How pandemic darling Stitch Fix returned to growth

Could Stitch Fix be on the path to a comeback? 

The clothing subscription service, one of the many pandemic winners that’s struggled to find itself in a post-lockdown world, is back to growth and seeing some early wins from a turnaround strategy that’s just over two years in the making. 

Under CEO Matt Baer, a former Walmart and Macy’s executive who was tapped to helm the business in June 2023, Stitch Fix posted its first revenue growth in 12 straight quarters for the three months ended May 3. It’s now forecasting its second consecutive quarter of top-line growth. 

While the apparel company’s customer file is still shrinking, its average order value has grown for seven consecutive quarters and every client cohort it’s acquired since last summer has stayed with the company for longer, and spent more, it said. 

The company, which charges a $20 styling fee for all “fixes” it sends, saw revenue per active client grow to $542 during its most recent quarter, up 3% from the year-ago period. 

“It’s been really affirming to us that, you know, with this return to growth, with this increase in engagement, with this increase in average order value, that we do have the right strategy,” Baer told CNBC in an interview. “We’ve got the right team and we’re executing against it at a high level as well.”

Stitch Fix hasn’t posted an annual profit since 2019 but for three straight quarters, its year-over-year losses have narrowed. It regularly generates free cash flow and its balance sheet is free of debt.

To be sure, Stitch Fix’s sales growth in its fiscal third quarter was modest, up just 0.7%, but it expects those gains to continue in its current quarter with sales projected to be flat to up 1.7% year over year. 

And the company’s stock price is still down more than 95% from its pandemic high in January 2021. So far this year, it’s up more than 3% as of Friday’s close. 

Retail and restaurant consultant Katrina Lake founded Stitch Fix in 2011 with the mission to combine data with personalized styling to develop a shopping experience that actually felt individualized at scale.

In a world where shoppers regularly groan about the banality of modern-day shopping, Stitch Fix sought to be the panacea by offering accessible personal stylists that could design and ship outfits specific to a customer’s unique needs and preferences.

Between its IPO in 2017 and 2021, the company was able to acquire customers cheaply online and regularly posted revenue growth north of 20%. 

But then the market grew crowded and suddenly, customers found themselves overwhelmed by all of the companies looking to sell them a monthly subscription box, whether it was a package of clothes, beauty products or dog treats.

The pandemic had changed the way customers were shopping for clothes, and Stitch Fix struggled to hang on to the customers it acquired. Some shoppers found…