Stitch Fix CEO Focuses on Organic Growth as Traditional Retailers Move In
Stitch Fix,
a San Francisco-based online personal styling service for women, believes “tons” of demand for its service
will help it grow and scale, said CEO Katrina Lake.
Since it was founded in 2011, Stitch Fix has raised a total of USD 16.75m primarily from Benchmark Capital and
Baseline Ventures. It most recently raised USD 12m in a Series B round last October, but Lake declined to say if another
fundraising round could be on the horizon.
Stitch Fix provides boxes of hand-selected clothing and accessories, which are delivered directly to its customers.
Online retail and brick and mortar retailers are increasingly coming together, according to Burt Yarkin, a managing
director at boutique investment bank The McLean Group, where he focuses on specialty online retail.
On 31 July Seattle-based department store
Nordstrom (NYSE:JWN)
announced it had acquired
Trunk Club
, a personal
styling service for men, for an estimated USD 350m. The Trunk Club had 250 stylists, according to a trade publication
regarding the transaction.
Yarkin said valuations for online retailers are in the 1x to 4x revenue range - depending on growth, margins and scale.
Logical buyers and investors in Stitch Fix could be retailers trying to move into online retail, other online retailers and
large private equity investors, he said.
When asked about possible exit plans for Stitch Fix, and whether it could pursue a similar path as Trunk Club, Lake said,
“We're excited about the great exit for Trunk Club, but we are focused on building a healthy business and have no plans
for an exit right now.”
Stitch Fix has more than 500 stylists, most of which have a background in fashion and retail, and all are employees of the
company, Lake said. The company has a presence in California, Texas, Pennsylvania and Indiana, where it recently added
a second distribution center.
The company uses its proprietary technology and its team of stylists to select a personalized box of five clothing and
accessory items for each customer, based on that customer’s style profile. The customer receives the box at her doorstep
and can choose to keep all or none of the items. The initial charge is USD 20 for the styling fee, which can be applied as a
credit to any items the customer keeps.
She said the business looks a lot like a
Bloomingdales
or
Macy’s
(NYSE:M), offering more than 200 brands, so one of its
biggest challenges is trying to anticipate demand three to six months in advance, Lake said.
When asked about the possibility of competitors entering the space, Lake noted that it has three and a half years of data
accumulated, which allows it to see what is working and what is not. It also has experienced executives from
Walmart
and
Netflix
, its algorithm and technology, and therefore a “significant head start” on any competition, she said.
The company’s legal advisor is Cooley. It does not have a financial advisor on retainer, but is not seeking one either, Lake
said.
by Heather West in San Francisco
