Home Fashion Is Stitch Fix the Netflix of Fashion?

Is Stitch Fix the Netflix of Fashion?

3 min read
0
37

Stitch Fix Chief Executive Katrina Lake


Photo:

Patrick T. Fallon/Bloomberg News

Wall Street has long loved subscription businesses. From

Costco

to

Netflix

to Dollar Shave Club, the successful ones lock in customers who provide a steady, predictable stream of revenue.

The latest subscription love interest is Stitch Fix, the fashion service that had its initial public offering in November. Investors were skeptical, partly because it came after

Blue Apron
,

a meal-kit subscription service that has largely tanked, and partly because it wasn’t clear whether a subscription model could work for clothing. After all, do consumers really need constant wardrobe updates?

That might depend on which consumers you ask.

Stitch Fix has surprised investors, though, showing consistent growth. On Thursday it announced third-quarter earnings of 9 cents a share, beating estimates of 3 cents, and revenue of $316.7 million, topping estimates of $307 million. That is 29% sales growth, year over year.

The company also said it reached 2.7 million active customers, a 30% increase from the same quarter last year. These results, coupled with the announcement that it is launching Stitch Fix Kids (“to give our littlest clients the freedom to express themselves”), sent the stock up sharply in after-hours trading.

Stitch Fix has leveraged social networks to grow really quickly, says

Sucharita Kodali,

an analyst at Forrester Research, but the question is whether they will be able to retain customers. According to Forrester, 70% of subscription customers churn within the first six months. That has been the downfall of Blue Apron, Birchbox, and others. Trunk Club, perhaps Stitch Fix’s nearest competitor, was acquired by

Nordstrom

in 2014 for $350 million, but Nordstrom wrote down $197 million of its value in 2016.

For now, Stitch Fix looks to be among the subscription-model successes. But its real test will come in the next quarters as customers decide whether to stick around.

Let’s block ads! (Why?)


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also

How This Dog-Loving Fashion Company Uses Instagram To Win Customers

Photo Credit: GettyGetty I’d Rather Be with My Dog is a new fashion retailer that pr…