In a “second phase of transformation,” Stitch Fix is elevating its shopping experience, expanding its assortments and putting a brighter spotlight on its network of stylists.
“It’s an inflection point for us,” said Matt Baer, Stitch Fix’s chief executive officer for the past 14 months who previously served as Macy’s chief customer and digital officer and earlier, vice president of e-commerce at walmart.com.
Features introduced Thursday in Stitch Fix’s ongoing transformation “gets us back on the path to sustainable and profitable growth and delivering greater engagement for our clients,” Baer contended. “When a client comes to Stitch Fix, whether it’s the first time or the 100th time, they’re going to see a different Stitch Fix. They’re going to feel it differently. They’re going to experience it differently. And it starts with the brand identity itself.”
Phase one of the transformation, Baer said, involved stabilizing the balance sheet, improving operations and “rationalizing” the business by eliminating redundant brands and products, and some of the workforce. There are currently about 700 corporate employees and a total workforce of about 4,000.
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“We’ve returned to adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] profitability, free cash flow positivity, and we worked really hard to remove about $400 million in annualized SG&A [selling, general and administrative] expense. We have no bank debt. So that gives us the financial stability and strength to execute the balance of our transformation.”
Phase two, Baer explained, centers on “building the business” by bringing in new senior-level talent including chief product, chief technology and chief people officers; “re-imagining and elevating” the shopping experience and how consumers first sign onto the brand; expanding the assortment through private brand and market brand additions; putting a brighter spotlight on the company’s stylists, and updating the brand image, including updated logos and new colorways.
“What you’ll see over the course of the next year is a tripling of the amount of newness within our assortment,” said Baer. “Within our men’s private brands alone, we’re actually quadrupling the amount of newness with new styles, new trends, new items we’ve never sold before. We went back into the market to fill white space,” with trend-forward and value-oriented styles.
Market brands new to the assortment cited by the company include Splendid, Few Moda, Travis Mathew, Kenneth Cole Reaction, and Reef. Apparel, footwear, and accessories prices range from $30 to $250 in women’s and men’s. Some of the assortment work is being done is without benefit of Loretta Choy, former chief merchandising and client services officer who left the company last May. A search for a successor is underway.
Two new private brands are being launched — a trendier Commons private label for men’s and women’s, and Montgomery Post for women’s contemporary workwear. “We also took the time to rationalize our private brand portfolio, and we’re now creating more synergies between our men’s, women’s and kids’ businesses.” For example, Baer said the We Wander athleisure women’s brand is extending into girls as well, and a men’s Algo active brand is expanding into boys. Nearly 50 percent of the assortment is in private brands.
Instead of shipping five items per delivery, Stitch Fix provides up to eight now. Based on focus groups and conversations with customers around the country, it was “abundantly clear” many shoppers were requesting outfits for a greater variety of occasions and uses, such as for starting a new job or refreshing a wardrobe, said Baer.
“At times, the limiting factor was the number of items in a fix [the Stitch Fix term for a delivery] being fixed to five items. We heard loud and clear from our clients they were looking for flexibility in that number.”
Clients can select all eight items, or request fewer items, and have the option of letting the Stitch Fix stylist select some or all of the items for them, so there’s some surprise when the delivery arrives and the package is opened. There is also no limit to the number of deliveries a client can receive. Stitch Fix is not a subscription service, though clients pay a $20 styling fee when they order and that amount is put toward whatever they purchase.
There’s a new “onboarding” process by introducing a “style file,” which is a snapshot of an individual’s style and the elements of it, based on input from an initial short customer survey with a dozen questions revolving around style and fit, as well as data already accumulated from existing clients. It’s currently live for new women’s clients, and in the coming months, will be rolled out to new men’s clients, and subsequently to women and men who have already been shopping on Stitch Fix.
“It’s more engaging,” Baer said. “There’s more of a give and take. It’s an experience that will give new clients greater confidence that we get them, and that the information they’re giving to us is going to create better outcomes for them.” Baer believes that once they see their style profiles, and that Stitch Fix has a sense of their fashion preferences, it will motivate clients to shop. Shoppers can update their style files as their preferences evolve over time, enabling stylists to better understand their needs and provide better recommendations.
“Before your first transaction, we already know your style preferences. We know your value orientation, and we can nail your fit on your very first transaction. That’s the holy grail for so many retailers, and they pursue that over the course of an entire lifetime relationship with the client. But that’s our starting point. It requires a certain amount of discipline and a certain amount of investment and that’s very difficult for other companies.”
Stitch Fix has a unique e-commerce model that blends data science, algorithims, customer surveys, and stylists, and a broad assortment of market brands and private labels. The intent is to provide a more personalized and convenient shopping experience with the right fits and styles.
“What gets me really excited is how we use technology and innovation to create better client experiences by getting deep into client insights, really understanding what a client would be looking for, and then creating better shopping experiences by removing pain points and adding value,” said Baer. “The technology is at the core of what differentiates Stitch Fix. It’s that commitment to data science and AI. We continue to invest there. At this point, it affects nearly all parts of our business. We’re going to continue to experiment and deploy AI and generative AI applications across the client and employee experiences.”
Families in America, Baer said, are “stretched thin on time, and for us to know all of their apparel and accessories needs, and deliver that proactively for them, it makes a difference. It saves them spending a weekend walking a mall. It saves them hours and hours browsing endlessly online.
“I recently styled a fix for Brittany from Alabama, a mother of three who works full time. She writes in that she doesn’t have any time to shop and she’s leaving on vacation in five days. I was actually able to meet all of her needs, and rushed to get the fix [to her] in advance of her vacation. It’s just an awesome experience we are able to deliver for clients.”
Asked if he regularly acts as a Stitch Fix stylist, Baer replied, “Every day — really. You have to be present with your clients. To be a leader in retail, you have to be immersed in the experiences that your teams are going through every single day.”
While delivering better online experiences, Stitch Fix still needs to deliver better financial results, though there’s been improvement. Last quarter, the company cut its loss practically in half to $35.5 million, from $65.6 million in the year-ago period, despite an 18 percent revenue decline from continuing operations to $330.4 million. For its fiscal year, which ended July 29, 2023, the company reported a 21 percent decline in revenue to $1.6 billion and a net loss of $172 million.
“Over the past several years, as both the market and our clients’ expectations evolved, we didn’t adapt our service and assortment quickly enough to meet their needs,” Baer acknowledged. “At the core, that’s what our transformation is about.”
