Stitch Fix improved its styling algorithm, resulting in more subscribers keeping more products sent in each box and helping the subscription retailer post strong growth in the quarter.
Revenue for its second quarter ending Jan. 26 was up 25.1% compared with the same period last year to $370.3 million. Stitch Fix, No. 59 in the Internet Retailer 2018 Top 1000, sends customers a curated box of clothes based on previous shopping habits and customers only keep what they like. The online subscription retailer generated 88% of its revenue from repeat shoppers in the quarter.
During the quarter, Stitch Fix rolled out a new inventory optimization algorithm that helped it to satisfy more customers, according to chief operating officer Mike Smith. Historically, the retailer would match products to each shopper one at a time based on which order was scheduled to ship out first. Stylists look at the full inventory available and assign pieces that best fit that shopper’s style. For example, if a shirt is an 80% match for a shopper, the stylist will assign it to her. However, the algorithm didn’t take into account if that shirt was actually a 100% match for a shopper later in the queue. Now, pieces that better match customers later in the queue can be held back for those shoppers.
“In doing so, this ensures our staff have the right inventory to meet each client’s style preferences regardless of the client’s position in queue,” Smith said. “Early results from this new algorithm demonstrated increases in client satisfaction, the number of items purchased for Fix and average order value. We believe this algorithm will enable us to more effectively serve our growing client base over time while also driving efficiencies across styling, inventory management and operation.”
The number of active shoppers, those that kept at least one item during the quarter, also grew, up 18% year over year and topping 3 million customers. Revenue per customer was also up 6% year over year with the growth of programs like Style Pass, which cuts out the styling fee in return for an upfront payment that can be used toward a future payment.
In other earnings news:
- Dick’s Sporting Goods (No. 54) grew ecommerce sales 17% for the fourth quarter ending Feb. 2. Ecommerce generated $573.2 million this quarter, or about 23% of overall revenue, compared with 19% during the same period last year. Full-year ecommerce growth also hit 17%, but exact penetration numbers weren’t disclosed. Like many omnichannel retailers, profit was down at Dick’s as the sporting goods retailer invested in ecommerce initiatives, such as two new dedicated fulfillment facilities in New York and California, along with automation to make those facilities more efficient. Net income decreased 1.1% to $319.9 million.
- Spanish apparel conglomerate Inditex Group (No. 500) grew ecommerce revenue 27% last year to 3.2 billion euros ($3.62 billion), while overall growth slowed to its weakest in five years at just 3%. Inditex continues to expand international online sales, with a Brazilian Zara ecommerce site coming online this month, joining native Zara ecommerce operations in 202 markets around the world. Online sales accounted for 12% of overall sales, and 14% of sales in regions with an online presence.