Harder times are headed toward Stitch Fix, as the pioneering fashion brand announces a massive workforce reduction of 20%. Chief executive officer Elizabeth Spaulding is among the departing.
The company says Katrina Lake, who famously founded Stitch Fix in 2011 as a Harvard grad student eager to combine machine learning with personal style, will step in as interim CEO.
The San Francisco-based company has been struggling for some time, announcing back in June that it would eliminate 15% of salaried workers.
Spaulding, a former consultant with Bain, joined in 2020 and moved into the CEO role in 2021.
But the company has stumbled in the post-pandemic apparel landscape.
Last month, it announced that first-quarter revenue had tumbled 22% to $455.6 million, compared to $581.2 million in the comparable period of the prior year, with the number of active clients slipping 11% to 3.7 million. Its net loss increased to $55.9 million, up from a loss of $1.8 million in the year-ago period.
It predicted a revenue decline of between 19% and 21% for the current quarter, between $410 and $420 million.
Among its woes is the struggle of a service called Freestyle service, an attempt to boost sales by letting members shop for clothing outside the standard Fix framework. In effect, critics said, it made the company more like every other ecommerce brand and less like the personalized and curated service company it was meant to be.
“That potentially cannibalized from the core service,” says Neil Saunders, managing director of GlobalData, in his note on the shakeup.
He writes that a turnaround won’t be easy. But Lake “probably has a much clearer view of its future direction, which inspires more confidence with the board and investors. She is also likely to bring the focus back to improving products and marketing in a bid to win more customers.”