Ten years and 50 million “fixes” later, the founder of online styling service Stitch Fix says new clients and expanded product offerings will see the company’s best days ahead.
This as the San Francisco-based clothing curator posted better than expected Q3 results for the three months ended May 1, in which it added nearly 700,000 new customers versus a year ago bringing its active client tally above 4.1 million.
“Apparel retail is at a pivotal point, with market share moving online at a record pace and consumers seeking more highly personalized and authentic experiences,” Katrina Lake told investors on the company’s earnings call. “Stitch Fix is purpose-built to address this evolution with our unique multi-touchpoint model.”
In what was her last call as CEO before transitioning the lead role to President Elizabeth Spaulding Aug. 1, Lake said top line revenue was up 44 percent to $535 million, leaving revenue per active client at $481, which was down 3 percent from 2020 but up 3 percent the previous quarter.
The company’s bottom line loss shrunk to about $19 million, down from roughly $35 million deficit it posted the year before.
Fixes + Direct Buy = Bigger Market
As much as its hand-picked monthly packages of clothing are Stitch Fix’s core business, company leaders were most excited about the expansion of its Direct Buy feature which will serve customers in a more traditional manner, and in turn, expand its addressable market exponentially.
The combination of strong demand, an improving apparel retail market backdrop, and the continued rollout of new product features is expected to drive increased client adoption this summer and beyond as the company will introduce Direct Buy to new clients by the end of the quarter.
“While Fixes have been incredibly successful, we know that this form factor alone doesn’t address all consumer use cases,” Lake said. “As such, we’re now embarking on our next growth horizon through our introduction of direct buy, which expands our ecosystem of experiences and opens up a total addressable market that we estimate to be multiple times larger than Fixes alone.”
Citing the company’s powerful combination of data science and creative human judgment, as well as the customer relationships and feedback loops that underpin its personalization capability, Lake said Stitch Fix was prepared to bring its radically different client experience and highly differentiated data model to the masses.
“We believe that this more personalized way to shop is universally appealing and one we are uniquely positioned to address,” Lake said. “How we shop and live, work and interact with each other has changed dramatically in the past year and we believe that consumer shift to shopping online will be a lasting one.”
With its CEO succession in place and the rollout of its expanded product offering underway, this $6 billion business will be looking to smooth some of the volatility that has surrounded it lately.
Shares of Stitch Fitch soared to an all-time high of $113 in late January, only to plunge roughly 70 percent to just $38 over the next three months. Since the beginning of May, however, the business has come back into favor again as consumers ramp up their outfit acquisitions ahead of what’s expected to be a big summer, and Stitch Fix shares have rebounded back above $60 again, including a 15 percent pop following its earnings results.
For the three months ending July 31, Stitch Fix said it sees its Q4 sales growing at least 22 percent, with its full-year sales, for the 12 months running through October, pegged to top $2 billion.
“Our mission remains the same as it has been since our inception: to transform the way people find what they love,” Spaulding told analysts and investors, before calling Stitch Fix a relationship-based brand that creates a transformational, curated and personalized shopping experience.
“Whether a client prefers to have items handpicked by our talented stylists, select their own pieces, or both, clients can trust that Stitch Fix has a shopping experience that uniquely caters to that,” she added.