Stitch Fix said Thursday that it will cut about 20% of salaried employees and that CEO Elizabeth Spaulding will step down.
Spaulding, who became CEO in August 2021, will be replaced by founder Katrina Lake in the interim while the company searches for a successor. Stitch Fix, a San Francisco-based online personal styling platform, also said it will close its Salt Lake City distribution center.
The company, which performed well during the pandemic as consumers predominately shopped for clothes online, has since struggled to maintain sales growth. In the three months ended Oct. 29, Stitch Fix’s net revenue fell by 22% from a year earlier, while active clients fell by 11%.
“We will be losing many talented team members from across the company and I am truly sorry,” Lake said in a message to employees. “Despite the challenging moment we are in right now, the board and I still deeply believe in the Stitch Fix business, mission and vision.”
Stitch Fix shares were up 2% to $3.27 in New York trading at 11:31 a.m.
“A turnaround will not be easy as the consumer economy is in a very different place to a few years ago and Stitch Fix still needs to think about its place in this new era,” Neil Saunders, a US-based analyst at consulting company GlobalData Plc, said in a note. “The sales and profit lines have weakened significantly and there are few signs that pressures will ease soon.”
KeyBanc Capital Markets analyst Noah Zatzkin wrote that the cost-cutting measures are positive but “additional headcount reduction coupled with a CEO transition further elevates execution risk.”
Lake founded Stitch Fix while in business school at Harvard in 2011. The company raised $120 million in its 2017 initial public offering, and was one of few companies at the time that was profitable when it came to market.
Customers pay a $20 styling fee to receive a box of individually picked wardrobe items, which they can choose to buy or return. Initial Stitch Fix investors were concerned that using human stylists could be an impediment to growth, given the time and staffing needed to execute that model.
The 20% reduction of salaried employees follows a 15% cut in June, which CNBC reported at the time.
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