In need of financial stitching... Stitch Fix, the online personal styling service, just unveiled its earnings for the last quarter — far from glamorous. It's a fashion company trying to look like a tech company. You fill out a style quiz (modern or boho? Slim fit or athletic?) and Stitch Fix sends you monthly subscription boxes of ambitious clothes to push your looks envelope.
- The population of Fixers jumped 17% over the year to reach 3.5M.
- And it's a scaling up tech company that's actually profitable ($11M last quarter).
But its latest service reveals a problem... "Direct Buy." Instead of using Stitch Fix's proprietary, algorithm-enabled, human-curated style decision tool to hook you on a monthly subscription, Stitch Fix offers the option to just buy clothes from its online store instead. Direct. Just like other ecommerce sites. That undermines Stitch Fix's core service and could be a sign of an underlying demand problem.
It's struggling to move past early adopters... And that's why the stock is down 67% from its peak. Early adopters drive initial sales and growth for innovative new companies — then it's time to go mainstream. The true test of success is expanding beyond its early demographic. But 2 stats show that's not exactly happening for Stitch Fix:
- To find new customers, Stitch Fix had to up its spending on ads — by 49% last quarter.
- But customers spent less per "Fix" on average.