Stitch Fix debuts IPO, hits $120m

Styling service Stitch Fix debuted its initial public on Friday, ending with a lacklustre result by close of day, as analysts and industry experts expected more from the buzzy US firm's performance.

Stitch Fix

Under the Nasdaq ticker SFIX, the San Francisco-based company disappointed analysts from the get go when it priced its shares at $15 each in its IPO, below the $18 to $20 it had projected.

At the start of trade on Friday, SFIX share prices hit $18.53, up as much as 23.5 percent, well exceeding the company's initial public offering price of $15. However, by close of day on Friday, investors had cut back the stock's value to $15.15, an increase of just 1 per cent for the firm.

By close of trade, the styling service had sold 8 million shares, immediately raising $120 million. A figure the firm will be pleased with, considering it surpassed the $100 million it had pegged as a preliminary amount back in October when it announced the IPO plans. 

The IPO left the company with a market capitalisation of $1.46 billion. ​Before the IPO, Stitch Fix had raised only $42.5 million.

Similar to a subscription-box model, Stitch Fix offers a personalised styling service that allows customers to receive curated selection of five items, whereby they can choose to keep or return items and receive a reimbursement. The only cost is a $20 shipping fee.

The website uses recommendations based on a series of tech algorithms and the suggestions of a remote stylist, including the customer’s previous preferences; popular items with similar customer profiles; budget and size. The business model has been a winner amongst its time-poor, style-conscious demographic, recording 2.2 million active users with a repeat order rate of 86%.

Founded by entrepreneur Katrina Lake in 2011, Stitch Fix recorded annual sales of $977.1 million in the fiscal year ended July 29, up from $730 million in 2016, and from $73 million in 2014. However, company growth was down from 113% in 2015 to 34% over the last fiscal year, accompanied by a loss of $594,000.

Moving forward, Stitch Fix is still a fledgling in a fierce e-commerce market and also has to face off against Amazon’s recently launched Prime Wardrobe service, aimed at a clientele similar to that of the start-up company.

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