Stitch Fix, Inc. (NASDAQ:SFIX) Q4 2023 Earnings Call Transcript - Page 4 of 5 - InvestingChannel

Stitch Fix, Inc. (NASDAQ:SFIX) Q4 2023 Earnings Call Transcript

David Aufderhaar: Yeah. Dylan, I’ll touch on that. I think to Matt’s point sort of this holistic approach to marketing touches on a couple of areas. First is in gross adds and I think that was a lot of what I was describing as well. But I think what you’re alluding to is on the dormancy side, we’ve talked about this in the past where we are still cycling through some of the Freestyle first clients that we’ve talked about in the past, although it’s definitely less of an impact than it’s been in the past. And we’re also still seeing some of that elevated first fix dormancy that we’ve talked about in prior calls, but we’re also seeing improvements in some of that first fix engagement as well. And so it’s still a big area of focus for us.

Dylan Carden: Got it.

Operator: Thank you. Please standby for our next question. Our next question comes from the line of Mark Altschwager of Baird. Please go ahead, Mark. Mark Altschwager, your line is open. We’ll go to our next question. The next question comes from the line of Edward Yruma of Piper Sandler.

Edward Yruma: Hey, guys, thanks for taking the question. Matt, thanks for all the forthrightness. I guess just stepping back maybe as a follow-up to the last question. When you look at churn obviously, maybe introduce some customers that were lower value or just not as focused on the service. But if you talk to your customer base and look at some of these longer-term customers that have churned or gone dormant, I guess one of the top two or three things that cause them to churn or go dormant? And how do you expect to address that long-term? Thank you.

Matt Baer: Hey, Ed, appreciate the question. Matt here. I will provide an answer and then David can follow up with additional context if he’d like. So I’ve spent a lot of time as noted with our clients. I’ve been a participant in multiple client focus groups. I’ll be participating in two more tomorrow. And one of the reasons or one of the things that really piqued my interest is both why they’re excited about the service that we offer, and then also, to answer your question, for those that have decided to leave us, what were those drivers and what could we do in order to improve our service such that we mitigate the dormancy that we see from some of our clients. And the top couple of reasons are probably no surprise and actually give me a lot of optimism in terms of the value of our service overall.

Number one, it’s just that there is a life-changing event that they’ve had that interrupts their need for our service, and it’s something where it’s — without — beyond our control and something that is why we’re also seeing I think a lot of success with the more recent re-engagement campaigns that we have. There’s times in people’s lives where our service is one that’s have incredible value to them and they might want to receive a fix every 30 days, and then something else changes in their life circumstance that then they might go for a while where the service is less valuable for them, but then we have a really great opportunity to reengage them in the future when their life’s circumstance changes again. The second and really proud of the work the team is doing is around continuing to —

Edward Yruma: Thank you.

Matt Baer: The second is around what we’re really doing to continue to improve the assortment quality and what we send to our customers. Overall, our customers give us really high marks in terms of the quality of our assortment and our keep rates — and our success growing the business demonstrate that. Our merchants are definitely focused on making sure that our assortment is holistically focused on our core customer segments that we serve today. So the experience then is at its best when we have the assortment breadth and depth to meet the needs of the entire closet for our customers and that continues to be a focus for us.

Operator: Thank you. Our next question comes from the line of Kunal Madhukar of UBS. Please go ahead, Kunal. [Operator Instructions] Our next question comes from the line of Mark Altschwager of Baird. Please go ahead. [Operator Instructions] We’ll go to the next question. The next question next question comes from Kunal Madhukar of UBS.

Kunal Madhukar: Hi. Thank you for taking the question. A quick numbers one and then a follow-up. So on the numbers one, you mentioned that UK had about 180 active clients, 180,000. So when we — when I take that out from the 1Q numbers, that implies that on a Q-o-Q basis, your — that would be a negative 5.5% in 1Q which is worse than the negative 5.1% in 4Q which kind of tells me — and since you said that the expectation would be that in 1Q, there would be an improvement, that would suggest that at least as far as the US is concerned, you expect to add active clients. Is that right?

David Aufderhaar: No, I don’t think that’s right, Kunal. We definitely expect — another way to look at this is quarter-over-quarter, we definitely expect active clients from an absolute number to get better from a loss standpoint than what you saw in Q4.

Kunal Madhukar: So in Q4, you lost 179,000 clients. Now if 180,000 clients are going to go out of the system in 1Q because UK would be a discontinued op?

David Aufderhaar: Yes. And so the down 3% that we were quoting included — it was a US-only number.

Kunal Madhukar: The down 3%. Okay.

David Aufderhaar: Yeah. When I was talking about the quarter-over-quarter sequential decline in Q1, it was a US-only — it was a US-only comp.

Kunal Madhukar: Okay. Okay, great. And then — and I think this has been asked before so I apologize. It takes me a bit to kind of understand stuff. But the negative 15% to negative 20% revenue guide for the full year, how should we kind of think about it in terms of where you’ll probably end up with active clients versus where you will end up with LTM revenue per active client?

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