No amount of stitching can save this styling company from coming apart at the seams. Stitch FixSFIX

, the online styling service known for using algorithms and data to recommend clothing, is struggling to find the right fit for itself.

Going out of style: In January, the style-curating platform announced a restructuring to reduce expenses in response to declining sales and a shrinking customer base. One major change was eliminating full-time stylists, reflecting broader challenges in the retail industry. Despite bringing in ex-Macy’s exec Matt Baer as CEO last year, Stitch Fix hasn’t turned things around. Shares have dropped 26% this year, trailing behind the S&P 500’s 20% gain. Baer acknowledged, “There is a lot of work still to do.”

• For its fiscal fourth quarter, Stitch Fix reported earnings of $319.6M, down 12.4% year-over-year, with a net loss widening to $35.7M.
• The active client base dropped by 125K to 2.5M, though higher net revenue per client ($533) helped offset the decline.

Fashioning A Turnaround

The rapid changes in trends, driven by fast fashion and online influencers, have forced retailers like Stitch Fix to adapt. But the data-powered fashion curator has struggled to keep up. UBS analyst Jay Sole noted that first-quarter guidance “suggests the US apparel consumer spending environment deteriorated in the last couple of months (August and September).” To cope, the personalized fashion subscription service is implementing a three-phase plan.

• They’ve already cut $100M in expenses for fiscal 2024, partly by exiting the underperforming UK market and closing two fulfillment centers.
• They also plan to replace full-time staffers with AI-powered style profiles, hoping to boost income and client retention by the end of fiscal 2026.

Frayed hopes: Some industry experts are skeptical about the turnaround timeline. William Blair analysts believe, “The largest risk remains lack of visibility into the business and a potential turnaround in active customers” — especially after a securities fraud investigation led to a 39% single-day decline in its stock. Still, Truist Securities analyst Youssef Squali remains hopeful, saying, “We are cautiously optimistic on the long-term prospects of the company’s strategy, but we believe it will take time for the strategy to play out.”