we lap a strong two year AOV stack , we believe there remains opportunity to continue driving steady AOV improvement .

Speaker #3: Ongoing enhancements to our client experience , including a stronger , more relevant assortment , continued category expansion , increased fixed flexibility , and the use of AI to support more dynamic client engagement .

Speaker #3: Provide a durable foundation for that progress. At the same time, we believe our methodical approach to rebuilding our active client base is working.

Speaker #3: We're encouraged by continue improvement in active client trends and remain confident that sequential net active Client adds will be positive in Q3 over time , as both AOV and active clients improve , we believe this positions the business for compounding growth We continue to expect full year gross margin to be approximately 43 to 44% , and full year advertising costs to be between 9% and 10% of revenue In closing , we're encouraged by the progress we're making across the business .

David Aufderhaar: We're encouraged by continued improvement in active client trends and remain confident that sequential net active client adds will be positive in Q3. Over time, as both AOV and active clients improve, we believe this positions the business for compounding growth. We continue to expect full-year gross margin to be approximately 43% to 44% and full-year advertising costs to be between 9% and 10% of revenue. In closing, we're encouraged by the progress we're making across the business. Our focus on delivering a strong client experience, rebuilding our active client base with discipline, and maintaining financial rigor is driving improved performance and positioning us well for the remainder of the year. With that, operator, we can open up the line for Q&A.

Speaker #3: Our focus on delivering a strong client experience, rebuilding our active client base with discipline, and maintaining financial rigor is driving improved performance and positioning us well for the remainder of the year.

Speaker #3: With that operator , we can open up the line for Q&A

Speaker #1: We will now begin the question and answer session . Please limit yourself to one question and one follow up . If you would like to ask a question , please press star one on your telephone keypad .

Operator 2: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dana Telsey from Telsey Advisory Group. Please go ahead.

David Aufderhaar: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dana Telsey from Telsey Advisory Group. Please go ahead.

Speaker #1: To withdraw your question , please press star one again . Please pick up your handset when asking a question . If you are muted locally , please remember to unmute your device .

Speaker #1: Please . While we compile the Q&A roster Your first question comes from the line of Dana Kessel from Tesla Advisor Group . Please go ahead .

Speaker #4: Hi everyone . Nice to see the progress . Wanted to get some more color on what you're seeing from the current consumer . It sounds like the orders are being well accepted .

Dana Telsey: Hi, everyone. Nice to see the progress. Wanted to get some more color on what you're seeing from the current consumer. It sounds like the AURs are being well accepted. Is that existing brands, new brands? You've brought on new brands over the past couple of months. How has that gone? Would love to know more about active client growth and sequentially how you're thinking about it going forward. Thank you.

Speaker #4: Is that existing brands, new brands you've brought on, new brands over the past couple of months? How has that gone?

Speaker #4: And then we'd love to know more about active client growth and, sequentially, how you're thinking about it going forward. Thank you.

Speaker #5: Hey, Dana, it's Matt. I appreciate the recognition on the progress that we've made. The team has done a phenomenal job driving this really continued outperformance from a revenue growth standpoint.

Matt Baer: Hey, Dana, it's Matt. Appreciate the recognition on the progress that we've made. The team has done a phenomenal job driving this really continued outperformance from a revenue growth standpoint. Appreciate that. Heard about three questions there, just a kind of a check in terms of how we're seeing the consumer, and how that has impacted our AUR performance, the impact between private brands and national brands, and then kind of an update on our active client count. I'll answer the first two, and David can jump in with additional color as well as answer the third on the active client count piece.

Speaker #5: So appreciate that . I heard about three questions there . Just a kind of a check in terms of how we're seeing the consumer and how that is impacted our our performance .

Speaker #5: The impact between private brands and national brands. And then kind of an update on our active client count. I'll answer the first two.

Speaker #5: And David can jump in with additional color as well. As to the answer to the third question on the active client count piece, in terms of the consumer, one of the things that gives us additional confidence in our ability to continue to perform and sustain this momentum is that we're seeing really equally positive performance across all different income cohorts within our client base.

David Aufderhaar: In terms of the consumer, one of the things that gives us additional confidence in our ability to continue to perform and sustain this momentum is that we're seeing really equally positive performance across all different income cohorts within our client base. We're seeing that strength really across the board. The increase in AUR that we've been able to deliver is really reflective of continuing to improve the quality of our assortment overall. Within our private brand portfolio, we've really been investing to deliver an even higher quality product, but maintaining exceptional value for the end consumer. Our clients have really resonated with that. That's why we were excited to share the outsized growth that we're seeing within many of our private brands within our portfolio.

