Stitch Fix Surges Over 10% on Strong Revenue Forecast
Investors overlook EPS miss and declining user base, focusing on surprisingly upbeat Q2 sales guidance and the company's generative AI strategy.
Shares of Stitch Fix (SFIX) jumped more than 10% in after-hours trading Thursday after the personal styling service issued a second-quarter revenue forecast that significantly outpaced Wall Street expectations. The optimistic outlook overshadowed a mixed first-quarter report that saw an earnings miss and a continued decline in its active client base.
The San Francisco-based company announced it expects revenue for the upcoming quarter to be between $335 million and $340 million. This forecast was well above the analyst consensus of approximately $312 million, signaling potential stabilization for a business that has struggled with customer retention and slowing growth.
For the first quarter of fiscal year 2026, Stitch Fix reported revenue of $342.1 million, narrowly beating analyst estimates of $336.7 million. However, the company posted a loss of $0.05 per share, slightly wider than the anticipated $0.04 loss per share.
Investor Optimism vs. User Metrics
The market's bullish reaction suggests investors are prioritizing the forward-looking guidance over the company's current user metrics. Stitch Fix revealed its number of active clients fell by 5.2% year-over-year to 2.307 million. This decline has been a persistent headwind, raising questions about the company's ability to attract and retain customers in a competitive apparel market.
Despite the user decline, the better-than-expected sales forecast fueled a rally that saw the stock climb to $4.69 in regular trading, a gain of 2.85%, before surging higher in extended hours. The company's market capitalization stood at approximately $589 million at the close of regular trading.
In the company's earnings release, CEO Matt Baer commented on the ongoing transformation, stating, “Our Q1 results demonstrate continued progress on our transformation, and we are encouraged by the green shoots we are seeing. We delivered net revenue and adjusted EBITDA above our guidance, and we are optimistic about the path ahead.”
A Bet on Generative AI
A key theme from the company's report was its increasing reliance on technology, particularly generative AI, to refine its styling services and improve operational efficiency. Stitch Fix highlighted its new “Stitch Fix Vision” tool, which leverages AI to better understand and match client preferences, a move aimed at enhancing the core value proposition of its data-driven fashion curation.
As noted by analysts, this technological pivot is central to the company's strategy to re-engage users and create a more personalized experience. The company believes AI can help bridge the gap between human stylists and algorithmic recommendations, ultimately leading to better client outcomes and stronger sales.
The Path Forward
While the strong guidance provided a significant boost to investor confidence, Stitch Fix still faces a challenging road ahead. The consistent drop in active clients remains a primary concern, and the company must prove its AI-driven initiatives can translate into sustainable user growth and profitability. The retail environment remains highly competitive, with consumers facing persistent economic pressures.
Prior to the earnings release, Wall Street analysts held a largely neutral stance on the stock, with an average price target of $5.25. The strong Q2 guidance could lead to upward revisions from analysts, but they will be closely watching for evidence that the company can reverse its client attrition trend in the coming quarters.
Investors will now look to the second quarter to see if the company's optimistic revenue forecast materializes and if its investments in AI begin to pay dividends in the form of renewed customer engagement.