Stitch Fix Lays Off 558 in Closing Dallas Distribution Hub
Stitch Fix will lay off 558 more employees over the next several months as it winds down operations at a Dallas distribution center.
Layoffs will begin Dec. 1 and continue in six phases until April 5, 2024, the last day Stitch Fix expects the distribution center will be open, according to a Worker Adjustment & Retraining Notification (WARN) notice the company filed with the Texas Workforce Commission.
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Open since 2015, the Dallas facility is one of two sites Stitch Fix is closing to consolidate warehouse operations. Another facility in Bethlehem, Pa., is on track to lay off 393 employees when it closes by February. After the closures, the company will have three distribution centers in Atlanta, Indianapolis and Phoenix.
Stitch Fix expects to hire up to 200 employees to enhance capacity at the three remaining distribution center locations. Employees affected by the layoffs might be able to land a role at a different facility.
Employees who stay with the company until the center closes will receive severance pay, subsidized health care coverage and an employee assistance program. Stitch Fix also plans to organize job fairs and offer other job search assistance in the coming months.
The closure should save the company $15 million. When combined with Stitch Fix’s exit from the U.K., it’s saving about $50 million altogether.
“We believe the consolidation will have immediate cost savings and having inventory in fewer warehouses will make it easier for stylists to build more relevant assortments for clients,” said Matt Baer, Stitch Fix CEO, in a September earnings call. “And we will realize inventory efficiencies as we scale.”
The savings won’t come without some short-term hits. Stitch Fix expects $7 million to $10 million in cash restructuring charges consisting of about $5 million to $7 million for separation-related payments, benefits and related taxes, and $2 million to $3 million for transportation and other closure costs to send inventory to other fulfillment centers.
Baer was appointed CEO in June as the San Francisco company tries to turn its fortunes around after a rocky fiscal year that ended on July 29. Stitch Fix incurred $172 million in net losses during fiscal 2023, with net revenue of $1.6 billion down 21 percent year over year. But it’s not just revenue Stitch Fix is losing—active customers are falling as well, down 13 percent to nearly 3.3 million.
Revenue numbers for 2024 aren’t supposed to be much better. Stitch Fix forecasts a 15 percent to 20 percent drop in net sales in the U.S..
The distribution center layoffs are the company’s latest job cuts. Stitch Fix laid off 15 percent of salaried positions last June, or nearly 330 employees, before closing its Berks County, Pa. sewing and knitting mill and eliminating 56 jobs.
When founder and executive chairperson Katrina Lake temporarily returned in January to the CEO position, Stitch Fix laid off another 20 percent of salaried staff, and closed its Salt Lake City distribution center.
As Stitch Fix further consolidates fulfillment, the market for logistics warehouse construction is slowing down as well, suggesting low demand for industrial real estate.
The volume of U.S. logistics warehousing construction starts is at its lowest level in nearly 10 years, according to commercial real estate database Costar.
Total quarterly industrial construction has now fallen below 50 million square feet after the 2023 third quarter, the lowest total since the second quarter of 2013.
Warehouse construction rates have fallen off a cliff since the first three quarters of 2022, when they reached all-time highs as companies scrambled to find more storage amid breakneck pandemic-driven e-commerce demand. By the second and third quarters of 2022, industrial construction had reached nearly 250 million square feet, nearly quadrupling the most recent quarterly total.
The collapsing pace is mostly attributed to the higher interest rates and slow consumer demand that have both dominated the macroeconomic environment this year. According to the research firm, the decline has hit all major markets, including Dallas-Fort Worth and Phoenix—two of the areas where Stitch Fix has warehouses—that aren’t land constrained and have enough space for development.
