Dive Brief:

• Stitch Fix said this week that it will lay off 1,400 stylists in California and hire stylists in other parts of the country. According to the company, these decisions are not related to the COVID-19 pandemic.
• The layoffs represent about 18% of the company's total staff of 8,000 people in the U.S. and UK, including 5,100 stylists. The company will hire 2,000 stylists in other areas of the U.S., including Austin, Dallas, Pittsburg, Cleveland and Minneapolis throughout the remainder of this year and into 2021. 
• "We have taken the very difficult decision to reduce the number of Stylists in our styling team in California, as we invest in our other styling hubs across the US, and the innovations that will help evolve our experience in the future," said Katrina Lake, founder and CEO of Stitch Fix. "All of our California-based stylists will be offered the opportunity to relocate to new roles in other states," she said. Lake also stated that impacted employees will be given severance, and are eligible for bonuses and extended healthcare. 

Dive Insight:

Digital retailer and wardrobe styling service Stitch Fix ran into snags earlier this spring.

In early March, the company lowered its guidance, stating that fiscal 2020 revenue growth would be between 15% to 17% year over year, a drop from its previous forecast of 20.5% to 22.5%. Additionally, its active client base grew 17% to 3.5 million, but average order values were lower for the quarter. At the time, executives pointed to Brexit challenges in the U.K., a highly promotional holiday season and uncertainty around the pandemic.  

On March 20, the company temporarily shuttered two of its distribution centers, but by April, Lake said all five of its U.S. distribution centers were open and operating. Additionally, the company previously announced that Lake would forgo her salary from April 13 through the end of the fiscal year.

Stitch Fix in February launched "Shop Your Looks" to its men's and women's clients in the U.S., an algorithm-led sub-service that allows customers to pick items that would go well with pieces they already own, rather than leaving that type of choice to their stylist. The personalized selection of between 30 to 40 items is organized into suggested outfits, available to purchase "a la carte," according to the company.  

Apparel as a category has been severely impacted in recent months due to COVID-19. Retail sales fell by 16% in April, with clothing and accessories falling by an astounding 89%. As nonessential retailers temporarily shut stores, consumers overwhelmingly paused discretionary spending, particularly with clothing. Customers have turned to e-commerce, but online shopping hasn't been the singular answer to rescue the apparel category in an unsteady economy that faces high unemployment rates.