BusinessDec 9, 2020
Stitch Fix reports a surprise profit and soars 50% — could continue to benefit from two e-commerce trends
Retail Strategy
Victor Lei
Discover
With Stitch Fix, you too can now have your own Ryan Gosling-esque personalized shopper.
On Dec. 7, Stitch Fix, the company that reinvented the apparel shopping experience, reported earnings that surprised investors and sent its stock soaring nearly 50%.
Stitch Fix was founded in 2011 by Katrina Lake, the youngest female founder to ever take a company public.
Stitch Fix isn’t your typical retailer — they send its customers a personalized monthly box of apparel known as the “Fix”. Customers pay for the items they want and send the rest back. Using the data it collects, Stitch Fix recommends items personalized to each customer.
Stitch Fix’s operations are also more complex than traditional apparel retailers. They buy its inventory from 1,000s of brands and personalize each box before sending it out. Afterward, they’ll receive millions of returns that must be cleaned and sorted for the next month — sounds like an operational nightmare…
Despite being an e-commerce business, COVID had taken a toll on Stitch Fix’s sales. Shipping delays led to an order backlog and sales drop in the first half of 2020.
But sales at Stitch Fix had begun to slow prior to COVID, pushing the business to expand its offerings over the past 2 years:
Despite growing its sales 30%/year in the past 3 years, Stitch Fix’s stock has been relatively flat — dragged down by several challenges:
But Stitch Fix isn’t a stranger to challenges — Katrina built a profitable business worth over $5b despite early naysayers (professors and investors) telling her the difficulties and challenges in her business model.
If Stitch Fix can overcome its challenges, the company can benefit from two trends — the growth of online retail and personalized online experience.
