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Stitch Fix (SFIX) Buoyant on Freestyle Launch & Clients' Base

Stitch Fix (SFIX) is consistently strengthening its digital and personalization capabilities including the Freestyle launch.

This story originally appeared on Zacks

Stitch Fix, Inc. SFIX is leaving no stone unturned to enrich customers’ experience. The company has been adopting several measures to offer them the best tailored service. Its efforts to boost client experience through Fix and direct buy (currently known as Freestyle) offerings are commendable. Management is also focused on expanding the company’s product menu and driving awareness for personalized shopping.

Such strengths have been fortifying this renowned online personal styling retailer’s active client base for a while now. Active clients rose 18% year over year to 4.2 million in fourth-quarter fiscal 2021. The company ended the second half of the fiscal year with about 300,000 total net additions. Net revenue per active client jumped nearly 4% year over year to $505 in the quarter. The company experienced positive trends in client engagement and retention with keep rates touching all-time highs and client churn rates closing the year at all-time lows.

Sturdy active clients’ growth and gains from strategic efforts have been aiding Stitch Fix’s top-line performance for a while now. Management recently highlighted that the company crossed revenues of $2 billion, annually, in fiscal 2021 for the first time. Net revenues grew 22.8% from the last fiscal year’s figure to $2.1 billion.

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More on Freestyle Drive

Management rolled out Stitch Fix Freestyle, which offers quite a distinct shopping experience. This platform allows customers to discover and buy curated items according to their style preferences, fit and size. Customers can buy items directly from Stitch Fix, irrespective of ordering a Fix first. The service offers an effective way to shop articles from a wider range of accessible categories.

The Freestyle service caters to customer style needs across casual, workwear, occasion, active, athleisure, loungewear, sleepwear and more. It boasts a variety of unique and new features including Trending for You, Complete Your Looks, Featured Brands and Shop by Department. This looks to offer brands like Free People, Universal Standard, Vince, Madewell, Mother, Rag & Bone, The North Face, Club Monaco and Girlfriend Collective. Management looks forward to introducing styles from brands like Adidas, Good American, Vans, Levis, DKNY and Champion.

Other Positives

Stitch Fix is expanding its assortments to house more affordable products across categories. Management is on track with a significant transformation of its business in several areas including the expansion of Shop to the existing client base, the launch and scale of Fix Preview, and investments in systems and people. It is constantly leveraging product innovation, evolving assortments and using personalized experience to grab more clients. The expansion of personalized direct purchases for the clients is also impressive.

Management is optimistic about the Fix Preview tool. The company rolled out Fix Preview to its entire women's and men's clients across the United States and the U.K. Continued strength across Women’s Fix, outsized growth in Kids and the company’s business in U.K. have been contributing to the company’s performance for some time now. The company’s Plus offering is also quite appreciative, delivering 51% revenue growth in fiscal 2021.

Bottom Line

Although all the aforesaid tailwinds speak volumes for Stitch Fix, the company is persistently grappling with higher costs including SG&A. We note that the company started witnessing higher advertising spend since the launch of its Freestyle service. Management continues to anticipate elevated investment ahead. However, this Zacks Rank #3 (Hold) company’s online and personalization efforts including Freestyle will highly pay off in the future, offsetting the increased costs. In a year, shares of the company have appreciated 42.6% compared with the industry’s 62.5% rally.

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