Online-only apparel retailer Stitch Fix’s revenue increased 10% year over year to reach $490.4 million for its first quarter of its fiscal 2021 ended Oct. 31, up from $444.8 million in the year-ago period.
New customers and strong repeat customers attributed to the 10% sales growth, CEO Katrina Lake told investors on an earnings call last week, according to a Seeking Alpha transcript. Stitch Fix, which sells subscription apparel boxes, says it ended its quarter with 3.8 million active customers, or customers who purchased within the past year, up 10% over its fiscal Q1 2020 and a net increase of 347,000 customers for the year. It also gained 240,000 new customers since fiscal Q4, Lake said. In Stitch Fix’s subscription model, a stylist selects five pieces for that customer and ships it to her, and the shopper keeps what she wants, ships the rest back and only pays for what she keeps. If she keeps all five products, she receives a 25% discount on the entire box.
While new customers have not spent as much as current customers, the apparel retailer is hopeful the new shoppers will be repeat customers and ultimately have a high lifetime value, Lake said. For example, instead of ordering one subscription box, the majority of new customers opted to receive the apparel box on a recurring cadence, she said.
“This surge of new clients who are still early in their spending journey with us resulted in an expected decrease in year-over-year net revenue per client of 4%,” Lake said. “Even early in their journey with us, these new clients have demonstrated very strong purchase behavior in their first fixes that we believe to be a strong signal of feature satisfaction, retention and lifetime value”
Stitch Fix’s net revenue per customer dipped to $467 from $485 in its fiscal Q1 2020. Its net income reached $9.5 million compared with a net loss of $178,000 in the year-ago period.
Stitch Fix spent 11% of its net revenue in the quarter on advertising, the same as the year-ago quarter. Those ads, however, did not tout deep discounts, as Stitch Fix traditionally does not offer promotions on its products, even during the holiday season.
In fact, Stitch Fix was only one of six of the top 50 online retailers that did not offer a promotion on Cyber Monday, compared with the 44 or 88% of merchants that did have a Cyber Monday discount, according to site visits conducted by Digital Commerce 360 editors to the top 50 online retailers in the company’s Top 1000 database. Stitch Fix is No. 39 in the 2020 Digital Commerce 360 Top 1000.
Even though many of its peers discount during the holidays, Lake said that its customers are coming to the brand because they find products that fit them in size and style preferences, and not because they are offering a promotion.
“Obviously, right now is the time when we see a lot of promotional activity. But the reality is because Stitch Fix is a place where people really are buying and investing in clothes that they want for the long haul,” Lake said.
“If you’re thinking about a pair of jeans, or even a pair of sweatpants that are going to be the sweatpants that you wear every single day, you’re not necessarily looking for the sweatpants at 80% off, you’re looking for the one that fits you really well, that feels really good on your body,” she added.
Direct buy and subscription preview
Stitch Fix also discussed the status of two features it is rolling out: its direct-buy option, which allows shoppers to purchase a single garment without having to purchase a box, and a preview feature that allows shoppers to view garments in their apparel box before they ship.
With its direct-buy program, it launched a beta “shop by category” element that allows consumers to browse via typical merchant categories such as athleisure or sweaters.
The beta is aided by data from its “Style Shuffle” quiz, which shows pictures to shoppers and asks for feedback. Millions of Stitch Fix customers have provided 6 billion ratings of garments based on those images. 80% of its customers have rated 1,000 items, and 50% of its app consumers play Style Shuffle daily.
This data previously helped power product recommendations, and now also helps provide curated category pages for each shopper based on what she said she liked during Style Shuffle and algorithmically generated recommendations based on those likes.
“With such strong client engagement, Style Shuffle has evolved into a key vehicle for data collection that has strengthened our algorithms and allowed us to build enhanced features that improve client outcomes,” said president Elizabeth Spaulding.
For U.K. shoppers that purchase on a subscription basis, Stitch Fix now allows 50% of them to view the five products that will be in their box before the box ships.
With the preview feature, the shopper can then make changes to what the stylist selected before the box ships. In its test, the preview option increased the number of garments the shopper kept and thus increased the average order value, Spaulding said.
Stitch Fix plans to roll the feature out to 100% of its U.K. shoppers and then begin piloting the feature in the U.S.
Stitch Fix notes, however, that it plans to keep the preview as an opt-in, as there is a subset of shoppers who have chosen not to preview items because they like the surprise of seeing the clothes when they are delivered.
Percentage changes may not align exactly with dollar figures due to rounding.