It has been about a month since the last earnings report for Stitch Fix (SFIX). Shares have lost about 3.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Stitch Fix due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent drivers for Stitch Fix, Inc. before we dive into how investors and analysts have reacted as of late.
SFIX Posts Narrower Q2 Loss, Lifts FY26 View on Improving Momentum
Stitch Fix reported second-quarter fiscal 2026 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. Also, both metrics increased from the year-earlier quarter.
The fiscal second quarter reflected a period of continued transition for Stitch Fix, with management emphasizing disciplined execution and sharper strategic focus. The company continued refining its operating model, prioritizing brand relevance, assortment quality and a more consistent customer experience.
Artificial intelligence and data science remained central to these efforts, supporting personalization, inventory decisions and more efficient internal workflows. Management highlighted growing confidence in the impacts of these AI-driven initiatives as execution improved. Reflecting this momentum, the fiscal 2026 outlook was raised, signaling stronger conviction in the company’s forward trajectory.
More on Stitch Fix’s Q2 Results
SFIX reported an adjusted loss of 2 cents per share, narrower than the Zacks Consensus Estimate of an adjusted loss of 5 cents. The metric was also narrower than the loss of 5 cents incurred in the year-ago quarter.
Stitch Fix recorded net revenues of $341.3 million, which surpassed the Zacks Consensus Estimate of $339 million. Also, the metric increased 9.4% from the year-ago quarter, supported by broad-based demand that remained resilient across all income cohorts.
The number of active clients engaged in ongoing operations was 2,288,000, marking a year-over-year decline of 3.5%. The average net revenues generated per active client (RPAC) from ongoing operations were $577, representing an increase of 7.4% from the previous year.
This marks the eighth consecutive quarter of year-over-year growth and the highest RPAC reported since the company became public. The increase in RPAC indicates that the company’s strategy is effectively driving higher client engagement and spending, resulting in a greater share of wallet from clients.
The fix average order value (AOV) increased 9.8% year over year. This increase was driven by higher average unit retail, which increased 7.7% year over year, marking the sixth consecutive quarter of growth. This increase was largely supported by a more compelling assortment and a favorable product mix.
The category performance was led by outerwear, which rose 26% across women’s and men’s, while denim increased 17%. Activewear and athleisure grew 37% combined, special-occasion styles rose 46%, footwear advanced 33% with sneakers up 46%, and accessories increased 51%, underscoring broad-based demand strength and improving client engagement trends.
Insight Into SFIX’s Margins & Expenses
In the fiscal second quarter, this Zacks Rank #3 (Hold) company’s gross profit increased 7.3% to $148.9 million from $138.9 million in the year-ago period. However, the gross margin decreased 90 basis points (bps) year over year to 43.6%, with contribution margins remaining above 30% for the eighth consecutive quarter.
Selling, general and administrative expenses (SG&A) increased 3.9% from $147.9 million in the prior-year quarter to $153.7 million. SG&A expenses, as a percentage of net revenues, were 45%, down 240 basis points from 47.4% in the prior-year quarter. Advertising represented 8.5% of revenues in the fiscal second quarter, slightly below the expected 9-10%.
Stitch Fix reported an adjusted EBITDA of $15.9 million, which remained flat year over year. We note that the adjusted EBITDA margin declined 40 bps year over year to 4.7% in the quarter under review.
SFIX’s Financial Snapshot: Cash, Inventory & Equity Overview
The company ended the fiscal second quarter with cash and cash equivalents of $118.8 million, short-term investments of $108.9 million, no debt, net inventory of $122.1 million, and shareholders’ equity of $209.3 million.
The net cash provided by operating activities was $7.3 million and the free cash was $3.4 million in the fiscal second quarter.
Stitch Fix’s FY26 Guidance
For the third quarter of fiscal 2026, SFIX expects net revenues of $330-$335 million, reflecting year-over-year growth of 1.5-3.1%. Adjusted EBITDA is projected to fall $7-$10 million, implying an adjusted EBITDA margin of 2.1-3%.
For the second half of the year, the revenue guidance range has been tightened, reflecting greater confidence in the company’s underlying momentum, while maintaining a measured outlook on the broader environment. Growth rates are expected to moderate as the company laps a strong two-year AOV comparison, though there remains an opportunity to continue driving steady AOV improvement.
Ongoing enhancements to the client experience, including a stronger and more relevant assortment, continued category expansion, increased Fix flexibility and the use of AI to support more dynamic client engagement, are expected to provide a durable foundation for continued progress. At the same time, the company’s methodical approach to rebuilding its active client base is showing results. Continued improvement in active client trends is encouraging, and sequential net active client additions are expected to be positive in the fiscal third quarter.
Management raised its fiscal 2026 guidance, reflecting the positive business trends. For fiscal 2026, Stitch Fix forecasts total revenues between $1.33 billion and $1.35 billion, indicating year-over-year growth of 5-6.5%. Adjusted EBITDA is anticipated to be $42-$50 million, indicating a margin of 3.2-3.7%. The company expects the gross margin between 43% and 44%, while advertising expenses are projected to account for 9-10% of total revenues. Stitch Fix anticipates generating a positive free cash flow for the full fiscal year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -12.5% due to these changes.
VGM Scores
Currently, Stitch Fix has a average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock has a score of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Stitch Fix has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Stitch Fix is part of the Zacks Retail - Apparel and Shoes industry. Over the past month, American Eagle Outfitters (AEO), a stock from the same industry, has gained 5.6%. The company reported its results for the quarter ended January 2026 more than a month ago.
American Eagle reported revenues of $1.76 billion in the last reported quarter, representing a year-over-year change of +9.7%. EPS of $0.84 for the same period compares with $0.54 a year ago.
American Eagle is expected to post earnings of $0.11 per share for the current quarter, representing a year-over-year change of +137.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +13.8%.
American Eagle has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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This article originally published on Zacks Investment Research (zacks.com).