In a busy day for Stitch Fix, No. 59 in the Internet Retailer 2018 Top 500, the apparel retail announced better-than-expected earnings, a new styling service and a new chief marketing officer.
Revenue rose 29.2% year over year to $316.7 million during the third quarter ending April 28, compared with $245.1 million last year before going public. Earnings for the period were $9.5 million, compared with a loss of $9.6 million for the comparable period a year ago. For the nine months ended April 28, net income was $26.6 million, up from $3.9 million a for the comparable period last year.
The company also announced a new kids’ line, adding to its women’s, men’s and plus-size categories. The new offering will be for kids Ages 2-14, with eight to 12 products per box.
The move is a “natural extension” for Stitch Fix because more than half of its clients have at least one child, Stifel Nicolaus & Co. analyst Scott Devitt said in a note to clients. Kids should be especially valuable as the retail market heads into the back-to-school season at the end of summer, Piper Jaffray analyst Erinn Murphy said.
Stitch Fix, however, is not alone with its clothing subscription boxes. Amazon.com Inc. (No. 1) has a similar service, Prime Wardrobe, which lets consumers select multiple clothing item to combine into a shipment, try them on, and then return the unwanted pieces.
And Stitch Fix is behind Gap Inc. (No. 20) in entering the kids subscription apparel space. Both Gap and subsidiary Old Navy have launched kid-focused subscription boxes. However, those brands haven’t expanded into Stitch Fix’s existing business of men’s and women’s apparel.
Stitch Fix Chief Executive Officer Katrina Lake isn’t too worried about Amazon. The vast majority of clothing purchases are still done in-store at places like Macy’s Inc. (No. 6) or Target Corp. (No.17), and there’s plenty of room online for multiple players, Lake said.
“We’re not in a place where we’re competing with Amazon head to head for every dollar,” she added.
Deirdre Findlay is also joining the Stitch Fix team as chief marketing officer. The former senior director of global hardware marketing at Google will parlay the company’s extensive user data into growing the brand’s image, according to a release announcing the hire.
Stitch Fix asks consumers about their clothing preferences, then uses software and human stylists to select and send them a custom package of apparel. The more data its users share, the smarter the company gets at selecting clothes, leading to higher sales and fewer returns, Stitch Fix says.