Alongside Stitch Fix’s fiscal first-quarter 2020 earnings, the company also on Monday dropped some surprises — like a change-up in its leadership team. Elizabeth Spaulding has been anointed the new president, the company said, stepping into what had been a primary function of president and chief operating officer Mike Smith.
Global head and founder of Bain & Company’s Digital Practice, Spaulding was brought on to “help lead the continued evolution” of the company’s personalization platform — namely, the company’s next phase of development focusing on direct buys and its global expansion plans. She will report to founder and chief executive officer Katrina Lake when she assumes the role on Jan. 27.
Stitch Fix is also adding staff, including merchandising professionals that hail from Old Navy and Gap, as well as saying goodbye to chief financial officer Paul Yee, who resigned from the company.
Smith, who will retain his president and chief operating officer titles, adds another role to the list. Leading the finance organization as Yee exits, Smith also becomes the interim cfo effective Jan. 3, and will help Stitch Fix in its hunt for a new financial executive. What happens after that isn’t clear, but the triple-titled executive said that he looks forward to figuring out where and how the company can structure — or restructure — his responsibilities.
In other words, Smith said, he’s not going anywhere. “This is my third go round as being a cfo,” he told WWD. “I was a cfo in the early days before we went public. And so that should be fairly seamless in me stepping into the role of leading our finance team for a third time.” He’s also looking forward to working with Spaulding, as she takes up the high-profile mantle.
The executive musical chairs came as the company released its latest quarterly earnings report on Monday.
The report contained more surprises: Apparently, after Stitch Fix’s rocky fiscal fourth-quarter earnings call — in which its positive results dimmed in the face of lowered guidance for the following (read: current) quarter — Lake managed to give investors reason to exhale.
The company reported a growth of active clients to 3.4 million — a jump of 17 percent, year over year — and a 10 percent increase in revenue per active client compared to last year. Sales landed at $444.8 million, exceeding estimates by $3.8 million.
The company, which had projected a loss of 6 cents a share, reported a loss of $200,000 amounting to less than one penny a share.
“We had another quarter of great momentum in Q1, delivering net revenue of $445 million, exceeding guidance and representing 21 percent year-over-year growth,” Lake said in a statement. She added that the growth in active clients was due to the company’s push in data science and ability to “delight our clients.”
The increase in revenue per active client, she said, represented Stitch Fix’s “sixth consecutive quarter of growth.”
The numbers were enough to cheer Wall Street, which sent shares up 3.86 percent immediately in after-hours trading on Monday.
On a conference call with analysts, Lake explained how recent features — such as Shop Your Looks and Shop New Colors — can increase the value of purchases per client. The services, which recommend items that go with purchased items or encourage clients to buy clothes in different colors, respectively, point to the company’s deep investments in artificial intelligence and machine learning.
Stitch Fix uses client data gathered through purchases, its Style Shuffle game and the Shop Your Colors and Shop New Colors features to analyze preferences, tastes and other insights. So far, the data science, plus the expansions into new categories and regions, has been the key strategy.
Now the company is fixating on how it can break into its next phase of growth. And apparently, that answer lies in two words: more AI, everywhere from the front of house to the back end.
According to Smith, the company is pushing to use AI to optimize “inventory management, styling and operations.” Beyond that, the company feels encouraged by growth in the kids category and in the U.K., and the rise of its direct-buy initiative, and will continue pushing its efforts behind them.
That brings things back to the switch-up in leadership — with Spaulding essentially in charge of what amounts to Stitch Fix 3.0.
So far, the company mainly self-funded, and according to Smith, it’s proud of its ability to balance unit economics and defy the temptation to grow at all costs. And despite the doubling down on artificial intelligence, he also believes it’s the human quotient that will help light the way forward.
“With the additional talent that we have in the business, we feel really confident in our ability to drive long term growth,” Smith explained to WWD. “In this business, we still have a ton of opportunities, a lot more total addressable market to go after, and we’re extremely confident in our ability to drive that with the talent that we have.”