SFIX - Stitch Fix's Model Needs Improvements

2024-03-16 01:14:50 ET

Summary

• Stitch Fix is an apparel retailer with an innovative fashion box model where clothing is sent to the customer in bundles chosen by stylists.
• The model is pretty successful among people who don't really like fashion, and therefore value the help of a designer in creating their wardrobe.
• That strength is also the model's weakness, as SFIX's customers tend to drop out of the service quickly, after renovating.
• I believe this excessively increases the weight of the Company's CAC on its costs, potentially making the model inviable.
• Despite the very low EV (even when adjusted), the stock is not an opportunity at these prices.

Stitch Fix ( SFIX ) is an American apparel retailer.

The company has an innovative model called style boxes, where customers buy bundles of five pieces selected by an AI-aided stylist.

The company has consistently lost money on an EBITDA basis since starting an aggressive growth campaign during the pandemic. This was made worse by revenue and client counts have also fallen almost 50% since their peak in late 2021....

For further details see: