Stitch Fix Inc (NASDAQ:SFIX) stock plunges 17.38% (As on September 25, 11:23:47 AM UTC-4, Source: Google Finance) after the company reported better-than-expected fourth-quarter results and provided an optimistic outlook for fiscal 2026. Stitch Fix’s strong performance was driven by successful execution of its transformation strategy, including improvements to its client experience and assortment. The company reported net revenue per active client of $549, up 3.0% YoY, despite active clients declining 7.9% YoY to 2.31 million. The company for the fourth quarter reported gross margin of 43.6%, a decrease of 100 basis points year-over-year, driven primarily by transportation deleverage and lower product margins. The company delivered net loss of $8.6 million and net loss margin of 2.8%. The company posted Adjusted EBITDA of $8.7 million and Adjusted EBITDA margin of 2.8%, which reflect continued cost management discipline. For the quarter, net cash provided by operating activities was of $7.0 million and free cash flow of $2.8 million. SFIX ended the quarter with $242.7 million of cash, cash equivalents, and investments; and no debt. The company has once again gained market share in the U.S. apparel market this quarter, according to Circana data.

Moreover, Fix average order value (AOV) grew 12% year over year. AOV growth was driven by higher items per Fix due to greater penetration of the larger Fix offering. AOV growth was also driven by Fix AUR that was up 7.6% year over year.

SFIX in the fourth quarter of FY 25 has reported the adjusted loss per share of $0.07, beating the analysts’ estimates for the adjusted loss per share of $0.10. The company had reported the adjusted revenue decline of 2.6 percent to $311.2 million in the fourth quarter of FY 25, beating the analysts’ estimates for revenue of $304.69 million. The company noted that when adjusted for the extra week in the prior year’s quarter, revenue actually increased 4.4% YoY.

Looking ahead, the company provided upbeat guidance for fiscal 2026, projecting revenue to be between $1.28 billion and $1.33 billion, above the analyst consensus of $1.26 billion. For the first quarter, Stitch Fix expects revenue to be in the range of $333-338 million, representing growth of 4.4-6.0% YoY. The company also expects to be free cash flow positive for the full fiscal year 2026, with gross margin projected to be between 43% and 44%. It expects full fiscal year 2026 advertising expense as a percentage of revenue to be between 9% and 10%. It also expects to be free cash flow positive for the full year.