Stitch Fix Inc. is no longer the big, new idea in fashion.
But it has something special, a real business on a solid financial footing that brings a different look to shoppers. And Matt Baer, who’s been chief executive officer of the AI- and human-powered styling service for two years, said the business has now turned around and is headed for new heights.
Stitch Fix is simply a better retail mouse trap by Baer’s way of thinking, replacing lackluster stores and the endless aisle with stylists who send shoppers a box of looks to try on at home.
The 14-year-old San Francisco-based company came of age with the direct-to-consumer darlings, but never flamed out — and never quite brought a wave of change to the industry that was initially promised.
Now Baer is throwing a little shade at retailers and arguing that Stitch Fix, which was the first to tackle personalization en masse, is ready to do big things as it launched back into growth mode.
“Consumers are extremely frustrated,” Baer told WWD. “You walk into any traditional retailer today, it becomes abundantly clear. The challenges that these customers face, the lack of service, the lack of personalization, the inconveniences, the dirtier, disheveled dressing rooms, browsing endlessly online.”
Baer personally styles dozens of clients — none seem to be aware that the CEO is himself filling out their wardrobes — and said he sees consumer/retail disconnect every day.
“The billions of data points that we have because of the continuous feedback loop that we have with our clients becomes such a valuable asset,” he said. “The feedback from the clients has consistently been like, ‘Wow, thank you so much for doing this. This is such a better experience.’”
That has translated into a for-real business, but one that has never quite lived up to its billing.
Investors have warmed to Stitch Fix, with shares growing 24 percent over the past year, but the company’s market capitalization still rests at just $550 million, although it has no debt and more than $240 million in cash on its books.
Stitch Fix showed signs of some momentum in its fiscal fourth quarter ended Aug. 2 with revenues up 4.4 percent to $311 million, excluding an extra week in fiscal 2024. Adjusted earnings before interest, taxes, depreciation and amortization totaled $8.7 million.
But the service’s active client count fell 7.9 percent to 2.3 million from a year earlier, although it is down just 1.9 percent from the third quarter.
That puts Stitch Fix at a big turning point.
In an interview, Neil Saunders, managing director of GlobalData, described Stitch Fix as “a very particular proposition”
“It is really a problem-solving player. It helps people curate outfits,” Saunders said. “It helps to give them inspiration and it cuts down on their cognitive load because they don’t have to think about what they want to buy and what outfits they want to put together.
“That isn’t fully mainstream,” he said. “Not everyone wants that service. Not everyone needs that service. Not everyone likes that service, but I think that there are a reasonably large number of people who appreciate that sort of service.”
Saunders said the consumer market is tough at the moment, but that Stitch Fix continues to have more growth potential even though it does not fit into a neat retail box.
“It’s a retailer, but a service. It’s a technology company, but it also retails things,” he said. “It is a strange beast in the sense that it covers a lot of ground, but I do think that the advantage for Stitch Fix is that there is relevance for what they do, and I think that they have a very good platform, they have very good technology. They’re investing in more things like AI.”
Baer said the service will start to grow its active client number and this year is projecting a 1 percent to 5 percent increase in revenues to $1.28 billion to $1.33 billion.
“I believe the proof points are there that it’s not only a differentiated experience, it’s a superior one,” Baer said. “As we continue to deliver these results, as we continue to gain market share, the analysts and investors will follow.”
Under Baer, Stitch Fix has been opening the aperture and is letting consumers get larger fixes on their own timetables as well as shipments based on a theme or built around a purchase through the platform’s freestyle service.
The consumer’s journey includes a introductory questionnaire that covers sizes and style preferences as well as an ongoing dialogue with a human stylist.
The rubber meets the road with the “fix” — the box of goodies users get to try on at home.
“Just as each individual’s fix is personalized, they can also personalize the experience to meet their unique needs as well,” Baer said. “The differentiation in Stitch Fix’s experience delivers for consumers something that is far superior to what those traditional retailers offer.”
If Baer is right and more shoppers try and stay with Stitch Fix, his will be the rare turnaround that helps a company not just bounce back, but finally realize its initial potential.
“We have been very methodical and very judicious,” he said. “A transformation to be successful, it really has to be built on that strong foundation. You cannot skip steps. We did not take shortcuts. We are committed to the long-term client experience to deliver long-term shareholder value.
“The opportunity that we’re capitalizing on as part of our transformation is how do you then ensure that this continuous feedback loop that we have and the communication channels that we have with them helps them understand that Stitch Fix can do so much more,” he said.
How much more Stitch Fix can do will become clear as the company’s turnaround story evolves into a growth story.
