Rack of fashionable clothes hanging on hangers

Stitch Fix to Lay Off 20% Staff and Close Distribution Center

As the company undergoes a leadership change and tries to adapt to an ever-changing economic climate

The pandemic giveth and the economic downturn taketh away. Like other membership and subscription box companies, Stitch Fix is transforming into its next iteration as CEO Elizabeth Spaulding steps away from her post. Stitch Fix founder and former CEO Katrina Lake will return to the CEO spot and serve in an interim role for six months, until a replacement is named, or she and the board come to a different agreement.

“Stitch Fix continues to embark on an ambitious transformation and in the immediate term, the focus for the team is squarely on creating a leaner, more nimble organization to set the company up for a return to profitability. First as president and then as CEO, it has been a privilege to lead in an unprecedented time, and to chart the course for the future with the Stitch Fix team,” said Spaulding in a January 5, 2023 news release.

Stitch Fix founder and returning CEO Katrina Lake.
Katrina Lake, Stitch Fix founder and returning CEO. Source: Stitch Fix

“It is now time for a new leader to help support the next phase. With that context, the Board and I have made the difficult decision that I will step down as CEO. I am proud of the new leadership team we have built, the evolution in culture we’ve created, and the products we’ve shipped. More than anything, it is a privilege to serve our clients and create many delightful moments in their lives,” Spaulding added.

Lake shared her thoughts about leading the organization again.

“I look forward to stepping back in to lead the business and working closely with the Board of Directors to identify a successor going forward,” Lake said. “My fellow Board members and I thank Elizabeth for her service to Stitch Fix, especially during the challenges of the last couple years. We wish her the best.”

The transformation will extend beyond the leadership changes. In an email to staff on January 5 that was posted to the Stitch Fix blog, Lake highlighted two major changes: laying off 20% of salaried staff and the closure of the Salt Lake City distribution center. Impacted employees will receive at least 12 weeks of pay with additional pay for longer tenures. The company will provide healthcare and mental wellness support through April 2023, and they will provide outplacement support.

“Our departing teammates have made valued contributions to Stitch Fix and any company will be lucky to have them on their teams,” Lake said in the email. “To those impacted, you took a chance on Stitch Fix, trusted us with your time and investment of yourself, and I am sincerely sorry that we are parting ways with you in this way today.”

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

Prior to the pandemic, Stitch Fix, a curated, personal clothing service, had 3.2 million active members, reports Retail Wire. Membership grew to 4.1 million in October 2021, as people got tired of wearing the same work-from-home wardrobe. As of October 29, 2022, membership had dropped to 3.7 million. First quarter revenue for 2023 is estimated at $456 million, compared to $581 million in the first quarter of 2022. Net revenue per active client is expected to stay steady. In Q1 2022, it was $524. Stitch Fix estimates it will be $525 in Q1 2023. In Q1 2023, Stitch Fix projects that cash and investments, working capital and total assets will decrease while liabilities will increase.

Founded in 2011, Stitch Fix was originally a subscription box and personalized styling service for women, growing the company to $1.7 billion in annual revenue. Over the last decade, Stitch Fix has undergone several transformations. They are no longer a subscription service. Instead, customers take a style quiz and either order a Fix delivery of curated pieces or, after their first Fix, they can buy items online from their personal Stitch Fix store. The curation of pieces by a style expert requires a $20 styling fee, and can be used as a credit toward items the customer purchases. If the customer purchases all five items in their Fix, they get a 25% discount. Shipping, returns and exchanges are free.

They now serve women, plus sizes, petites, kids, maternity, men and big and tall sizes. Women’s sizes include XS to 3X. Men’s sizes are XS and 3XL, Kids’ sizes range from 2T to 18. The company offers products from more than 1,000 brands and styles, including Kate Spade, Nike, Under Armour, Calvin Klein, Ugg, Girlfriend Collective, Callaway and others.

Samples of curated Stitch Fix fashions and an Asian model wearing several of the Stitch Fix pieces (black leather jacket, black top and knit, patterned skirt)
Source: Stitch Fix

Insider Take

As inflation and fear of a recession continue, consumers are reconsidering their disposable income and how to spend their money. To some, clothing is an essential purchase. To others, it is more of a want than a need. Like so many businesses, Stitch Fix is trying to right size their organization, drastically cutting costs just to stay alive. Though Stitch Fix did well during the pandemic, the current economic climate is a serious issue. However, they’ve successfully navigated global changes and changes to their business model since 2011. We think they will ride this out, but it may be a bumpy ride.

Copyright © 2023 Authority Media Network, LLC. All rights reserved. Reproduction without permission is prohibited.

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