For the first time in three years, Stitch Fix is growing again — just barely.
The subscription business announced 0.7 percent revenue growth to $325 million in its third quarter ending May 3, snapping a 12-quarter streak of declines that saw the company’s sales shrink by more than one-third.
Share rose by 8 percent in after-hours trading, a sign of cautious optimism by investors that a turnaround under chief executive Matt Baer is bearing fruit. Since assuming the CEO role in 2023, Baer has cut costs, tripled new products and introduced a new slate of customer features including more ways to purchase the company’s personalised clothing boxes.
The strategy aims to put a fresh sheen on its core subscription service, which Stitch Fix pioneered in the early 2010s but lost much of its lustre as fewer consumers than expected proved willing to rely on the company’s stylists to choose their wardrobe over the long term.
In an interview, Baer said efforts to improve the shopping experience are winning new customers and convincing existing shoppers to spend more. Average order value increased 10 percent year-on-year. Stitch Fix also posted active client growth as well as its highest average lifetime value in three years, Baer said on the company’s earnings call.
“Nearly every initiative that we’ve worked on, both in terms of the internal work and also the client-facing work, has had a great outcome for us and has delivered results faster than anticipated and to a greater degree than we anticipated,” Baer told The Business of Fashion.
By offering better recommendations, more product options and more purchase flexibility — users can receive up to eight items from five per “fix,” or what the company calls its monthly or quarterly shipments — Stitch Fix is hoping to not only recover customers it lost in recent years, but also outcompete traditional retailers.
“We know our clients better before their first ever purchase than any other retailer is going to get to know their clients today over the entire lifetime of that relationship,” said Baer, who has held executive positions at Walmart and Macy’s. “We know your style preferences, we know what’s going to fit you … and we assign you to an actual human being that you can develop a real and enduring relationship with.”
Subscription Fatigue
When founder Katrina Lake launched Stitch Fix in 2011, she set out to create a shopping solution for people who simply hated shopping.
Instead of excursions to the mall or browsing the internet’s endless aisle of options, Stitch Fix users could opt to receive a box of five personalised pieces to try on at home. The $20 fee would be applied to any items they choose to keep; returns are free.
This disruptive retail model was a hit. At its peak, Stitch Fix commanded a market capitalisation of $4.8 billion.
But online shopping has only gotten easier, with Amazon becoming a major fashion player, and fast fashion sellers like Shein and Temu removing much of the friction to e-commerce and bombarding consumers with personalised ads on social media. Stitch Fix’s subscriber count fell from 3.2 million in fiscal 2019 to 2.5 million in 2024.
Another problem was subscription fatigue. Over time, the magic of getting a mystery box delivered to your door wore off. Stitch Fix shoppers complained of limited assortment and misguided recommendations. Other subscription box services such as Trunk Club and BirchBox Beauty shut down.
Lake stepped down as CEO in 2021. Later that year, her replacement, Bain-alum Elizabeth Spaulding, introduced a direct-buy option known as Stitch Fix “Freestyle” but it wasn’t enough to offset the declines in the subscription business.
Baer’s Plan
Baer assumed the CEO role in 2023. The company shuttered its UK operations, closed two distribution centres and slashed more than $100 million in expenses, including cutting 20 percent of its salaried payroll that year. It also shifted all stylist roles to part-time.
With costs under control, Stitch Fix broadened subscription options, allowing clients to curate a fix around one focus item or choose themed kits such as summer vacation or return-to-work, and extended box sizes from five items maximum to eight items.
Stitch Fix increased its private‑label assortments to account for roughly half of total inventory, which helped enhance margins and enabled greater control over product churn. It also made human stylists more visible to customers by adding profiles and areas of specialisation while also improving its AI recommendation engine.
It remains to be seen whether Stitch Fix can lure customers back from Amazon and Walmart, or resurgent mall brands like Abercrombie & Fitch and Gap. Even with the option to purchase directly from Stitch Fix’ hundreds of brands, first-time shoppers must still opt in for their inaugural “fix,” even if they choose a one-off box rather than committing to a subscription.
But there are plenty of friction points in the traditional retail model, Baer pointed out, including a lack of an interpersonal relationship between customers and store sales associates.
“I think back to my grandfather in South Bend, Indiana and how when he needed a suit and he’d walk into the local store and they’d say ‘Hey, Mr. Baer, it’s great to see you,’” he said. “They know what suits are hanging in my grandfather’s closet, they know his size, they know his budget.”
“Stitch Fix the closest thing that I believe is out there today that represents that experience that my grandfather would have had a long time ago, and what we continue to do every day is work on that service to enhance it even further,” Baer added.
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