Matt Baer: In terms of the consumer, one of the things that gives us additional confidence in our ability to continue to perform and sustain this momentum is that we're seeing really equally positive performance across all different income cohorts within our client base. We're seeing that strength really across the board. The increase in AUR that we've been able to deliver is really reflective of continuing to improve the quality of our assortment overall. Within our private brand portfolio, we've really been investing to deliver an even higher quality product, but maintaining exceptional value for the end consumer. Our clients have really resonated with that. That's why we were excited to share the outsized growth that we're seeing within many of our private brands within our portfolio.

Speaker #5: We're seeing that strength really across the board, and the increase in orders that we've been able to deliver is really reflective of continuing to improve the quality of our assortment overall within our private brand portfolio.

Speaker #5: We've really been investing to deliver an even higher quality product , but maintaining exceptional value for the end consumer and our clients have really resonated with that .

Speaker #5: That's why we were excited to share the outsized growth that we're seeing within many of our private brands , within our portfolio . We also continue to strategically add market and national brands in order to meet the needs of our clients and fill white space .

David Aufderhaar: We also continue to strategically add market and national brands in order to meet the needs of our clients and fill white space. In addition to the brand piece, something else that we've talked about on prior calls that's part of our merchandise focus transformation is investing in newness and making sure that we stand for style and trend. In Q2, sales from new styles was up roughly 50% year-over-year. That investment that we're making into new product is also resonating extremely well with our clients. As you know, having the best assortment is critical for delivering outperformance and revenue growth. We really do feel good about the work that we've done there and the way that it's helping to drive that performance across the board. Dana, on active clients.

Matt Baer: We also continue to strategically add market and national brands in order to meet the needs of our clients and fill white space. In addition to the brand piece, something else that we've talked about on prior calls that's part of our merchandise focus transformation is investing in newness and making sure that we stand for style and trend. In Q2, sales from new styles was up roughly 50% year-over-year. That investment that we're making into new product is also resonating extremely well with our clients. As you know, having the best assortment is critical for delivering outperformance and revenue growth. We really do feel good about the work that we've done there and the way that it's helping to drive that performance across the board.

Speaker #5: In addition to the brand piece, something else that we've talked about on prior calls that's part of our merchandise focus transformation is investing in newness and making sure that we stand for style and trend.

Speaker #5: In the second quarter, sales from new styles was up roughly 50% year over year. So, that investment that we're making into new product is also resonating extremely well with our clients.

Speaker #5: As you know , having the best assortment is critical for delivering outperformance in revenue growth . So we really do feel good about the work that we've done there and the way that it's helping to drive that performance across the board .

Speaker #3: And then Dana , on on active clients , first , the results we saw this quarter were definitely in line with our expectations , sort of as a reminder , we have seasonality really in our in our active clients where Q2 and Q4 tend to be a little bit seasonally softer quarters for us around active client growth .

David Aufderhaar: Dana, on active clients.

David Aufderhaar: First, the results we saw this quarter were definitely in line with our expectations. Sort of as a reminder, we have seasonality really in our active clients, where Q2 and Q4 tend to be, you know, a little bit seasonally softer quarters for us around active client growth. I'm certainly encouraged by being able to continue to commit to seeing, you know, sequential client growth in Q3, and we're confident we remain on track to do that. You know, size and shape, we're just returning to quarter-over-quarter growth, so we probably anticipate that Q3 client growth to be a little less than 1% quarter over quarter. Again, encouraged with those results.

Speaker #3: And and certainly encouraged by being able to continue to commit to seeing sequential client growth in Q3 . And we're confident we remain on track to do that .

Speaker #3: You know , size and shape were just returning to quarter over quarter growth . So we probably anticipate that Q3 client growth to be a little less than 1% quarter over quarter .

Speaker #3: But again, encouraged with those results and taking a step back, you know, we continue to be encouraged with the overall trends that Matt called out earlier in his remarks around new client acquisition.

David Aufderhaar: Taking a step back, you know, we continue to be encouraged with the overall trends that Matt called out earlier in his remarks around new client acquisition, re-engage clients, and client retention. That really goes back to that methodical approach that we've been talking about the last few quarters, where we're really focused on rebuilding a healthy client base, and that continues to be our focus. You know, one of the metrics I know we've been calling out a lot lately is that 90-day LTV, and that was up 5% year-over-year. It was the 10th quarter in a row that we've seen year-over-year growth. Just really confirming that we're bringing healthy clients into the mix. From a go-forward perspective, you know, we'll provide more detail on specific numbers around Q4 next quarter.

