Stitch Fix Scores in Stay-at-Home World

Stitch Fix Inc. is clearly connecting — with stay-at-home consumers and Wall Street.

Shares of the styling service, which uses machine learning and human stylists to send members looks to try on at home, shot up 34.7 percent to $48.27 on stronger-than-expected fiscal first-quarter results, released after the market closed Monday.

Net profits tallied $9.5 million, or 9 cents a share, and compared with losses a year ago of $178,000, or nil on a per-share basis.

Analysts had primed themselves for much worse, predicting losses of 20 cents a share on average, with at least one analyst looking for a deficit of 87 cents a share.

Stitch Fix has been prone to at-times sharp changes in stock price as it comes out with quarterly results, with investors at turn second-guessing or applauding its approach in a rapidly evolving market.

But the company, led by founder and chief executive officer Katrina Lake, has pressed on, expanding to new product offerings and into new markets as it sharpened its approach and picked up more market share.

Revenues for the three months ended Oct. 31 increased 10.3 percent to $490.4 million from $444.8 million. The company’s active client count rose by 10 percent, or 347,000, over the past year to nearly 3.8 million.

“This quarter we are proud to have achieved several multiyear highs, including our highest sequential client addition on record and the highest level of successful first Fixes in the past five years,” Lake said. “Our powerful personalization engine is evolving, and innovations in our Fix and direct buy offerings will expand our addressable market, deepen client engagement and grow wallet share over time. We’re excited about the momentum in our business, confident in the future ahead, and we expect to deliver between 20 percent and 25 percent growth for the full year.”

On a conference call with analysts, Lake said the company’s new clients have been ready converts to the company’s approach.

“In a time period where many traditional brick-and-mortar retailers are still experiencing double-digit year-over-year revenue declines in their most recent quarter, we delivered an increase of over 240,000 net active clients quarter-over-quarter, a return to double-digit year-over-year active client growth, which we expect will increase further this fiscal year,” Lake said.

“In their very first experience with us, these recently acquired Fixed customers are demonstrating both strong purchase behavior and satisfaction,” she said. “We previously shared a measure that we internally refer to as a successful first Fix, which we define as a percent of clients who purchase at least one item in their first Fix and look forward to their second Fix.

“In each of the last two quarters, nearly 80 percent of our first Fixes met this criteria. Which is the highest level we’ve seen in five years. Even as we acquired a high volume of clients, we’re very pleased that we’re able to meet their needs and preferences.”

With the economy still in the midst of recession, Stitch Fix has been selling more goods with lower price points, but will watch closely as consumer trends develop next year.

The Stitch Fix model is evolving too, especially with an option to buy some specific items from the site in addition to a box of goods chosen by the company. The direct buy option has performed well in the U.K. and now is being tested in the U.S.

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