Stitch Fix Surges After Earnings

Written by Jennifer Clark
Posted March 13, 2019

There are a lot of services out there that make our lives a little more convenient. Traveling to the mall, going in and out of stores, and trying to find new clothes is exhausting — especially in a time of fast fashion. Not everything fits your style or even fits you in the way that you were hoping. It’s difficult trying to express yourself through your style. But now, there are a few services on the market that help with this problem.

Stitch Fix is one of those companies; it delivers clothing to your door. Founded in 2011 by Erin Morrison Flynn, a former J.Crew buyer, and Katrina Lake, the business initially started out of Lake’s apartment in Cambridge, Massachusetts. The online subscription and personal styling service delivers clothing chosen by stylists based on customers' tastes, making them more inclined to purchase items. What makes the company stand out is its dedication to using data science in curating selections suited to each customer's individual style.

The company became profitable in 2014 and went public on NASDAQ in November 2017. Since Stitch Fix's IPO, it has done pretty well and set itself apart from competitors with its focus on perfecting algorithms that keep customers satisfied with what's inside their subscription boxes, increasing the likelihood that they'll keep items.

Stitch Fix President and COO Mike Smith said that one of the company’s key strengths is its ability to use data science to match its inventory to millions of customers with their own preferences. He continued by saying, “which we believe is a competitive advantage and fundamental to driving compelling client experiences.” If the customer is happy then they’ll continue their subscription.

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Stitch Fix started out this week on a high note. It soared as much as 20% in extended trading on Monday with the help of the release of the company’s impressive second quarter earnings. According to Refinitiv, Wall Street expected earnings of $0.04 on revenue of $365 million, but instead, Stitch Fix reported earnings of $0.12 on revenue of $370 million.  

During the earnings call, Katrina Lake said:

Quarter two was another strong quarter for us, delivering net revenue of $370.3 million, exceeding our guidance, and representing 25% year-over-year growth. Since becoming a public company, we have posted six consecutive quarters of over 30% growth, which demonstrates our ability to drive consistent business performance.

And that’s not the only thing that’s soaring for Stitch Fix. Active client numbers are up, coming in at 2.96 million — an increase of 18% year-over-year.

Lake added:

We launched our first integrated brand campaign in February to increase awareness and consideration with new and existing clients and we’re excited to connect even more people to the power of personalized styling.

The company is not only on the path of strong growth; it’s determined to continue growing. Stitch Fix is finding new ways of improving while retaining and gaining clients. Perfecting its business and focusing on data science is paying off in a big way.

Stitch Fix’s stock is up more than 78% since its IPO. The future is bright for this company, and it’s time you start paying attention.

Until next time,

Jennifer Clark
Pro Trader Today
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