Speaker #3: ReEngage clients and client retention , and that really goes back to that methodical approach that we've been talking about the last few quarters where we're really focused on on rebuilding a healthy client that continues to be our focus .

Speaker #3: You know , one of the metrics I know we've been calling out a lot lately is that 90 day LTV , and that was up 5% year over year .

Speaker #3: It was the 10th quarter in a row that we've seen year-over-year growth. And so, just really confirming that we're bringing healthy clients into the mix.

Speaker #3: And from a go forward perspective , you know , we'll provide more detail on specific numbers around Q4 next quarter . But our focus continues to be around sustainable , profitable client growth and using that methodical approach , we absolutely expect year over year comps to continue to improve .

David Aufderhaar: Our focus continues to be around sustainable, profitable client growth and using that methodical approach. We absolutely expect, you know, year-over-year comps to continue to improve. Our goal is to return to year-over-year active client growth in FY27. Definitely encouraged with the results we're seeing.

Speaker #3: And and our goal is to is to return to year over year active client growth in FY 27 . So so definitely encouraged with with the results we're seeing

Speaker #4: Thank you .

Dana Telsey: Thank you.

Speaker #1: Thank you very much for your question. Your next question comes from the line of Dylan Kardon from William Blair. Dylan, your line is now open.

Operator 2: Thank you very much for your question. Your next question comes from the line of Dylan Carden from William Blair. Dylan, your line is now open.

Operator: Thank you very much for your question. Your next question comes from the line of Dylan Carden from William Blair. Dylan, your line is now open.

Speaker #6: Thanks . The comments around revenue per decelerating as you laugh harder comparisons . I mean , you already kind of have started to lap some of those comparisons .

Dylan Carden: Thanks. The comments around revenue per decelerating as you lap harder comparisons. I mean, you already kind of started to lap some of those comparisons. Can you give a sense sort of what's behind that or is that just sort of general caution? I have some follow-ups.

Speaker #6: So can you give a sense of what's behind that , or is that just sort of general caution I have a some follow ups .

Speaker #3: Yeah. Dylan, are you talking about sort of the back half revenue comps?

David Aufderhaar: Yeah. Dylan, are you talking about sort of the back half revenue comps?

Speaker #6: Correct .

Dylan Carden: Right.

Speaker #3: Yeah . Got it . Yeah . So , you know , over the last couple quarters , I think we've consistently guided to a deceleration in the back half of the year .

David Aufderhaar: Yeah. Got it. Yeah. You know, over the last couple quarters, I think we've consistently guided to a deceleration in the back half of the year. Actually this back half guide is an improvement from last quarter's guide. There are a couple factors that I'd call out. You know, first is what we have been discussing the last couple of quarters. There are just more challenging AOV comps in the back half of this year. You know, we've had 10 consecutive quarters of AOV growth, and Q3 and Q4 last year had AOV growth of 10% and then 12%. Our guidance in the back half of this fiscal year still assumes healthy AOV growth, but it's probably in the 4% to 6% range. That's the first factor.

Speaker #3: And actually this back half guide is an improvement from last quarter's guide . But there are a couple factors that I'd that I'd call out , you know , first is what we have been discussing the last couple of quarters .

Speaker #3: There are just more challenging AOV comps in the back half of this year. You know, we've had ten consecutive quarters of AOV growth, and Q3 and Q4 last year had AOV growth of 10%.

Speaker #3: And then 12%. And our guidance in the back half of this fiscal year assumes healthy AOV growth, but it's probably in the 4% to 6% range.

Speaker #3: So that's that's the first factor . The second , when you think about sort of Q2 to Q3 , we had a really strong holiday season compared to last year in Q2 .

David Aufderhaar: The second, when you think about sort of Q2 to Q3, we had a really strong holiday season compared to last year in Q2, and that doesn't necessarily play forward into future quarters. Like one data point there, December was our highest revenue comp in the quarter at around 12% year-over-year growth. And that's also, you know, the holiday period also created probably a little bit of a pull forward activity from Q3 into Q2. Then lastly, you know, considering the macro environment, current trends in consumer sentiment, and some of the volatility that we're thinking, we still think it's prudent to assume some headwinds in spending in the coming quarters. All of that's factored into our guide for the year.

