Capital Strength & Innovation Drive SFIX's Growth Trajectory

Stitch Fix, Inc. SFIX continues to exhibit a strong capital position, providing a stable foundation for sustainable growth and strategic flexibility. At the end of the first quarter of fiscal 2026, the company held cash and cash equivalents of $114.5 million and short-term investments of $129.7 million. With no outstanding debt and shareholders’ equity of $204.1 million, Stitch Fix is well-capitalized to navigate evolving market conditions while continuing to invest in growth initiatives.

The company’s liquidity strength is complemented by improving cash generation. In the fiscal first quarter, net cash provided by operating activities totaled $10.9 million, while the free cash flow reached $5.6 million. These results reflect disciplined cost management and improving operating efficiency. Management expects the business to remain free cash flow positive for fiscal 2026, enhancing internal funding capacity and reducing the dependence on external financing sources.

Reflecting positive business momentum, management raised its fiscal 2026 guidance. Total revenues are projected at $1.32-$1.35 billion, indicating growth of 4.2-6.5% over the prior year’s actual. Adjusted EBITDA is expected between $38 million and $48 million, implying a margin of 2.9-3.6%. The gross margin is forecast at 43-44%, while advertising costs are expected to be disciplined at 9-10% of revenues.

For the fiscal second quarter, Stitch Fix anticipates revenues of $335-$340 million, suggesting year-over-year growth of 7.3-8.9%. Adjusted EBITDA is projected at $10-$13 million, with a margin of 3-3.8%. Resilient client demand is expected to support continued improvement in active client growth, with a sequential rise in net additions anticipated in the fiscal third quarter.

While management acknowledges potential headwinds in the back half of the year from inflation and tougher average order value comparisons, confidence remains high in its strategy. Investments in AI and innovation are expected to drive stronger client engagement and retention, reinforcing Stitch Fix’s long-term, sustainable growth outlook.

Stitch Fix’s Price Performance & Valuation Picture

SFIX shares have gained 31% in the past six months as compared with the industry’s growth of 11%.

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From a valuation standpoint, Stitch Fix trades at a forward price-to-sales ratio of 0.51X, down from the industry’s average of 1.92X. It has a Value Score of A.

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Stitch Fix currently carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks are FIGS Inc. FIGS, American Eagle Outfitters Inc. AEO and Boot Barn Holdings, Inc. BOOT. 

FIGS is a direct-to-consumer healthcare apparel and lifestyle brand. It flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for FIGS’ current financial-year earnings and sales suggests growth of 450% and 7%, respectively, from the year-ago actuals. FIGS delivered a trailing four-quarter average earnings surprise of 87.5%.

American Eagle is a specialty retailer of casual apparel, accessories and footwear. It sports a Zacks Rank of 1 at present.

The Zacks Consensus Estimate for American Eagle's current fiscal-year earnings and sales suggests a decline of 23.6% and growth of 2.4%, respectively, from the year-ago actuals. AEO delivered a trailing four-quarter average earnings surprise of 35.1%.

Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It currently has a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Boot Barn’s fiscal 2026 earnings and sales implies growth of 20.5% and 16.2%, respectively, from the year-ago actuals. Boot Barn delivered a trailing four-quarter average earnings surprise of 5.4%.

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This article originally published on Zacks Investment Research (zacks.com).

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