Stitch Fix has made its name delivering stylist-curated boxes of clothing and accessories. The company is now looking to broaden its reach with a service that lets anyone purchase items directly from its site or app without expert input.
Previously, customers had to order a box, or “Fix,” before gaining access to the direct buying experience, but the new service, branded as Stitch Fix Freestyle, is also open to first-time shoppers. On the company’s fourth-quarter earnings call Tuesday, CEO Elizabeth Spaulding outlined how the launch will help expand Stitch Fix’s user base beyond the more than four million active customers it saw last year, “unlocking the channel to entire marketplace and marking the beginning of a tremendous opportunity for our business.”
The San Francisco, Calif.-based company far surpassed analyst expectations for the quarter, reporting earnings per share of 19 cents compared with the forecasted 13-cent loss. Revenue jumped to $571.2 million from $443.4 million in the same period last year, blowing past the $548 million expected by Wall Street.
The unexpected profit came as Stitch Fix surpassed $2 billion in annual revenue for the first time, growing 23% year-over-year. While the company’s projections for the coming quarter fell short of analyst forecasts — with sales expected to come in between $560 million and $575 million, compared with the $588 million looked for by analysts — Stitch Fix’s share price was up more than 14% by midday Wednesday.
Beyond bringing in new customers, the Freestyle service could open up new opportunities for Stitch Fix. According to Spaulding, footwear accounted for a greater share of revenue through the company’s direct-buy channel than it did through curated Fixes in both women’s and men’s. The channel also helped boost how much money the average customer spent, with revenue per active client reaching $505 in the fourth quarter.
Personalization remains a key differentiator for the company’s Freestyle offering, with algorithms (trained in part by data collected by Stitch Fix stylists) determining which items are recommended to customers on their feeds. In the coming year, said Spaulding, “we plan to test and incorporate distinctive client-facing features such as enhanced outfit capabilities, curated search and styles-led nudges to further support our algorithmically generated recommendations.”