Stitch Fix Inc.’s sales came roaring back last quarter — just as the company turns to new horizons.
Revenues for the fiscal third quarter ended May 1 increased 44.1 percent to $535.6 million from $371.7 million a year earlier, when the first rush of the pandemic disrupted consumer spending patterns.
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That easily topped the 25.6 percent growth analysts projected. The momentum helped push the stock up 15.9 percent to $67.14 in afterhours trading on Monday, adding to a 4.4 percent gain in regular trading.
Net losses for the three months narrowed to $18.8 million, or 18 cents a share, from $33.9 million, or 33 cents a year earlier.
But Wall Street seemed content with the sales growth for now and has been watching for signs of increased traction with shoppers as the company transitions from founder Katrina Lake to president and incoming chief executive officer Elizabeth Spaulding and begins expanding its model.
Stitch Fix was built on the back of “the fix,” or a selection of items that the company’s algorithms and human stylists choose and send to clients to try on at home. While that business continues, the company is branching out. In addition to giving more clients the option to shape their fix, the company is also offering the Shop direct-buy program, which will be expanded to non-fix customers this quarter.
A key question for the future is how that business develops, especially given Stitch Fix’s trove of customer data and its savvy in the area of personalization.
As vaccination rates rose and COVID-19 cases dropped in the U.S. and the market began to open back up, more people connected and reconnected with Stitch Fix, suggesting the company has a ready base of shoppers to develop its direct business.
Stitch Fix’s active client count grew by 689,000, or 20 percent, from a year ago, to over 4.1 million.
That marked the second-highest quarter of new customer growth in Stitch Fix’s history as clients “reactivated.”
Net revenue per active client tallied $481, an increase of 3 percent from the second quarter and a decrease of 3 percent from a year earlier. The company attributed the year-over-year decline to the influx of new clients, who are still “earlier in their spending journey with us.”
Lake, who will become executive chairperson on Aug. 1 when Spaulding steps up, told analysts on a quarterly conference call — her last as CEO — that the company is on the cusp of something big.
“Apparel retail is at a pivotal point with market share moving online,” said Lake, adding that customers were looking for more personalized experiences and that Stitch Fix, with its data moat, could deliver.
She said the company was looking to be serving tens of millions of customers — a base much larger than the 4.1 million currently served.
“We’re now embarking on our next growth horizon through our introduction of direct buy, which expands our ecosystem of experiences and opens up a total addressable market that we estimate to be multiple times larger than fixes alone,” she said. “We believe that this more personalized way to shop is universally appealing and one we are uniquely positioned to address.”
And Spaulding conveyed a sense of continuity and optimism.
“We are a relationship-based brand creating a more curated and discovery-led ecosystem, a personalized shopping experience that is truly transformational,” she said. “Whether a client prefers to have items handpicked by our talented stylists, select their own pieces or both, clients can trust that Stitch Fix has a shopping experience that uniquely caters to that.”
The company plans a marketing push next fiscal year to support its broader range of services.
And the Stitch Fix umbrella might be getting bigger still as Lake said there was also potential for the company to get into secondhand goods as well.
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