Stitch Fix Men

Growth is everything for a public company — but maybe even more so for Stitch Fix Inc.

The Silicon Valley darling led by chief executive officer Katrina Lake has to keep up with fashion and deliver the tech set’s idea of a growth curve. The company has been dutifully pushing forward, launching kids over the summer and on Monday revealing an initiative to launch in the U.K. with women’s and men’s looks by next summer. Stitch Fix also weighed in with results for the fiscal year ended July 28, when its active client base rose by 25 percent to 2.7 million and revenues jumped 26 percent to $1.2 billion.

Still, the expansion and the sales growth weren’t enough for Wall Street, which saw fourth-quarter revenue growth of 23.2 percent as a comedown after the third quarter’s 29.2 percent expansion.

Shares of the company dropped 20.5 percent to $35.48 in after-hours trading after results were released. That’s still well ahead of the company’s initial public offering price of $15 a share, but Stitch Fix is finding it has more competition at the crossroads of tech and fashion. Marketplace Farfetch went public last month, scoring an $8 billion valuation, and Revolve just revealed its own plans for an IPO on Friday.

Even if investors were disappointed on Monday, the market has been particularly skittish and Stitch Fix is playing both the long game and bringing a more analytical mind-set than many of its traditional retail competitors.

During the fourth quarter, the company pulled the plug on its national TV advertising campaign for 10 weeks “to measure the channel’s efficacy” and to “more precisely gauge the impact TV has on new client acquisition.”

The result? Stitch Fix gets more out of TV than it thought.

On a conference call with analysts, Lake said: “We have turned TV back on. Now, it’s even more measurable, we understand its contribution even deeper and you’ll see us on the air.”

The idea is that a smarter marketing approach on TV helps drive more profitable growth.

This year, Stitch Fix is looking for revenues to rise by 20 to 25 percent to a range of $1.47 billion to $1.53 billion, without the addition of the U.K. business.

And while Lake has plenty of competition in the apparel space, she told analysts she has one part of the field to herself.

“A lot of the innovation we’ve seen [in fashion] over the years has really been around this cheap and fast value proposition,” the ceo said. “We haven’t seen anybody address the really hard part of shopping for apparel, which is the discovery element. We don’t see a lot of other businesses that are really approaching it with a solution that’s truly personalized and really incorporating a human element.”

Stitch Fix By the Numbers

Fourth-quarter results from the online styling service.
Revenues $318.3 million +23.2 percent
Adjusted EBITDA $11.1 million +355 percent
Net Income $18.3 million vs. loss
Active Clients 2.7 million +25 percent
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