Stitch Fix CEO lays out his three-phase plan to rebuild using AI and human connection

After two years of heavy lifting, Stitch Fix is quietly stitching itself into a new shape.

Once best known for its subscription styling boxes, the online personal styling service is emerging from a sweeping transformation with a sharper identity: a retailer that marries human connection with artificial intelligence.

The turnaround comes after a steep comedown. Stitch Fix shares hit record highs in early 2021 as more consumers embraced at-home styling during the pandemic. But demand cooled just as quickly, and the stock has given back nearly all of its pandemic-era gains — though shares have risen more than 50% over the past 12 months.

Even so, CEO Matt Baer, who joined from Macy’s in 2023 after leading its digital strategy, has spent the past two years methodically rebuilding the business through a three-phase plan he calls rationalize, build, and grow.

“The original Stitch Fix was about personalization, convenience, and innovation,” Baer told Sherwood News. “This transformation is about fully realizing that vision, pairing leading technology with the empathy of a stylist.”

During its last fiscal year, which ended August 2, 2025, Stitch Fix finished with positive free cash flow and a debt-free balance sheet. It also notched its second consecutive quarter of year-over-year revenue growth as Baer looks to bring the company’s model into its next chapter.

The following conversation has been edited for concision and clarity.

Sherwood News: In the company’s recent messaging, you’ve emphasized “getting back to the original Stitch Fix.” What does that really mean? Is it about retail, personalization, or something deeper in how you’re approaching the business today?

Matt Baer: Stitch Fix was founded nearly 15 years ago on a vision that through personalization, technology, and innovation paired with a human stylist, we could create a superior shopping experience compared to traditional retail.

That vision is what made me so excited to join the company a little over two years ago, and it is what our transformation is rooted in. We have been executing on that strategy for the past two years, and we are really proud of the results. In the fourth quarter, we grew revenue for a second consecutive quarter, up more than 4% year over year on an adjusted basis, and we are gaining market share in the US apparel market.

Through those two years of transformation — first rationalizing the business, then rebuilding it, and now fully entering the growth phase — we have stayed grounded in that original Stitch Fix idea of personalization, convenience, and innovation through new technology and trends.

Sherwood: You’ve talked about the “rationalize, build, grow” strategy. What were the key moves that made it work, and what’s driving the most traction now?

Baer: From the start, we wanted the transformation to be both profitable and sustainable. That’s why we began with what we called the rationalization phase instead of jumping straight to growth. In that phase, we implemented retail best practices across pricing, fulfillment, and inventory management. We asked ourselves: are we as efficient as possible, and are we delivering the best client experience in the most efficient way? As a result, our contribution profit increased 500 basis points in just two fiscal years.

From there, we focused on building flexibility into the business model and strengthening our assortment. Clients told us they wanted to engage more and spend more with us, so we introduced Themed Fixes (think: date night, summer vacations, etc.), the ability to build a Fix around a Freestyle item, larger Fixes (more items in an order), and family accounts.

Those updates are already driving higher engagement and revenue. At the same time, we’ve tripled the amount of newness in our assortment, launched 50 new brands, and started using generative AI in our private-brand development process. Larger Fixes and a stronger assortment have played an outsized role in bringing us back to revenue growth.

Sherwood: Who would you say Stitch Fix primarily serves? Who’s your target audience?

Baer: Our core client at the end of the day is someone who’s frustrated with the traditional shopping experience. The data is pretty clear: less than 10% of people enjoy shopping for apparel in person, and less than 15% enjoy shopping for apparel online. It’s a cumbersome process. It’s full of friction.

For example, one person that I style for lives in Alabama. When I started styling her, she was a single mom of three. Now she has four kids. She has no time left to shop for herself at the end of the day, and she relies on Stitch Fix, relies on me to ensure that I’m getting all of her needs met.

Often our stylist is also the first person who finds out if a client is pregnant, if someone in their family is getting married, or if they’ve gotten a new job. It’s those relationships, that trust and confidence, that keep our clients coming back and that create the competitive moat that allows us to continue doing business with them over time.

Sherwood: I imagine word of mouth plays a role in those kinds of communities and situations?

