Once seen as a broken-IPO, Stitch Fix’s data science saves the day

Unless you live in the US or the UK you may not know StitchFix.

It is an online apparel retailer with revenue exceeding $2.1b.

Its USP is data science. StitchFix employs over 140 modellers who pour over a client’s clothing preferences to recommend five items that “fix” neatly into a box.

On sign up, customers fill out a questionnaire based around their shape, style and material preferences. The company looks at 3 data buckets: client profile, merchandise and critically feedback.

Source: Jilt

It’s an intriguing selling pitch and one that clearly resonated with investors when the business IPO-ed at $15 back in 2017.

However for its first 3 years as a public company, the stock price wandered between $15-20 earning it a disparaging moniker: a broken IPO.

This year there has a been change in leadership. Founder Katrina Lake has stepped down, to be replaced by an ex-Bain management consultant.

Shares are currently trading at $33. The reason? StitchFix’s revenue is up 23% due to the massive shift to online during the pandemic. StitchFix say that online apparel is 47% of the category, up from 37% pre-pandemic, a seismic change. Losses are also down significantly.

StitchFix makes over 45% gross margin and has little debt.

I would wager it has significant international growth too.

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