Stitch Fix aims to grow business (SFIX)

pulse

December 26, 2017 4:51 PM

The subscription apparel retailer grew revenue by 25% year-over-year (YoY) to nearly $300 million.

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Stitch Fixreportedsubstantial revenue and customer growth in fiscal Q1 2018 (ended). The subscription apparel retailer grew revenue by 25% year-over-year (YoY) to nearly $300 million.

Its active client base — a customer who has reviewed an order in the past 12 months — grew 30% YoY to 2.4 million at the end of Q1. Despite that growth, net income only saw a tepid increase of 2% YoY to $13.5 million.

The company cited its women’s plus-size clothing and men’s apparel, which increased marketing, shipping, and inventory costs, as the reason for lackluster profit margins in Q1.

These new product categories are targeting markets that could be lucrative for the company.

Men’s apparel.
Plus size.

Although the company had increased costs this quarter, it will likely see a corresponding increase in revenues and clients in the next quarter, justifying these investments. Stitch Fix has already brought on one huge brand partner for the next quarter, Nike, helping it strengthen its product assortment. Moreover, the company’s artificial intelligence (AI)-driven approach allows it to provide highly personalized clothing selections in each shipment, which resonates with its existing customers.

Although these initiatives can help it build loyalty and increase purchase sizes among its existing customers, growth for the company may depend on it expanding its client base, which is why introducing new categories could be a good move. As such, these marketing initiatives are a necessary cost of expansion right now, as they'll likely help the company increase brand awareness and draw in customers in the coming quarters.

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