Speaker #3: And that doesn't necessarily play forward into future quarters . Like one data point there , December was our highest revenue comp in the quarter at around 12% year over year growth .

Speaker #3: And and that's also , you know , the holiday period also created probably a little bit of a pull forward activity from Q3 into Q2 .

Speaker #3: And then lastly , you know , considering the macro environment and current trends in consumer sentiment and some of the volatility that we're thinking , we still think it's prudent to assume some headwinds in spending in in the coming quarters .

Speaker #3: And so all of that's factored into our guide for the year . But again , we're really encouraged with what we're seeing . And we're really encouraged with the guide that we've been able to provide where we raise the low end of the full year of the revenue guide .

David Aufderhaar: Again, we're really encouraged with what we're seeing, and we're really encouraged with the guide that we've been able to provide, where we raised the low end of the full-year revenue guide. After significantly increasing our full-year guide last quarter, you know. As a reminder, sort of if you take the last two quarters and add them together, we raised the midpoint of our revenue guide by about $35 million over those two quarters and our EBITDA by almost $9 million. Still really encouraged with what we're seeing with those trends.

Speaker #3: And and after significantly increasing our full year guide last quarter , you know , as a reminder , sort of if you take the last two quarters and add them together , we raise the midpoint of our revenue guide by about $35 million .

Speaker #3: Over those two quarters . And our EBITDA by almost almost 9 million . So , so still really encouraged with what we're seeing with those trends .

Speaker #6: Very good . Thank you . And then I'm curious on the assortment , Matt , maybe do you kind of have it where you want it now , particularly as you start thinking about maybe the women's business that inflects ?

Dylan Carden: Very good. Thank you. I'm curious on the assortment, Matt, maybe. Do you kind of have it where you want it now, particularly as you start thinking about maybe the women's business with that in flux?

Speaker #5: Yeah . Hey , Dylan , I appreciate the question . Ensuring that we have best in class assortment . That's a perpetual area of focus for us .

Matt Baer: Yeah. Hey, Dylan, I appreciate the question. Ensuring that we have best in class assortment, that's a perpetual area of focus for us. We're always gonna challenge ourselves to make sure that we have the right brands, the right mix, the right breadth and depth within that. We're always gonna continue to drive an improvement there. As we've talked about previously, the initial focus as part of our transformation was more heavily weighted towards our men's business. We feel really good about where we are there. We also feel great about the progress that we've made across the board within our women's business. As I noted, our women's Fix business was up double digits from a revenue perspective last quarter, which is, you know, really a strong signal in terms of the strength there.

Speaker #5: We're always going to challenge ourselves to make sure that we have the right brands, the right mix, the right breadth and depth within that.

Speaker #5: And we're always going to continue to to drive an improvement . There . As we've talked about previously , the initial focus as part of our transformation was more heavily weighted towards our men's business .

Speaker #5: We feel really good about where we are there, and we also feel great about the progress that we've made across the board within our women's business.

Speaker #5: As I noted , our women's fix business was up double digits from a revenue perspective last quarter , which is , you know , really a strong signal in terms of the strength there , but also recognition that we still have opportunity to improve that assortment , even further , which gives us even greater confidence in our ability to sustain the gains that we're seeing across the board .

Matt Baer: Also recognition that we still have opportunity to improve that assortment even further, which gives us even greater confidence in our ability to sustain the gains that we're seeing across the board. In addition to that, I would just point us back to something that was in the prepared remarks and that we've talked about previously around this billion-dollar wallet share opportunity that we have with our existing client base across footwear, accessories, activewear, and athleisure. We're delivering outsized growth in those categories, but because of the relatively smaller base that they started at, we still have an exceptional opportunity to continue to lean in there. That's part of, again, what enables us to increase engagement with clients, deliver success with larger fixes.

Speaker #5: In addition to that, I would just point us back to something that was in the prepared remarks and that we've talked about previously around this billion-dollar wallet share opportunity that we have with our existing client base across footwear, accessories, and activewear and athleisure.

Speaker #5: We're delivering outsized growth in those categories. But because of the relatively smaller base that they started at, we still have an exceptional opportunity to continue to lean in there.

Speaker #5: And that's part of , again , what enables us to increase engagement with clients , deliver success with larger fixes , increase our wallet share , and ultimately continue to deliver these outsized market share gains that we've delivered .

David Aufderhaar: Increase our wallet share and ultimately continue to deliver these outsized market share gains that we've delivered.

