Katrina Lake, CEO of Stitch Fix
Adam Jeffery | CNBC
Stitch fix Founder Katrina Lake told employees on Thursday that the corporate would cut its full-time workforce by 20% and re-assume its CEO position because the fledgling apparel company continues to struggle with low sales, a dwindling customer base and reduced market capitalization.
The brand’s current CEO, Elizabeth Spaulding, who joined the corporate as president in 2020 and took over as CEO in August 2021, will step down immediately, Lake said.
“I’ll step in as interim CEO and lead the seek for our next CEO,” said Lake he said on Thursday. “Despite the difficult time we’re in right away, the board and I proceed to imagine deeply within the business, mission and vision of Stitch Fix.”
The corporate’s shares rose about 9% on Thursday after the announcement, with its market capitalization hovering around $386 million. The stock closed greater than 9% higher at $3.50.
Stitch Fix, which sells curated boxes of clothing on a subscription basis, has been very successful through the Covid pandemic after consumers stuck at home freshly flooded with money used the service to update their wardrobes. But as buyers ventured back into the world, sales plummeted and Spaulding’s recent strategies failed.
Shortly after becoming CEO, Spaulding introduced a direct purchase option called Freestyle, which allowed customers to purchase products directly from the corporate with the hope of gaining them as regular subscribers. However the initiative stalled, and in June the corporate announced it could lay off about 15% of its salaried employees, or about 330 people.
The cuts left Stitch Fix with about 1,700 salaried staff in June.
Neil Saunders, GlobalData’s managing director and retail analyst, said in a press release Thursday that the corporate has “lost its way” and the issues it faces are neither temporary nor immediate to be resolved.
“That is one of the explanations the corporate has announced about 20% job cuts – an motion it hopes will help stave off losses and put the corporate in a greater financial position,” Saunders said.
Stitch Fix employees learned of the job cuts Thursday morning and were told the brand’s distribution center in Salt Lake City, which has been open for just over a yr, may even close. About 150 staff at the middle may even be made redundant, according to a plant worker. The person spoke on condition of anonymity as he isn’t authorized to speak on internal matters.
Employees on the Utah distribution center, which opened three months after Freestyle launched in December 2021, received the news during their monthly meeting Thursday morning, the worker said. Employees were “surprised” and surprised to hear in regards to the layoffs as the power had not been open for therefore long, an worker said.
“I feel they did well. We do [an] all hands just before work and [they] gave us a package with all the knowledge we wanted from final dates to parting. They even had an interpreter for our Spanish speakers,” a CNBC worker told CNBC, adding that they felt “overwhelmed” by the news.
When Stitch Fix closed one other distribution center up to now, some employees got the choice to relocate to other facilities inside the company. The worker said this time it was impossible for staff in downtown Salt Lake City.
Wage staff affected by the cuts will receive no less than 12 weeks of pay, which increases with seniority, and health care and mental support will proceed until April 2023, Lake said.
Lake told staff she was “really sorry” for the cuts and thanked them for his or her “labor” and “sacrifice”.
Because the founder, Lake has a singular perspective on the corporate and its potential, but will face a consumer environment that has modified significantly over the past yr and the looming recession that can see shoppers cut back on discretionary items akin to recent apparel.