Stitch Fix Announces Layoffs and CEO Departure

Stitch Fix Inc. announced on Thursday that it will be cutting approximately 20% of its salaried employees. In addition, Chief Executive Officer Elizabeth Spaulding will be stepping down.

Spaulding, who became CEO in August 2021, will be replaced by founder Katrina Lake in the interim while the company searches for a successor. Stitch Fix, an online personal styling platform based in San Francisco, also said it will close its Salt Lake City distribution center.

Stitch Fix was one of the companies that performed well during the pandemic, as consumers predominately shopped for clothes online. However, since then the company has struggled to maintain sales growth. In the three months ended Oct. 29, Stitch Fix's net revenue fell by 22% from a year earlier, while active clients fell by 11%.

"I'm sorry to say that we will be losing many talented team members from across the company," Lake said in a message to employees. "Despite the challenges we're facing at the moment, the board and I still believe strongly in the Stitch Fix business, mission, and vision."

Stitch Fix's stock price rose by 2% to $3.27 in New York trading at 11:31 a.m.

"It will not be easy for Stitch Fix to turn things around, as the consumer economy has changed significantly in recent years," Neil Saunders, a US-based analyst at consulting company GlobalData Plc, said in a note. "Sales and profits have weakened significantly, and there are few signs that the pressures will ease soon."

KeyBanc Capital Markets analyst Noah Zatzkin wrote that the company's cost-cutting measures are positive, but added that "additional headcount reduction coupled with a CEO transition further elevates execution risk."

Stitch Fix was founded by Lake in 2011 while she was in business school at Harvard. The company raised $120 million in its 2017 initial public offering and was one of the few companies that was profitable when it came to market.

Customers pay a $20 styling fee to receive a box of individually picked wardrobe items, which they can choose to buy or return. Some initial investors were concerned that using human stylists could be an impediment to growth, given the time and staffing needed to execute that model.

This latest round of layoffs comes after a 15% reduction in staff back in June, as reported by CNBC at the time.