Matt Baer: Increase our wallet share and ultimately continue to deliver these outsized market share gains that we've delivered.

Speaker #6: Excellent. And then just last one—on the repeat customers that are some of the higher that you've seen, has that proven out to be greater?

Dylan Carden: Excellent. Just last one on the repeat customers that are some of the higher that you've seen. Is that proven out to be greater wallet share across use cases? Is that just sort of spending more on existing categories? How should we think about kind of how people are coming to you more and more?

Speaker #6: Wallet share across use cases? Is that just sort of spending more on existing categories? How should we think about kind of how people are coming to you more and more?

Speaker #5: So, if I understand the question correctly, Dylan, the work that we do is to ensure that we are able to serve clients across a variety of use cases, and whatever use case that a client comes to us for.

David Aufderhaar: If I understand the question correctly, Dylan, the work that we do is to ensure that we are able to serve clients across a variety of use cases. Whatever use case that a client comes to us for example, if they're starting a new job and we need to update their wardrobe with the appropriate workwear, through that client stylist relationship, we're also able to navigate them to other use cases. It's why we're excited to share in the prepared remarks the success that we've seen, for example, in social occasion dressing and in night out. You know, that's also why we're seeing that outsized growth in activewear and athleisure as well.

Matt Baer: If I understand the question correctly, Dylan, the work that we do is to ensure that we are able to serve clients across a variety of use cases. Whatever use case that a client comes to us for example, if they're starting a new job and we need to update their wardrobe with the appropriate workwear, through that client stylist relationship, we're also able to navigate them to other use cases. It's why we're excited to share in the prepared remarks the success that we've seen, for example, in social occasion dressing and in night out. You know, that's also why we're seeing that outsized growth in activewear and athleisure as well.

Speaker #5: For example, if they're starting a new job and we need to update their wardrobe with the appropriate workwear through that client-stylist relationship, we're also able to navigate them to other use cases.

Speaker #5: It's why we're excited to share in the prepared remarks . The success that we've seen . For example , in social occasion , dressing and night out .

Speaker #5: And, you know, that's also why we're seeing that outsized growth in activewear and athleisure as well, because we have such great assortment across the board for all of these different use cases. That expansion of use cases with our clients continues to be one of the drivers.

David Aufderhaar: Because we have such great assortment across the board for all of these different use cases, that expansion of use cases with our clients continues to be one of the drivers that's helping propel the revenue growth. We're gonna continue to lean into that, as well as continue to lean into head-to-toe outfitting across footwear and accessories.

Matt Baer: Because we have such great assortment across the board for all of these different use cases, that expansion of use cases with our clients continues to be one of the drivers that's helping propel the revenue growth. We're gonna continue to lean into that, as well as continue to lean into head-to-toe outfitting across footwear and accessories.

Speaker #5: That's that's helping propel the revenue growth . We're going to continue to lean into that as well as continue to lean into head to toe outfitting across footwear and accessories .

Speaker #1: Thank you very much for your question. Your next question comes from the line of Jessica Tien from Bernstein. Jessica, your line is now open.

Operator 2: Thank you very much for your question. Your next question comes from the line of Jessica Tian from Bernstein. Jessica, your line is now open.

Operator: Thank you very much for your question. Your next question comes from the line of Jessica Tian from Bernstein. Jessica, your line is now open.

Speaker #7: Hi . Thank you for taking my question and congrats on the quarter . I had a two part question on the guide , so first on the H2 guide , it looks like the Q2 ve on adjusted EBITDA didn't fully flow through to the full year outlook .

Jessica Tian: Hi. Thank you for taking my question, and congrats on the quarter. I had a two-part question on the guide. First, on the H2 guide, it looks like the Q2 beat on adjusted EBITDA didn't fully flow through to the full year outlook. Should we read that primarily as conservatism on your part, or is there anything in the underlying margin trends that caused you to hold back some of that upside? Second, on the Q3 active client inflection, sequential inflection, with new clients growing year-over-year for the second consecutive quarter and 5-year low dormancies last quarter, can you talk about what's driving the expected sequential increase in the adds? Should we think about that improvement as coming more from reduced dormancy or is it coming more from new clients? Thank you.

Speaker #7: Should we read that primarily as conservatism on your part , or is there anything in the underlying margin trend that caused you to hold back some of that upside And then second , on the Q3 , active client inflection , sequential inflection with new clients growing year over year for the second consecutive quarter and five year low dormancy last quarter .

