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Stitch Fix: Q4 2021 Soars, As Revenue Breaks $570M

·4-min read

Stitch Fix’s business is booming, as fiscal fourth-quarter earnings revealed a jump in revenue, to $571.2 million, and a swelling active client base.

The fashion e-commerce company sailed over revenue expectations of $548 million and earnings of 19 cents a share handily leapfrogged the 13 cents analysts anticipated. Active clients climbed to almost 4.2 million, marking 18 percent growth year-over-year.

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Wall Street rewarded the company by catapulting shares up more than 17 percent in after-hours trading.

Elizabeth Spaulding, chief executive officer, attributed the success to “strength in our top-line business through both our Fix and Direct Buy offering. Overall in Q4, we delivered $571 million in net revenue, representing 29 percent growth over Q4 2020, along with $55 million in adjusted EBITDA.”

She believes the last year and a half — essentially, the first phases of the COVID-19 era — “ushered in a new era for apparel and footwear retail shifting our category from roughly 25 percent of sales online to nearly 40 percent online with a meaningful, and we believe permanent, shift in consumer behavior.”

Decoding that, Stitch Fix wound up benefiting enormously from the surge in online shopping, particularly given its focus on technology.

“As a result of this shift, and our proactive focus on innovation, this period has been a galvanizing moment for Stitch Fix as consumers adapted,” she continued. “We intentionally and successfully captured an outsize piece of the disrupted apparel market by leveraging new product innovations, evolving our assortment and using our personalized experience to migrate more clients into our ecosystem.”

Interestingly, one of the company’s latest updates loomed rather large on the call: Stitch Fix’s new Freestyle service, which was only unveiled in recent weeks — too late for its effects to drive the numbers.

But the company planted the seed for what it sees as future growth with this announcement.

In reality, Freestyle isn’t entirely new, but an evolution of its existing Direct Buy business, except now unleashed for anyone, not just subscribers. The service functionally curates a personalized shopping feed of products based on style preferences from a quiz, shopping history, fit and size. Stitch Fix very much sees it as a gateway to bring more consumers into its fold.

In some ways, it brings the company, whose business was built on a data intelligence-fueled subscription model, a little closer to traditional e-commerce. But there’s a twist: Freestyle is not based on search, the typical keyword-driven way of seeking out product. That means there may be some element of risk, if people don’t see something they want.

The company is dedicated to ensuring that doesn’t happen, focusing on its data and algorithms to drive more fashion intelligence. It also plans on a number of expansions, such as adding more brands, driving more advertising — including influencer marketing, particularly using stylists as influencers, as it has tested in the U.K. — to raise awareness and adding additional product categories.

“Today, we are a largely U.S.-based business with a heavy focus on tops and bottoms, representing over 75 percent of our sales, yet only 30 percent of our relevant apparel categories,” Spaulding added. “We are currently focused at affordable and mid-tier price points, sold through a strong assortment of exclusive and national brands. We are now expanding into our broader range of brands and price points, as well as investing further and product categories where we are seeing promising success to Freestyle and Fix Preview — namely footwear, dresses, outerwear, accessories, and sleep and loungewear.

“These product categories represent $90 billion in the U.S. women’s market alone, and we have already started to see higher growth rates in categories, like dresses, to our Freestyle experience, relative to fixes,” she added.

Stitch Fix isn’t relying solely on Freestyle or changes to the assortment alone, nor is it abandoning the subscription service that built the business. The company plans ongoing investment in Fix Preview, the service that allows subscribers to vet items before they’re shipped, and it’s also pushing on new models, like consignment and Drop Ship. On the latter two, Spaulding noted that “we’ve had multiple beta programs across both of those, and we’re really in build mode. [We] have the infrastructure, the vendor tools, the ability to automate the capabilities to be able to bring that fully to life.”

All of these different aspects of the business will inform one another to create a matrix of fashion data, buying behaviors and preferences that, the company hopes, will keep people fixated on its fashion proposition.

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