Stitch Fix Still Grow­ing, Adding Kids

WWD Digital Daily - - News - BY EVAN CLARK

The styling ser­vice saw 30 per­cent growth in ac­tive clients in the fis­cal third quar­ter.

Stitch Fix Inc. is still heat­ing up.

The on­line styling ser­vice grew faster than ex­pected in the third quar­ter — ex­pand­ing its ac­tive client count by 30 per­cent — and founder and chief ex­ec­u­tive of­fi­cer Ka­t­rina Lake is jump­ing into kids styles and bring­ing on more mar­ket­ing ex­per­tise to help keep up the mo­men­tum.

In­vestors have been watch­ing the tech-fash­ion hy­brid closely since its De­cem­ber ini­tial pub­lic of­fer­ing, check­ing for signs it will be able to keep bring­ing in new shop­pers and gain ad­di­tional scale. So far, the an­swer seems to be yes. Stitch Fix spe­cial­izes in sharp­en­ing the choice of hu­man stylists with the help of ar­ti­fi­cial in­tel­li­gence — an ex­per­tise that’s catch­ing on and is be­ing used or tested by oth­ers, in­clud­ing Ama­zon and Posh­mark.

In an in­ter­view with WWD, Lake saw the fact that oth­ers are us­ing com­bi­na­tions of the two as “an im­por­tant sig­nal of val­i­da­tion.”

“This com­pany was pred­i­cated on re­ally em­brac­ing tech­nol­ogy,” Lake said. “What I’ve seen his­tor­i­cally about peo­ple us­ing data science in their busi­ness is that they use it in their busi­ness retroac­tively. What they’re not nec­es­sar­ily al­ways do­ing is us­ing it to drive their busi­ness. In our model, we live and die by rec­om­men­da­tion. We’re kind of forced to be the best in the world at that.”

Stitch Fix raked in fis­cal third-quar­ter net prof­its of $9.5 mil­lion, or 9 cents a share, mark­ing im­prove­ment from losses of $9.6 mil­lion, or 38 cents, a year ear­lier.

Earn­ings per share came in 6 cents ahead of the 3 cents an­a­lysts pro­jected, with Lake at­tribut­ing the re­sult to Stitch Fix’s gen­eral per­for­mance, in­clud­ing the de­vel­op­ment of the men’s and plus-sized busi­nesses, and a shift in tim­ing for mar­ket­ing ex­pen­di­tures.

Rev­enues for the three months ended April 28 in­creased 29.2 per­cent to $316.7 mil­lion from $245.1 mil­lion.

That top-line growth came as more peo­ple logged on to Stitch Fix’s ser­vice. The com­pany reg­is­tered 2.7 mil­lion ac­tive clients dur­ing the quar­ter, pick­ing up 200,000 clients since the end of the sec­ond quar­ter in Jan­uary.

Stitch Fix started in women’s and ex­panded into men’s in 2016, and then plus sizes and con­tem­po­rary looks last year and in­ti­mates this year. (Men spend about 80 per­cent of what women do through the ser­vice, more than the in­dus­try av­er­age of 50 per­cent).

The kids cat­e­gory is a nat­u­ral ex­ten­sion for Stitch Fix, bring­ing the ser­vice to the whole fam­ily and get­ting more out of the com­pany’s ex­ist­ing in­fra­struc­ture and busi­ness model.

And adults who use Stitch Fix are the de­ci­sion mak­ers for their kids, cre­at­ing a nat­u­ral au­di­ence.

Kids fixes will op­er­ate a lit­tle dif­fer­ently. Where adults get five items per fix as a base­line, kids will get eight to 12. Lake said the ser­vice caters to kids ages two to 14 and fea­tures leg­gings as low as $12 and oc­ca­sion dresses for $35.

The ser­vice cre­ates in­di­vid­ual pro­files so the Stitch Fix sys­tem can tune each user’s pref­er­ences.

“These kids have re­mark­ably strong opin­ions,” Lake said, re­fer­ring to re­search lead­ing up to the ser­vice. “One lit­tle boy said, ‘I just want clothes to make me fast.’”

To keep ahead, and fend off the likes of Ama­zon, Lake will also have to stay fast.

Ears perked up last month when Lake, speak­ing at the Code Con­fer­ence, said she hadn’t had “any se­ri­ous dis­cus­sions about com­bin­ing” with Ama­zon. The ceo de­clined to clar­ify just what types of dis­cus­sions she has had with the e-com­merce gi­ant, but said, “We feel we should be a stand­alone com­pany.”

Lake also noted that Stitch Fix and Ama­zon have very dif­fer­ent busi­ness mod­els. “Ama­zon solves very dif­fer­ent prob­lems. [They are] cheap­est and fastest and easy de­liv­ery. We’re solv­ing around the discovery.”

The seven-year-old com­pany has 6,300 em­ploy­ees, the new­est be­ing Deirdre Find­lay, who joined as chief mar­ket­ing of­fi­cer.

Find­lay will over­see mark­ing, cre­ative and com­mu­ni­ca­tions ini­tia­tives and comes to the com­pany from Google, where she was se­nior di­rec­tor of global hard­ware mar­ket­ing. Prior to that she was se­nior vice pres­i­dent at Dig­i­tas, work­ing with com­pa­nies such as eBay, Whirlpool Brands, All­state In­sur­ance, MillerCoors, and Kaiser Per­ma­nente.

Styling ser­vice Stitch Fix is get­ting into the kids busi­ness.

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