Speaker #7: Can you talk about what's driving the expected sequential increase in net adds ? Should we think about that improvement as coming more from reduced dormancy , or is it coming more from new clients ?

Speaker #7: Thank you

Speaker #3: Yeah . Thanks , Jessica . On the on the EBITDA guide , I think we're really encouraged with increasing , you know , even the full year guide , if you look at the full year guide , I think we increased the low end of the guide by around $4 million .

David Aufderhaar: Yeah. Thanks, Jessica. On the EBITDA guide, I think we're really encouraged with increasing, you know, even the full year guide. If you look at the full year guide, I think we increased the low end of the guide by around $4 million and the high end of the guide by $2 million. You know, definitely still feel like we've got a very healthy flow through of EBITDA for the year. On the active clients, on sort of the sequential, you know, I think Matt might have called out in some of his prepared remarks as well, but what we're really seeing strength across all three of those, you know, cohorts that we tend to call out. The new acquisition was up year over year for the second quarter in a row.

Speaker #3: And the high end of the guide by by 2 million . And so , you know , definitely still feel like we've got a very healthy flow through of EBITDA for the for the year on , on the active clients on sort of the sequential , you know , I think Matt might have called out in some of his prepared remarks as well .

Speaker #3: But we're really seeing strength across all three of those . You know , cohorts that we tend to call out that , you know , new , new acquisition was up year over year for the second quarter in a row , reengaging clients was up for the second quarter as well , from a year over year perspective and client retention is definitely looking healthier than it's been in in quite a long time .

David Aufderhaar: Reengaging clients was up for Q2 as well, from a year-over-year perspective. Client retention is definitely looking healthier than it's been in quite a long time. I think that is a big part of our focus, that client retention side, and it almost comes back to that full loop of making sure that we are bringing in those high LTV clients, you know, that engage with the service. Also for our existing client base, all of the new client features, you know, the improved assortment that Matt called out as well, all of those things, you know, just create stickier relationships from a client perspective as well.

Speaker #3: And I think that is a big part of our focus is , is that client retention side , and it almost comes back to that full loop of making sure that we are bringing in those high LTV clients , you know , that engage with the service .

Speaker #3: And also for our existing client base, all of the new client features, the improved assortment that Matt called out as well, all of those things just create stickier relationships from a client perspective as well.

Speaker #3: And so all three of those things are sort of trending in the right direction. And that's why we've felt comfortable really calling out that sequential improvement and the sequential quarter-over-quarter increase in Q3.

David Aufderhaar: All three of those things are sort of trending in the right direction, and that's why we've felt comfortable really calling out that sequential improvement and the sequential quarter-over-quarter increase in Q3.

Speaker #1: Thank you very much for your question. We will now move on to the next question from David Bellinger at Mizuho. David, your line is now open.

Operator 2: Thank you very much for your question. We will now move on to the next question from David Bellinger from Mizuho. David, your line is now open.

Operator: Thank you very much for your question. We will now move on to the next question from David Bellinger from Mizuho. David, your line is now open.

Speaker #8: Hey , everyone . Thank you . I want to ask on the Q3 guidance , revenue growth up something above 2% at the midpoint .

David Bellinger: Hey, everyone. Thank you. I wanna ask on the Q3 guidance, revenue growth up something above 2% at the midpoint. I think if I'm hearing you correctly, a lot of that deceleration from this quarter has to do with the lapping positive revenue growth last year, some of the AOV uptick. Is there anything else that explains the deceleration? Any other context around the external pressures that you've started to factor into the guidance? You got gas prices moving up. Is any of that starting to show up in the business? And then can you just remind us how gas prices moving higher has historically affected Stitch Fix?

Speaker #8: And I think if I'm hearing you correctly , a lot of that deceleration from this quarter has has to do with lapping positive revenue growth last year .

Speaker #8: Some of the AOV uptick. Is there anything else that explains the deceleration? Any other context around the external pressures that you've started to factor into the guidance—you've got gas prices moving up?

Speaker #8: Is any of that starting to show up in the business? And then, can you just remind us how gas prices moving higher have historically affected Stitch Fix?

Speaker #3: Yeah , David , I think I think outside of you know , we called out the AOV comps earlier , you know , and that is certainly probably the bigger factor around sort of the change quarter , quarter .

David Aufderhaar: Yeah, David. I think outside of, you know, we called out the AOV comps earlier, you know, and that is certainly probably the bigger factor around sort of the change quarter-over-quarter. I think the second call-out was really the holiday period. You know, we had a really strong holiday period this Q2, and so I think that's a big part of sort of when you just think about the sequentials, where that's not necessarily something that plays forward. On the macro side, you know, definitely when you see the consumer sentiment, where it is, the February jobs report, gas prices certainly going up, you know, and gas prices for us, that's not discretionary spend.

