Mike Smith is stepping back as Stitch Fix Inc.’s president and chief operating officer at a high point.
The company is growing rapidly — expanding its offering and testing a direct-buy option in the U.S. — while also hitting its stride with a stay-at-home consumer. Revenues for the quarter ended Oct. 31 rose 10.3 percent to $490.4 million as the service’s active client count rose by 10 percent to 3.8 million over the past year.
That was enough to excite investors and scare some short sellers, driving the company’s stock up 46 percent to $52.19 in midday trading Tuesday, making for a market capitalization of $5.5 billion.
Now Smith is striking out to start a venture capital firm, looking especially to fund Black, Latinx and women tech entrepreneurs. But he’ll stay in the mix at Stitch Fix, where he’ll join the board.
Founder and chief executive officer Katrina Lake thanked Smith for his efforts on a conference call with Wall Street late Monday and was greeted by a chorus of congratulations from analysts.
In an interview with WWD, Smith remained — as ever — a Stitch Fix cheerleader.
“All the underlying metrics in this business, whether it’s kids or men’s or the U.K. or women’s, all are clicking,” Smith said, touting the quarter’s results as “outstanding.”
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Over the past six months, 80 percent of first-time users purchased at least one item from their initial Fix of five items, chosen by the company’s algorithm and stylists. That’s the highest rate in five years and a sign that the service has been successfully expanding its reach during the pandemic. The new direct buy option, where shoppers can choose to buy a specific item as in more traditional e-commerce, is also taking off in the U.K. and showing promise in a test in the U.S.
“This active client, coming through first Fixes, and with how successful direct buy has been, it’s just been amazing,” Smith said.
Stitch Fix has moved from a kind of unknown quantity, a new idea that had yet to play out, to a growing business and important merchant for brands struggling to reach consumers and a vital fashion link for homebound consumers.
Along the way there’s been a learning curve for Wall Street, vendors and within the company itself.
As one of the styling service’s earliest employees, Smith has covered many bases in his nearly nine-year tenure, launching and running the firm’s men’s business; playing a key role in introducing the service to the U.K., and introducing kids. This year he served as interim chief financial officer, a role he turned over on a permanent basis to Amazon veteran Dan Jedda, who joined the company this week.
“The thing I’ve learned is to lean in to personalization and lean into this being the future of retail,” Smith said. “In the early days we weren’t so sure.”
But the company saw early signs of “market fit” and was able to, with some effort, build into men’s and overseas.
“It wasn’t easy in the U.K. in the beginning, but now the trend in that business is on a really positive trajectory,” he said.
Stitch Fix started out with a combination of artificial and human intelligence that helped it assess and then address the needs of shoppers, something many brands in fashion are now trying to retrofit into their models.
“We’ve been investing in technology talent at a pretty high rate,” Smith said. “I’ve learned that we should feel confident that we should invest.”
And that will help the personalized Stitch Fix experience continue to evolve.
“We will continue to show the world what this looks like, why shopping this way is just a better way to shop,” he said.
But helping Lake drive that process is now up to others, especially Elizabeth Spaulding, who joined the company as president in January.
Spaulding said in the interview that there are still plenty of ways to improve upon the standard retail or e-commerce experience.
And the opportunities to catch new consumers might be greater than ever right now with the pandemic forcing so many to consider new ways to shop.
“We need to seize the day to really accelerate what we’re doing,” Spaulding said.
She said Stitch Fix can lead the way in “discovery-based shopping,” an element she described as the “Achilles heel of online shopping.”
For many retailers, it is the in-store impulse purchases that really drive profits in their businesses and are especially lacking in today’s more utilitarian world of pandemic shopping online and curbside pick up.
Stitch Fix naturally skirts the issue with its try on at home model and Spaulding is clearly looking to press the company’s advantages.
“There are still so many pain points” in traditional online shopping, she said.
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