Stitch Fix Tailors Turnaround Strategy With AI, Personalized Offerings

Stitch Fix, the online personal styling service, began its fiscal year 2025 with a clear vision to reinvigorate its business and return to growth by the end of FY 2026.

Despite some challenges in its first-quarter financial performance, CEO Matt Baer said the company is making strategic moves to strengthen its market position by elevating client engagement, introducing a “freshness of inventory,” and leveraging artificial intelligence (AI) to optimize its operations.

“We’re delivering on our vision to be the most client-centric, personalized shopping experience,” Baer shared with analysts Tuesday (Dec. 10) during the first-quarter earnings call. “We’re reimagining our client experience, creating flexibility in our experience, and improving acquisition economics. We’re on track to successfully transform our business and return to growth by the end of FY 2026.”

Client Experience at the Core

The first quarter revealed changes in how Stitch Fix is approaching its customer base and evolving its services, Baer said.

One of the main areas of focus has been increasing the “newness” of the product offering, which has been integrated across various categories, Baer said. In the quarter, Stitch Fix boosted the penetration of newness in its inventory by 40%, aligning its merchandise more closely with current trends and customer preferences. This push to provide customers with fresh, relevant styles is key to increasing engagement and driving repeat business.

“Our clients are responding positively to the newness we’ve introduced into our assortment,” Baer said.  

To further enhance the client experience, Stitch Fix introduced greater flexibility in its service offering, Baer said. Clients can now receive up to eight items in a shipment, which allows for a broader selection tailored to individual preferences. The increased flexibility is designed to provide more value to customers and drive higher engagement levels. This personalized approach is supported by a revamped AI-powered inventory tool, which the company continues to enhance for better assortment curation.

“Stitch Fix was built on personalization,” Baer said. “We are also engaging our client segments through a new personalized approach to marketing.”

Personalized Marketing

As part of its methodical approach, Stitch Fix has refined its client engagement strategy, Baer said. The company has adopted more targeted, personalized marketing strategies to better serve its clients across different segments. Through tailored promotions and new capabilities for rotating holiday offers, the company aims to meet clients’ needs more effectively, particularly during the busy holiday shopping season.

Additionally, Baer said the company has focused on leveraging new promotional capabilities built from the ground up. These capabilities are designed to drive deeper connections with both new and existing customers, especially during high-traffic periods like the holidays. Baer pointed out that these enhancements are helping Stitch Fix better serve its clients and gain share in the highly competitive online retail space.

“These promotional capabilities are enabling us to bring Stitch Fix into consideration during the holiday season,” Baer added.

AI and Data Analytics

AI is a key strategy for Stitch Fix, Baer explained, because it’s integrated into every facet of the business and is crucial to the company’s ability to drive engagement and improve retention. Through AI-powered algorithms, Stitch Fix can personalize styling recommendations and inventory assortment to meet the unique preferences of its clients.

“For us, AI is in our DNA and a core part of our value proposition,” Baer said. “We use it methodically and cost-effectively to drive engagement and reengagement. It’s a key component for us to unlock the strength we’ve seen in our promotional capabilities. It’s something we’ll continue to lean on and it will continue to be an area of competitive strength for us.”

In terms of client reengagement, Stitch Fix has seen positive results. Baer said reactivations are up 17% year over year, thanks to improvements in the user experience and the more targeted, personalized marketing approach.

“That’s been a big focus of ours,” he said. “As we continue to improve our AI-driven experience and targeting capabilities, we can go back to our previous clients and give them an enhanced experience.”

Positioning for Growth

Despite the challenges reflected in its first-quarter results — including a 12.6% year-over-year revenue decrease, to $318.8 million, and a 3% decline in active clients (2,434,000) — Baer remains optimistic.

“I’m pleased with our strong start to the fiscal year, and I think we have the right strategy in place to return to growth.” Baer added.

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