Retail start-up Stitch Fix on Friday became the latest Internet darling to go public, raising $120 million to help fuel future growth.
But the initial public offering also marked a milestone: It was the first female-led tech company to go public in more than a year.
Katrina Lake, who founded San Francisco-based Stitch Fix in 2011 while she was attending Harvard Business School, has spent the past six years expanding the data-driven clothing subscription company to include plus sizes and maternity wear, as well as options for men. The company uses a combination of algorithms and personal stylists to pick out outfits based on customers’ preferences and purchase history, and mails boxes of clothing and accessories to clients for a flat rate of $20 (that fee can be applied toward the purchase of any of the items).
“We believe we are the only company that has successfully combined rich client data with detailed merchandise data to provide a personalized shopping experience for consumers,” the company said in a filing with the Securities and Exchange Commission.
But despite investors’ high hopes, the stock had a rocky start. Stitch Fix made its Nasdaq debut on Friday morning with 8 million shares priced at $15 each. (The company had said it would sell 10 million shares at a price of $18 to $20, but scaled back its plans earlier this week.)
Shares rose momentarily — to a high of $18.53 — before closing at $15.15, just a notch above where they began.
But despite the stock’s disappointing performance, other women in retail and technology lauded the company’s efforts.
Just 3 percent of American companies overall that went public from 1996 to 2013 were led by women, according to research by professors at the University of California at Davis. The figure, analysts say, is even lower in the male-dominated tech industry. (The last female-led tech firm to go public was BlackLine, a Los Angeles-based accounting software company, that debuted on the Nasdaq in October 2016.)
“This is an extremely important IPO, not just because Stitch Fix has created an innovative business model that utilizes data, but also because it shows girls and women that they can be the CEO of a public company,” said Jennifer Hyman, co-founder and chief executive of online clothing site Rent the Runway. (Hyman, incidentally, also started her company as a student at Harvard Business School, two years before Lake founded StitchFix.)
Stitch Fix has grown rapidly, thanks in part to $44 million in venture capital funding. The company has more than 2 million clients, and last year, it logged $1 billion in revenue, a 34 percent increase from the year before, according to regulatory filings. The company now carries more than 1,000 brands, including Toms, Theory and Kate Spade New York.
But, analysts say, growth is slowing and attracting new customers has become increasingly difficult — and costly — for Stitch Fix. The company, which was profitable in 2015 and 2016, posted a loss of $594,000 in the most recent fiscal year, as its expenses rose.
“The easy apples are picked — they’ve got 2.4 million clients — but where do you go from here?” said Kathleen Smith, a co-founder of Renaissance Capital, an investment management firm that specializes in IPOs. “The real test for Stitch Fix is going to be in delivering 20 percent growth and improved profit margins.”
She added that investors are particularly wary following disappointing stock market debuts by Blue Apron and Snap — other similarly lauded Internet start-ups — that failed to live up to investors’ hopes. Shares of Snap are down more than 50 percent since its March IPO, while Blue Apron’s stock is down nearly 70 percent following its June debut. (The overall stock market, meanwhile, continues to cruise to record highs.)
Stitch Fix also faces growing competition from Nordstrom’s Trunk Club, as well as Amazon, which is testing a similar service (Jeffrey P. Bezos, the founder and chief executive of Amazon, owns The Washington Post).
“Under [Lake’s] lead, this company has done very well,” Smith said. “But she still has to cross to the other side — and so far, the stock is barely holding on to its IPO price.”