Stitch Fix CEO Matt Baer Gains Some Q1 Momentum

Stitch Fix Inc.’s momentum started to pick back up in its fiscal first quarter.

The company — which uses AI and human stylists to choose a box of styles for shoppers to try on at home — has been in turnaround mode for at least two years and chief executive officer Matt Baer told WWD it is going back into growth mode.

Revenues for the quarter ended Nov. 1 increased 7.3 percent to $342.1 million. 

The active client base of 2.3 million was down 5.2 percent from a year earlier, but showed a decrease of just 0.1 percent from the proceeding quarter, a move in the right direction.  

Revenue per active client rose 5.3 percent to $559, showing how the company’s efforts to grow with its best customers were gaining traction. 

The bottom line remains a work in progress, however. 

Net losses tallied $6.4 million, but adjusted earnings before interest, taxes, depreciation and amortization held roughly steady at $13.4 million. 

It was enough for the company to nudge up its outlook for the year. 

In an interview, Baer was crowing over “a third consecutive quarter of revenue growth growing over 7 percent” as a sign that the company was bouncing back and taking market share. 

“It’s a continuation of the efforts that we’ve put into our transformation and the successful execution of it,” Baer said. “We’ve always been focused on doing what’s right for the client and building towards a sustainable and profitable future, and this is just another milestone for us. We remain really hungry, we remain really focused and we also have a high level of confidence that we’re going to continue to accelerate that growth going forward.”

Baer said new features, like an AI tool that lets users see what fashions will look like on their own digital likenesses, are engaging customers, who are spending more and staying longer.

The company has also added an option that lets parents manage a sub-account for their kids and is expanding in non-apparel categories to dress users head-to-toe. 

Currently, 40 to 50 percent of Stitch Fix’s sales come from private brands, which carry margins about 5 percent higher than national brands. 

He pointed specifically to The Commons, an elevated essentials line for men, and Montgomery Post in women’s workwear as successes among Stitch Fix’s own labels.  

Outside brands like Alex Mill and Faherty are also growing at “great rates,” he said. 

“Core to our competitive advantage is the portfolio of brands that we have and the fact that we believe now we have a leading assortment relative to who we’re competing with,” Baer said. 

While Stitch Fix stands apart from the usual fashion retailers and brands, the company is getting in on the holiday rush and the CEO said sales broke records over the stretch from Black Friday to Cyber Monday. 

“We leaned in more intentionally, more meaningfully than we ever had before,” Baer said. “We had the right assortment, we had the right pricing, we had the right promotions, we delivered an awesome experience for our clients and they were extremely responsive to the offering that we had.”

Now Baer just has to keep growth up and make sure more of those dollars fall to the bottom line to pique Wall Street’s interest.

For the year, Stitch Fix is now expecting revenues will expand by 4.2 to 6.5 percent, leaning higher than the 1 to 5 percent growth forecast in September.