Stitch Fix: AI-Powered Recommendations Boost Keep Rates and Customer Satisfaction

Stitch Fix executives said Tuesday (March 11) that the online personal styling service is seeing results as it continues its transformation strategy.

The company’s proprietary artificial intelligence (AI) merchandising tool is contributing to improved inventory management, Stitch Fix CEO Matt Baer said during an earnings call covering the second quarter of fiscal year 2025, which ended Feb. 1.

By predicting demand based on client transaction and feedback data, the tool helps the merchandising team make better decisions, he said.

During the second quarter, this helped the company deliver an average order value (AOV) that was 9% higher year over year, driven by in part by higher keep rates.

“The investments we’ve made to improve the quality of our assortment and ensure a healthy inventory position are working,” Baer said during the call.

Stitch Fix’s algorithms and data science are also improving its client-stylist relationships, Baer said. During the second quarter, the company enhanced its AI models to deliver better recommendations to its human stylists so that they, in turn, can deliver the right products to each client.

“In Q2, the percentage of clients requesting the same stylists for their next Fix hit the highest level in nearly five years,” Baer said during the call.

Stitch Fix continued to invest in Freestyle, an alternative to Fix that offers shoppers a curated selection of products they can buy on demand rather than through the personalized styling service.

For this offering, the company adopted more advanced, data-driven forecasting tools during the second quarter and found that they expanded its shoppable selection by more than 20% without increasing its inventory ownership.

“Initiatives such as these contributed to Freestyle returning to year-over-year growth in Q2, and we see more runway to improve future performance,” Baer said during the call.

Addressing the issue of tariffs, Baer said that Stitch Fix and its partners have experience managing tariffs and that they do not expect tariffs to affect client prices or margins in the second half of the company’s fiscal year.

“As a multibrand retailer, we also really benefit from the vast matrix of national and market brands in addition to our private brands,” Baer said. “So, if necessary, in order to mitigate any potential impact from tariffs, we are able to shift within that portfolio or within that matrix of brands really strategically.”