Baer: It can. We rebranded our business and also rethought our marketing strategy around what we call our Retail Therapy brand platform. That platform is built so we can segment it to reach different client segments and demographics.

Another use case I’m really passionate about is what I call fashion deserts. Across the country, department stores are closing, malls are shutting down, and more and more people have no access to apparel or to anyone who can actually help them.

We’ve also developed specific ad campaigns and content to speak directly to clients in their unique circumstances. One great example is people who are on GLP-1 medications and going through a body transformation. We’re uniquely positioned to serve that client as their body changes, making sure they have the right apparel that fits today and the right product that will fit tomorrow as well.

Sherwood: Beyond Stitch Fix Vision and the interface changes, how else is AI showing up across the business?

Baer: AI is built into our DNA; it’s part of everything that we do. When we go to market to determine what products to buy, in what quantities, and how to price them, that’s all driven by proprietary AI algorithms we’ve built in-house. The same is true across our business.

Everything within our supply chain, our customer service, even the tools we’re developing for our stylists on the back end, we’re utilizing AI all the time. It makes the process more efficient and gives stylists a better experience, all with the ultimate goal of giving clients a better experience.

The way Stitch Fix Vision works today is a great example. It’s a really seamless process: you upload a selfie and a full-body image, and we’ll send you different looks of your generative-AI likeness in full outfits. They’re all shoppable and can be shared both externally and with your stylist.

Sherwood: You also introduced a new AI Style Assistant — can you talk a little bit more about what that does?

Baer: Everything that we put into our road map is rooted in client insights. We do in-person client focus groups on a monthly basis to understand what motivates our clients, where they’re experiencing pain points in traditional retail, and how we’re uniquely able to solve them.

One of the interesting things we learned was that a lot of clients were challenged in expressing what they were looking for. For people who are more fashion savvy, that’s easier. But for most people, it’s hard to describe exactly what they want. So we created an AI Style Assistant that lets clients engage with the AI to help them tailor and articulate what they’re looking for.

We also built in AI visualization, so the client can actually see what they mean. They can say, “Yes, that’s exactly it,” or adjust it, and then the assistant writes a full note that goes to their stylist. The client can approve it as is, suggest changes, or edit it themselves. It has had great adoption and engagement with clients and is also helping our stylists better serve their clients.

Sherwood: Do you think that’s had a direct or indirect impact on those higher order numbers?

Baer: The successful execution of our transformation strategy over the last two years, in aggregate, has driven a lot of that. One of the best metrics to look at is that we’ve had eight consecutive quarters of average order value growth. In the last quarter, average order value was up 12%.

That’s because we’re bringing in better-fit clients, the service is resonating more, and we’ve enhanced the client experience to deliver more of what they want at the right time, in the right quantity.

Sherwood: How did you come to realize that people really want that kind of connection — a stylist who knows them personally — when that level of service is usually reserved for luxury shopping or in-store experiences?

Baer: When I think about the best retail experience someone can have when shopping for apparel, I always anchor it in what I call the golden age of retail. That was when my grandfather could walk into a store in South Bend, Indiana, and the person he saw when he walked in was going to know who he was. They were going to know his family, know which community he was part of. If he was going to buy a suit, they knew what was already hanging in his closet, his size, and his budget.

That was the experience people loved and appreciated for their apparel purchases, and over time that experience has almost completely disappeared. The idea that not everyone can access a stylist or even a level of service that understands them as an individual is exactly where Stitch Fix comes in. We are enabling every single person to have someone they can build a deep and lasting relationship with who understands their style and their budget at any given moment.

Sherwood: Looking ahead, what are you most excited about as Stitch Fix moves into this next phase?

Baer: The work we’ve done over the last two years to transform the business has given us confidence that we have the right strategy, the right team, and the ability to execute at the highest level. What we’re most excited about is continuing to gain market share and serve more clients. What we guided to on our September 24 earnings call was that we will return to active-client growth in the third quarter of our fiscal year.

Even more exciting is what we shared about the current quarter we’re in, where we said active clients will be flat to down just half a percent. At our scale, that’s a difference of only a few thousand clients. We’ve already proven we can grow revenue, gain market share, and we’re now on track to grow our active-client base as well.