Dive Brief:
- Stitch Fix shares soared late Thursday as the online styling company blew past analyst expectations for third quarter sales and profit and in a press release announced it has grown its client base 30% to 2.7 million active customers.
- Net revenue in the quarter rose 29% to $316.7 million, well past the Thomson Reuters I/B/E/S forecast for $306.4 million cited by Reuters and net income reached $9.48 million after a $9.56 million loss in the year-ago period. Diluted earnings of 9 cents per share bested the Thomson Reuters I/B/E/S expectation for 3 cents per share.
- The company also announced the launch of Stitch Fix Kids, timed for the back-to-school season. Parents can sign up a child age 2 to 14 onto their account, though boxes can’t be combined between parent and child, executives said on a conference call, according to a transcript from Seeking Alpha.
Dive Insight:
Stitch Fix is heading to the one-year anniversary of its initial public offering with surging sales after making investors nervous in the past few quarters. The third quarter marked the company's fifth consecutive quarter of over 20% year-over-year topline growth, CEO founder Katrina Lake told analysts on Friday.
The company has added a number of initiatives to make its boxes more appealing to existing customers, including the introduction of "extras" like underwear and socks that can be added to the five pieces sent in each box and a Style Pass that allows unlimited styling for an annual membership fee. And it's working to attract new sign-ups through a marketing campaign and product and service additions like men's, plus sizes and now kids.
Plus sizes were added a little over a year ago, with styles from Stitch Fix's own private label as well as third parties, and sales are in line with its flagship women's sales, according to Lake. Those customers tend to order a mix of plus and regular sizes, she said, underscoring the disadvantage of pure-plus size retailers like Ascena's Lane Bryant and Catherine's brands.
The latest introduction, which Lake called a natural extension of its services, is a challenge to Gap Inc., which has launched subscription services for babies and kids at its Gap and Old Navy banners and Target, which similarly has babies and kids apparel box services. But that's unlikely to be the end of it. Stitch Fix will continue to explore new ways to add to its value proposition, said Amit Sharma, founder/CEO of post-purchase solutions company Narvar.
"Expect to see Stitch Fix experiment with new ways to care for its customers in the coming years," he said in comments emailed to Retail Dive, noting that the company leverages both AI and the human touch to build relationships with its customers. "With a high correlation between voice device ownership and subscription and auto-replenishment enrollment ... it would make sense for Stitch Fix to deploy this compatible channel to further strengthen its relationship with consumers and build trust.”
As if to prove that, the company on Friday announced the hire of former Google Senior Director of Global Hardware Marketing Deirdre Findlay as chief marketing officer. Findlay oversaw marketing for Google’s home hardware products, including Google Home, Chromecast and Google Wifi, according to a company press release. She has nearly 20 years of strategic integrated marketing and brand building experience from her years at leading digital marketing agency Digitas, serving companies including eBay, Whirlpool Brands, Allstate Insurance, MillerCoors, and Kaiser Permanente.
