Stitch Fix Leads Shopping Boom
Open Economy Equals Updated Wardrobe
After more than a year of pandemic shutdowns, some consumers have forgotten how to dress. Comfy clothes, including sweatpants and hoodies, were popular items while many people worked from home. With the economy reopening, there’s been a major attitude shift for more presentable apparel. That has been a boon for Stitch Fix (SFIX), an online personal styling service, which reported third-quarter results that topped Wall Street estimates this week.
For the quarter, Stitch Fix reported a narrower loss than expected and revenue growth jumped 44% year-over-year. The modern-day styling company’s active client count was up 20% compared to the same period a year ago, reaching 4.1 million users. This marked an increase of 234,000 active clients since the second quarter. Stitch Fix attributed the growth to consumers updating their wardrobes for vacations and a return to work as pandemic restrictions ease and the economy rebounds.
Return to Work, Vacations Collide
Stitch Fix is benefiting from a few trends happening simultaneously. Not only are people returning to work and in need of professional attire, but they are vacationing again. They are also attending more events and parties. That is driving sales of everything from rompers, which were up 60% in the quarter, to dresses, which saw an 80% increase. In Stitch Fix’s men’s division, requests for suits and button-down shirts are on the upswing. Demand for tailored clothes is now doing better than loungewear.
It is not just Stitch Fix’s existing clients which are using the service more. The company said demand from first-time users and those who reactivated their accounts is strong. The online styling company also raised its earnings and revenue forecast for its current fourth quarter amid the strong demand.
Logistics Still an Issue
Despite the upbeat results in the latest quarter, Stitch Fix does have some challenges it needs to overcome. A big one is logistics. Stitch Fix has faced merchandising delays in its warehouses, which has weighed on results. Stitch Fix is also about to embark on a new business model of selling clothes directly to consumers. In the past, this has been something reserved for existing clients only.
Stitch Fix’s strong results for the third quarter are a testament to its eye for style and ability to capitalize on pent-up demand. It will be interesting to see if the online stylist can hold on to its momentum into the second half of the year.
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