What's going on?
Shares in Stitch Fix – the US online subscription and personal shopping service worth $2.5 billion – put on their fancy pants on Friday, rising 10%. And on Thursday, the company reported better-than-expected quarterly results.
What does this mean?
Founded in 2011, Stitch Fix sends individually handpicked items of clothing to men and women based on information about their style preferences. The company “went public” last year, raising $120 million. In Stitch Fix’s last quarter, it added 30% more subscribers to its service compared to the same time last year – and it now has 2.7 million active customers.
Why should I care?
For markets: Stitching together a map for growth.
Alongside its results, the company announced plans to affix (get it?) a new segment to its business: kids. Stitch Fix will start selling children’s clothes across a range of brands – and hopes its technology will help its new little customers better express themselves. The children’s apparel market is expected to grow by almost 10% a year on average – so part of the stock’s rise may have been down to investors thinking this new and growing market could help boost the company’s future sales and profits beyond currently forecasted levels.
The bigger picture: Stitch Fix is following a well-trodden path.
Companies sometimes start by attempting to tackle a very specific problem, market or customer group – but often find they must expand into pastures new in order to wholly fulfill their potential. A famous example is Amazon – which moved beyond selling books into selling, well, everything. And in food, Germany’s meal-kit provider HelloFresh and the US’s Blue Apron have expanded from dinners to prepared meals for children and wine, respectively.