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Stitch Fix on its way to pivot sale of more clothes directly to the customer

Stitch Fix has debuted as a new way for shopped to buy clothes. This online styling service is working on marketing a new way of shopping to its customers in the coming year.

Chief Executive Elizabeth Spaulding said that it would take time for the customers to know what is waiting for them out there.

Stitch Fix is popular for its subscription offering. It sends its customers bundles of hand-picked apparel and accessories. The AI of the company guides the selection. It is now extending its direct-buy option with the name “Freestyle”.

“We are going to be launching many new features, more brands, and personalized stores,” Spaulding said. “We want to give ourselves time to make this big transition into becoming the destination for personalized shopping and styling.”

The stocks of Stitch Fix closed on Wednesday, a mark which is up more than 15% at $41.01. It had fallen at almost 30% year to date.

Investors have an eye behind the upbeat fiscal fourth-quarter results of Stitch Fix that were released after the market closed Tuesday. But many are looking forward to the future potential of the business. Spaulding is leading Stitch Fix in a new direction with a larger market opportunity.

She said that she is expecting this change to help Stitch Fix grow further in its addressable market. Previously the customer had to be a subscriber to purchase clothing or shows from the website. Now Direct-buy will be available to the public.

She also said that Stitch Fix would have to invest in advertising “Freestyle” to a large audience who might have resisted a sign-up earlier. The hope is that the direct-buy sales will boost up its profitability in the long term.

The company further said that “Freestyle” is boosting the amount of money that the active clients of Stitch Fix spend on average. In the latest quarter, it topped $500 for the first time.

Stitch Fix now counts a near about 4.2 million active clients who are people who have either ordered the subscription or have bought items directly from the website in the last 52 weeks.

Most of the analysts are remaining cautious. Spaulding is steering Stitch Fix away from its previous model. Even though there was a relatively low expectation, the company delivered a better fourth-quarter fiscal model.

Stitch Fix is anticipating its revenue growth in the Fiscal year 2022. Boruchow noted that the multi-year average of the company is more than 20% YoY increased, although it has stepped up investments in marketing. But the online apparel dynamics are stronger than this.

JPMorgan Analyst Cory Carpenter said they have faith in “Freestyle,” which had been highly successful with its editing clients. Now it is facing a more meaningful test in its ability to drive new customers. Cory thinks the company’s profit needs to have sustainability to turn the corner in the following multiple years of compression. JP Morgan has a neutral rating on the stare of Stitch Fix with a price target worth$45.

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