Dan Jedda: Yes, I’ll take that one. We did see, as we mentioned, some impact of the deep discounting in the retail industry, which impacted our October sales which is the last month of the quarter. And on a go-forward basis, how we’re looking at the revenue guide is a function of what we saw in the holiday period and the deep discounting and expecting the macro environment to continue as is, but also taking into account some of the marketing initiatives that we’ve talked earlier in the call. So the way I would think about that guide going forward is it’s more of a similar change on a year-on-year basis for the rest of the quarters as it is just given that the guide that we gave of the negative the $1.6 billion to $1.7 billion for full year revenue.
David Bellinger: Got it. And then my follow-up, just bigger picture, if we step back, do you think your inventory position is holding back revenue growth and client growth in some ways? Is there some type of larger inventory issue at play for Stitch Fix? And do you need sort of a reset or a refresh in order to again connect with your core customer base?
Elizabeth Spaulding: I mean I can start, and Dan, feel free to chime in. I mean, I think we feel like over the course of the last year plus, we introduced a really healthy mix of national brands together with our strong exclusive and Stitch Fix only brands, which is the latter make up the majority of our inventory. We onboarded north of 80 brands in FY €˜22. We have been able to grow our different product categories with Freestyle in particular, like footwear and outerwear and dresses. And we have a refreshed rebuy approach to our exclusive brands that makes us reasonably adaptable that we will keep leaning into. So I think we actually have a lot of the right product. Now of course, for true category expansion, getting into the layers of growth we see possible as we really go after expanding our TAM.
That, I think, is setting ourselves up as we work towards this fiscal year on some of the client experience, some of the other work that we’re focused on in the background are things like a unified data platform, which I think I’ve mentioned some of this on prior calls that our infrastructure was built very rapidly to scale our fixed business into multiple lines of business like women’s, men’s, kids in the UK. It didn’t have the foresight to know we’d launched Freestyle or the fourth site to say let’s get into a lot of different product categories. So we are essentially slowing down a bit to speed up in the future by preparing our infrastructure so that we can add on more of these new categories as we get into fiscal year €˜24. But that all said, we feel like we have the right assortment for our consumer.
We’re very focused on a combination of what we call our super mom within women’s as well as leaning into a fashionista, and we know we’ve actually grown the penetration of that fashion used to client over the last 12 months.
Operator: Thank you. And our next question comes from the line of Ike Boruchow with Wells Fargo.
Jesse Sobelson: This is Jesse Sobelson on for Ike. I was just curious with the Freestyle offering being a little bit challenged with the promotional environment today, do you guys ever plan on evolving the offering to be maybe more in line with general retail business practices and the general retail landscape with the calendar promotions and such? Thank you.
Elizabeth Spaulding: Hey, Jesse, thanks for the question. Can you just clarify when you say more like traditional.
Jesse Sobelson: A lot of traditional retailers typically exhibit promotions on a typical calendar such as deeper discounts during the holiday period or summer sales depending on whether it is for selling, whereas I kind of understand Freestyle to be a little bit more full priced. So I was curious if there was any interest in potentially adapting the offering to be more in line with the cadence of some other apparel distributors in the industry?
Elizabeth Spaulding: Okay, got it. Yes. So I mentioned this a little bit earlier. I guess a few things I would offer. First, in terms of some of our highest converting areas within Freestyle, I think we’ve shared this in the past between 40% to 50% of our conversions happen in outfit-based shopping, which is a big differentiator. We’re helping clients see what items could go with something that they have already purchased as well as output-based shopping based on what we think is trending for them as well as in any of our product detail pages being able to see items in the context of algorithmically generated outfits as well as outputs that have been curated by our stylists. So, those characteristics, one thing that’s interesting as we have done episodic, limited time offers now that we can flex that muscle similar to traditional retail is that we see a halo effect to full-price items during those same time periods as people come into the site experience.
So I think we absolutely will continue to experiment and likely lean forward. We had our first Black Friday, Cyber Monday event, which we saw good lift in terms of what we were able to offer our clients in that window. But I think we really want to strike a good balance of being relevant in those seasonal time periods, but ultimately do what we do best, which is differentiated based on style discovery fit. And as I mentioned to one of the prior questions I got on the notion of loyalty, we’ve always had the Style Pass but we see down the road, no time line yet to share here being able to offer just rewards back to our clients the same way they are rewarded if they buy five items in a fix. So I think rather than trying to just replicate the retail calendar, we would like to be really focused on what’s unique to us.
Jesse Sobelson: Great. Thank you.
Operator: Thank you. And our next question comes from the line of Tom Nikic with Wedbush Securities.
Tom Nikic: Hi, everybody. Thanks for taking my question. Is it safe to assume that the cut to the revenue guidance is predominantly because of more conservative assumptions, a lot Freestyle when the business inflects if you start growing again, it would be predominantly driven by a recovery in the Freestyle business? Thanks.
Elizabeth Spaulding: Hey, Tom, you cut out a little here. I think I’ll let Dan answer but just to play back, I think your question was, is the reduced guide largely driven by Freestyle. Was that the question? Or can you just clarify?
Tom Nikic: Yes, that’s right. And then like, would you expect a recovery to be driven by Freestyle as well?
Dan Jedda: Yes. I can take that. It wasn’t driven entirely by Freestyle. We talked a little bit about the reduction in advertise, talked a lot about the reduction in advertising. Certainly, that’s some of the reduction in revenue that we guided to. We also €“ part of that is just the net actives and where we are today. And so while I do think Freestyle will €“ as the economy improves, freestyle improvement that will help with growth certainly fix is critical and important to our business as well. And Elizabeth talked earlier about a variety of areas that we are focusing on to drive re-engagement, engagement in clients who have filled out their style profile, but never purchased with us, etcetera. So, that is also going to be the catalyst to grow going forward. And of course, the macro environment, as we talked about, will be a catalyst when that does improve as well.
Tom Nikic: Thanks very much and happy holidays.
Elizabeth Spaulding: Thanks Tom.
Operator: Thank you. And our next question comes from the line of Kunal Madhukar with UBS.
