SFIX

Stitch Fix is a genuine cost-out turnaround wrapped around a shrinking business. The bull case is the loss trajectory: net loss narrowed to -$28.7M in FY2025 from -$129M the prior year (+77.7% YoY), operating loss improved to -$38.9M, and — critically — operations still throw off cash, with $25.6M of operating cash flow against just $16.3M of capex. The balance sheet is defensible: $114M cash, $203M equity, liabilities/equity of 1.37x and current assets ($374M) comfortably covering current liabilities ($206M). At $3.84 the market caps this at $495M, roughly 0.4x sales — you are paying almost nothing for the top line and getting a company approaching breakeven. That combination keeps this out of 'sell/avoid' territory.

The problem is the top line itself, and the filing is candid about it. Revenue fell 5.3% to $1.27B in FY2025 and has now declined every year from $2.10B in FY2021 — a ~40% erosion in four years. The MD&A ties this directly to 'challenges in acquiring and retaining active clients': active clients fell 7.9% to 2,309,000, and management explicitly guides that FY2026 begins with fewer clients still and expects macro pressure on discretionary spending. Their own offset — 'positive trends in average order values and items kept per Fix' — is an admission they are managing decline, not returning to growth. Gross margin (44.4%) is healthy, but it is being spread over a smaller base each year, and the $496M accumulated deficit and -14.2% ROE show how much value the core model has destroyed.