Dive Brief:
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Stitch Fix reported that Q3 net revenue fell 15.9% year over year to $322.7 million, with net revenue per client up 2% to $525.
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From last year, the apparel box retailer’s number of active clients declined by 655,000 or 20%, according to a company press release. From last quarter, the decline was 6%.
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Gross margin expanded by 280 basis points, thanks to improved product margins and lower transportation costs. Net loss narrowed by 2.3% to $21.3 million.
Dive Insight:
After revealing in March that Stitch Fix was exploring changes to its customer experience, CEO Matt Baer on Tuesday provided a few new details, and said some aspects would debut in coming weeks.
One change already made is that the company now offers what it calls “Quick Fixes” only to clients who are most likely to make a purchase, based on information gleaned from its algorithms. A Quick Fix is an opportunity to get another box of clothing shortly after receiving one, rather than waiting for a Fix that may be already scheduled for a later date, according to a customer video from August. Within three weeks of making that adjustment, Quick Fix average order value rose 25%, Baer told analysts.
Other potential moves are related to pricing, sending more than the traditional five items per box and adding ways for stylists to interact with customers, he said. Some changes implemented in the past months and weeks have resulted in some of the highest average order values in the company’s history and better client retention, he said.
“As we work to reimagine the client experience, we're rethinking every interaction,” he said, adding, “We have a number of tests in the market tied to these areas, and we are encouraged by the results we are seeing so far. We expect the first of a series of experience updates to launch this summer. The end result will be a more modern and dynamic Stitch Fix.”
William Blair analysts warned that there remains a “lack of visibility into the business,” though they said they are encouraged by the early advances reported by executives, the ongoing effort to overhaul the customer experience, and improved profitability and margins.
“While active customers are likely to remain pressured in the near term, relative improvements in customer metrics alongside better keep rates and average order value seems to suggest a healthier cohort of newer customers and relative stabilization,” they said. “In addition, management’s new strategic initiative to ‘reimagine the client experience’ speaks to the company’s focus on strengthening brand affinity among new and existing customers.”
Despite the evidence of improvements, however, it’s not yet clear whether these efforts will stem Stitch Fix’s declines in sales and customer counts, according to Wedbush analysts led by Tom Nikic.
“There’s still a lot of heavy lifting to do to stabilize the top line,” he said in emailed comments.
