By  on November 17, 2017
Katrina Lake, founder and ceo of Stitch Fix.

Stitch Fix Inc. — which has a business model that helps it avoid price promotions by individually appealing to shoppers — had to take a price cut on its own stock.The buzzy company priced it shares at $15 each in its initial public offering, below the $18 to $20 it had projected. But once the stock hit the open market, investors gave the company a boost, trading its shares up as much as 23.5 percent to $18.53. After almost an hour of trading on the Nasdaq, the stock was up 14.3 percent to $17.19.Stitch Fix sold 8 million shares, immediately raising a total of $120 million. Underwriters have the option to purchase another 1.2 million shares. The company will use its portion of the proceeds to increase its financial flexibility.Despite the lower than hoped for price in its offering, Stitch Fix is one of the buzziest players in the industry, in part due to its savvy use of data and artificial intelligence to choose looks for users. But that also makes for a more nuanced tech-fashion story that can be harder for investors to fully digest, a factor that might have contributed to the initial price.There have also been some concerns that Stitch Fix’s model could be replicated, particularly by Amazon, but founder and chief executive officer Katrina Lake told WWD there’s plenty of room for her now-public company.“Going public is a choice for us,” Lake said. “It gives us more working capital and flexibility in funding our own growth, and helps us deliver on existing business goals: serving existing clients better, acquiring new clients, and expanding our addressable market.“Amazon is an impressive business and they’re making a large investment in apparel. Given the significant opportunity retail presents  — $353 billion with more than 80 percent of product still being sold in stores — there’s room for many players to be successful,” Lake said. “We offer a much different value proposition than Amazon and we believe that our unique combination of data science and human judgement is our competitive moat and I believe that our model offers a much better way for consumers to discover, find and buy clothes that they love.”The six-year-old styling service grew revenues by 34 percent in its last fiscal year, to $977.1 million last year, churning out adjusted earnings before interest, taxes, depreciation and amortization of $60.6 million. (On a net basis, the company posted modest loss after two profitable years).That’s enviable considering the firm raised only $42.5 million.But now the goalposts have moved for Stitch Fix, which grew the number of people who used its service in the proceeding year from 261,000 in 2014 to 2.2 million in fiscal 2017, ended July 29.The company’s new investors will be looking for even more growth — and will be looking for signs of it in each quarterly update.

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