Speaker #3: I think the second call out was was really the holiday period . You know , we had a really strong holiday period this , this Q2 .

Speaker #3: And so I think that's a big part of, sort of, when you just think about the sequentials—where that's not necessarily something that plays forward.

Speaker #3: And then on the macro side , you know , definitely when you know , when you see the consumer sentiment , where it is the February jobs report , gas prices certainly going up , you know , and gas prices for us , that's you know , that's not discretionary spend .

Speaker #3: And so if someone's having to spend more on gas , that just means less in their wallet for discretionary spend like apparel . And so certainly those things , you know , we've taken into account in that back half guide , you know , the other thing that you can see though is , you know , because the point in time where we are this year , you can sort of back into a Q4 guide as well .

David Aufderhaar: If someone's having to spend more on gas, that just means less in their wallet for discretionary spend like apparel. Certainly those things, you know, we've taken into account in that back half guide. You know, the other thing that you can see, though, is that, you know, because the point in time where we are this year, you can sort of back into a Q4 guide as well. You know, we're really encouraged that, you know, between Q3 and Q4, you still see an acceleration in that revenue growth as well at the midpoint, where the midpoint in Q4 calculates to something closer to 4%. Definitely really encouraged with that as we close out the year.

Speaker #3: And , you know , we're really encouraged that , you know , between Q3 and Q4 , you still see an acceleration in that revenue growth as well at the midpoint where the midpoint in Q4 calculates to something closer to to 4% .

Speaker #3: And so , so definitely really encourage with that , as we close out the year .

Speaker #5: David, what I'll add as well is, while not to minimize the impact of gas or challenges on the consumer and the broader macro environment, something that we've talked about previously is just how we're uniquely situated to perform really well.

Matt Baer: David, what I'll add as well is while not to minimize the impact of gas or challenges on the consumer and the broader macro environment, something that we've talked about previously is just how we're uniquely situated to perform really well, you know, if and when the overall wallet for our clients shrink. Our clients and stylists have a very deep and enduring relationship. That allows them to have a real conversation around how budgets might be shifting month to month, week to week, quarter to quarter. We have the breadth and depth of assortment across all different price points, so we can meet our clients where they are at any given time. We continue to see us, you know, perform relatively well in those periods where the consumer is potentially challenged.

Speaker #5: You know , if and when the overall wallet for our clients shrink , our clients and stylists have a very deep and enduring relationship that that allows them to have a real conversation around how budgets might be shifting month to month , week to week , quarter to quarter , and we have the breadth and depth of assortment across all different price points so we can meet our clients where they are at any given time .

Speaker #5: And we continue to see us , perform relatively well in those periods where the consumer is potentially challenged . And that's what gives us so much confidence that , you know , wherever the overall market goes , we'll continue to be a market share gainer

Matt Baer: That's what gives us so much confidence that, you know, wherever the overall market goes, we'll continue to be a market share gainer.

Speaker #8: Very helpful. My second question: I want to ask about GLP-1 usage. That seems to be a relatively new and positive customer driver.

David Bellinger: Very helpful. My second question, I want to ask about GLP-1 usage. That seems to be a relatively new and positive customer driver. Can you help frame up any exposure to the business? Are these customers more sticky, more engaged, and can you simply get more of them as GLP-1 usage becomes increasingly popular? Thank you.

Speaker #8: Can you help frame up any exposure to the business—are these customers more sticky, more engaged? And can you simply get more of them as GLP-1 usage becomes increasingly popular?

Speaker #8: Thank you .

Speaker #5: Yeah , David , I appreciate that question as well . Again , the uniqueness of our service and that superior level of service that we provide each of our clients positions us extremely well to serve clients .

Matt Baer: Yeah, David, I appreciate that question as well. Again, the uniqueness of our service and that superior level of service that we provide each of our clients positions us extremely well to serve clients going through a body transformation. We've made it a real point of emphasis to market that capability of our service. We're out in market and have been for a while explaining to consumers that are potentially on a GLP-1 medication that as their body transforms, they have the ability to work with a personal stylist to help ensure that they have everything that they need so that they can dress in clothing that fits at each stage of that weight loss journey that they're on.

