Men's sales fuel Stitch Fix momentum

Dive Brief:

Stitch Fix on Wednesday evening reported that third quarter revenue rose 29% year over year to $408.9 million, thanks in large part to growth in women's and the "continued scaling of Men's," according to a letter to shareholders on the quarter.
The styling service's number of active clients rose 17% to 3.1 million, the company said in a press release. Adjusted EBITDA was a negative $0.3 million, which topped the company's previous guidance, and is on pace to turn positive in the next quarter, executives said on a conference call with analysts.
Net income in the quarter dropped to $7 million from $9.5 million a year ago.

Dive Insight:

Stitch Fix founder and CEO Katrina Lake told analysts Wednesday that the service has gained meaningful traction and improved margins in its 2.5-year-old menswear business and has figured out how to drive repeat sales among its women customers as well. In addition to the increase in its active client base, revenue per active client rose 8% year over year, which CFO Paul Yee said was the fourth consecutive quarter of acceleration in that metric.

The company's year-old Style Pass, which offers unlimited styling for a $49 membership fee, was key to driving that, so the brand is looking to expand it, Lake also said. A marketing boost also drove the quarter's performance, executives said.

The company is still in learning and investing mode, executives said on the call, and it continues to hone its ability to manage inventory and improve clearance rates in order to protect margins.

Tariffs have so far not affected the business, but the company is keeping an eye on developments and their impacts, in light of how much of its private labels are sourced in China, Yee said. If and when it must react, the company can rely on its close relationships with its brand partners and, for its own private labels, can shift its supply chain, including migrating manufacturing to different countries if necessary. "We have a really rich data set," he said. "Should we have to surgically pass on costs, we do have a good capability to do so. ... We're very much monitoring and managing scenarios."

While several apparel retailers blamed a cold spring for less-than-stellar results in their similar quarters, that was notably absent during the call. The service missed much of the fallout from a cold spring because stylists keep an eye on weather where their clients' live and because data helps it keep such tight control on inventory, Lake said.