Stitch Fix reveals improved earnings due to AI tools, enhanced client-stylist relationships, and strategic inventory management during its latest earnings call.

Stitch Fix, the online personal styling service, is reporting positive results as it continues to implement its transformation strategy, according to comments made by CEO Matt Baer during the company’s earnings call on March 11. The earnings call highlighted the company’s performance for the second quarter of fiscal year 2025, which concluded on February 1.

Baer emphasized the effectiveness of the company’s proprietary artificial intelligence (AI) merchandising tool, which is aiding in improved inventory management. This tool predicts demand using client transaction and feedback data, thereby empowering the merchandising team to make more informed decisions. As a result, the company achieved an average order value (AOV) that was 9% higher compared to the previous year, a gain partly attributed to increased keep rates.

“The investments we’ve made to improve the quality of our assortment and ensure a healthy inventory position are working,” Baer stated during the call, underscoring the positive impact of their strategic changes.

Additionally, the company is leveraging its algorithms and data science to enhance client-stylist relationships. Baer noted that in the second quarter, improvements to their AI models resulted in better product recommendations for human stylists, which subsequently led to a notable increase in client satisfaction; the percentage of clients requesting the same stylist for their next “Fix” reached its highest level in nearly five years.

Stitch Fix is also focusing on the Freestyle initiative, which provides shoppers with a curated selection of products available for on-demand purchase, distinguishing it from the traditional personalized styling service. Baer reported that the adoption of advanced, data-driven forecasting tools for Freestyle has led to an expansion of their shoppable selection by over 20% without increasing inventory ownership. The Freestyle segment returned to year-over-year growth in Q2, with potential for further improvement expected.

In regard to the ongoing issue of tariffs, Baer indicated that Stitch Fix and its partners have a long-standing experience in managing these tariffs. He stated that they do not anticipate any adverse impact on client prices or margins for the latter half of the fiscal year. Baer noted that being a multibrand retailer enables the company to strategically adjust within its diverse portfolio of national and market brands, as well as its private labels, to mitigate any potential tariff impacts.

With these developments, Stitch Fix continues to navigate its transformation while enhancing its service offerings and operational efficiencies.

Source: Noah Wire Services