When you AutoFit DS tries to adjust the sahpe of the fitted item to match the shape of the new figure, but the less closely the item follows the shape of the original figure the more likely it is to get distorted - and in this case the garment hangs straight down, so the converion process adds all sorts of bumps. It might be simpler not to fit it at all, just pose your figure to fit inside the zeroed garment, memorise the pose (Edit>Figure>Memorise>Memorise Figure Pose) and run the simulation like that. Still, as GGreen says, even with the bumps running the simulation will probably laegely smooth it out.