Speaker #5: Going through a body transformation . And we've made it a real point of emphasis to market that capability of our service . So we're out in market and have been for a while , explaining to consumers that are potentially on a GLP one medication that , as their body transforms , they have the ability to work with a personal stylist to help ensure that they have everything that they need so that they can dress in clothing that fits at each stage of that weight loss journey that they're on .

Matt Baer: We've seen really positive results in terms of how that's helping them improve their confidence, how that's helping them improve their ability, you know, to get dressed and outfit themselves on a daily basis. We've seen that also show up in our data as well. Client mentions of weight loss in their Fix request notes, as an example, has tripled over the last two years, and it's actually surged 75% year-over-year just this past quarter. You know, what that tells me is that the work that we've been doing to improve the segmentation and targeting within our marketing capabilities is working extremely well, and that the quality and superiority of our service is really resonating with those clients.

Speaker #5: We've seen really positive results in terms of how that's helping them improve their confidence, how that's helping them improve their ability, you know, to get dressed and outfit themselves on a daily basis.

Speaker #5: And we've seen that also show up in our data as well . Client mentions of weight loss in their fixed request notes . As an example , has tripled over the last two years , and it's actually surged 75% year over year .

Speaker #5: Just this past quarter. And you know what that tells me is that the work that we've been doing to improve the segmentation and targeting within our marketing capabilities is working extremely well, and that the quality and superiority of our service is really resonating with those clients.

Speaker #5: We'll continue to lean in, and we'll continue to serve that demographic at a really high level.

Matt Baer: We'll continue to lean in, and we'll continue to serve that demographic at a really high level.

Speaker #1: Thank you . There are no further questions at this time . I will now turn the call back to Matt Baer , CEO , for closing remarks .

Operator 2: Thank you. There are no further questions at this time. I will now turn the call back to Matt Baer, CEO, for closing remarks.

Operator: Thank you. There are no further questions at this time. I will now turn the call back to Matt Baer, CEO, for closing remarks.

Speaker #5: Thanks. To wrap up, as I said, we're incredibly pleased with the strong results we delivered this quarter, and the improved guidance that we shared for the back half of the year.

Matt Baer: Thanks. To wrap up, as I said, we're incredibly pleased with the strong results we delivered this quarter and the improved guidance that we shared for the back half of the year. We believe we're uniquely positioned to lead in this moment of AI innovation, and that's because of just how seamlessly data science and AI are integrated into our business, how deeply and personally we know our clients, and how holistically we've integrated our expert stylists. Due to the significant improvements we've made to our experience and assortment through our transformation, we're capturing increased market share and outperforming the broader apparel retail market. We're also building a stronger client base. That's with seven consecutive quarters of improving year-over-year active client trends. Also, as we noted, the expected sequential growth in active client count in Q3.

Speaker #5: We believe we're uniquely positioned to lead in this moment of AI innovation, and that's because of just how seamlessly data science and AI are integrated into our business, how deeply and personally we know our clients, and how holistically we've integrated our expert stylists.

Speaker #5: Due to the improvements we've made to our experience and assortment through our transformation, we're capturing increased market share and outperforming the broader apparel retail market.

Speaker #5: We're also building a stronger client base . That's with seven consecutive quarters of improving year over year active client trends , and also , as we noted , the expense expected sequential growth in active client count in the third quarter , we're confident the growth in our business will continue and that this growth will be sustainable .

Matt Baer: We're confident the growth in our business will continue and that this growth will be sustainable. Important to note that since the start of our transformation, we've improved our contribution margins more than 500 basis points, and we've maintained contribution margins above 30% for the last 2 years. I appreciate everyone's interest in our business and look forward to sharing future updates with each of you in the future.

Speaker #5: Important to note that since the start of our transformation, we've improved our contribution margins by more than 500 basis points, and we've maintained contribution margins above 30% for the last two years.

Speaker #5: So I appreciate everyone's interest in our business, and I look forward to sharing future updates with each of you.

Speaker #1: This concludes today's call . Thank you for attending and you may now disconnect And this is your verbal

Operator 2: This concludes today's call. Thank you for attending, and you may now disconnect.

Operator: This concludes today's call. Thank you for attending, and you may now disconnect.

Operator 1: This event has now concluded. Thank you for joining Stitch Fix Q2 FY26 Earnings Call. The line will disconnect automatically.

Operator: This event has now concluded. Thank you for joining Stitch Fix Q2 FY26 Earnings Call. The line will disconnect automatically.

Q2 2026 Stitch Fix Inc Earnings Call

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