Stitch Fix stocks fall as founder Katrina Lake steps down as CEO
Stitch Fix’s shares fell more than 5% Tuesday afternoon after the company announced that founder Katrina Lake would step down as CEO.
The company’s president, Elizabeth Spaulding, will start as managing director on August 1st, according to a press release.
Lake started the online styling service a decade ago when she was a student at Harvard Business School. The company personalizes e-commerce by having employees select clothing and accessories for customers who subscribe to the service or sign up for a “fix”. Items tailored to each person’s style are delivered by post and include a prepaid envelope for return. Customers only pay for what they keep and the styling fee is applied to their purchases.
Since Lake Stitch founded Fix, the company has grown into a company with around 4 million customers in the US and UK and around 8,000 employees. At the time Stitch Fix debuted on the stock exchange three years ago, she was the youngest woman to take a company public. (That distinction now belongs to Whitney Wolfe Herd, CEO of Bumble.)
However, the company has had an often tumultuous ride on Wall Street. The earnings reports often lead to sell-offs, even if the stock price has ultimately risen over the years. Its shares debuted on the Nasdaq at $ 16.90 in 2017 and closed at $ 49.49 on Tuesday. The market value is $ 5.26 billion.
Stitch Fix has been struggling with shipping delays and lower customer spending lately. In March, the analysts’ sales expectations for the first quarter of the fiscal year were missed. Active customers spent an average of $ 467, down 7% from the same period last year.
Last year, 1,400 stylists in California, or about 18% of the workforce, were laid off. At the time, the company had announced it would be hiring 2,000 stylists in other parts of the US with a lower cost of living, such as Dallas and Minneapolis.
The company has expanded beyond its personal styling and subscription-based model to grow sales as well. Customers can now purchase individual items, including some suggestions based on previous purchases or recommended to complete an outfit.
The company’s shares are down nearly 16% so far this year.
Stitch Fix said in a press release that Lake will continue to have an interest in the company as its chairman. She will also focus on the sustainability efforts and marketing of the personal styling service.
In a company-wide email, Lake said the time is right to transition as more customers look for clothing and other merchandise online.
“The clothing retail industry is being reinvented and Stitch Fix is extremely well positioned to catch on,” she said. “This moment of change in our business and in our industry makes it the right time to start thinking about the next generation of leaders in our company.”
Before joining Stitch Fix, Spaulding was a partner in the consulting firm Bain & Company.