Stitch Fix has filed to list shares on a public stock exchange, a move that will test investor appetite for e-commerce stocks.
The company, which offers personal online shopping, has seen revenue rise 13-fold since 2014 to $977.1 million this year, the kind of growth that should appeal to investors hungry for new e-commerce stocks, according to a prospectus filed with regulators on Thursday.
And the success of the IPO, if it occurs, will likely affect the prospects of potential listings by other digital-first retailers such as Warby Parker and Rent-the-Runway. Stitch Fix’s operations are profitable, though it posted a small net loss this year after two years of sizable profits, something likely to whet investor interest at a time some similar companies are struggling to make money, hurt by massive investments in market-share developing efforts. Shares in Blue Apron (APRN) have tanked since its IPO earlier this year.
The e-commerce company, founded in 2011, filed its prospectus with the U.S. Securities and Exchange Commission seeking to list its shares on the Nasdaq stock exchange. Various media reports have pegged Stitch Fix’s valuation at as much as $4 billion. The company has 5,500 employees (including 3,400 stylists) and said in its filing it would ramp up hiring significantly in 2018.
Stitch Fix, founded and led by CEO Katrina Lake, has won favor with women seeking to buy clothes regularly without having to go to stores. It is essentially a “subscription box” model, in which a shopper pays to get items of clothing shipped regularly. But Stitch also lets non-members use its service.
Customers of Stitch Fix pay a $20 upfront styling fee and fill in a survey about their tastes. Based on that, along with guidance from a flesh and blood stylist, Stitch Fix then sends five items, clothing and accessories. The customer keeps what is satisfactory and returns what he or she doesn’t like. The accuracy of its algorithms is something the company touted in its prospectus: “Our data science capabilities fuel our business,” Stitch Fix said.
Widely hailed for that tech, Stitch Fix is nonetheless facing growing competition: Amazon.com s rolling out “Prime Wardrobe” which is essentially a subscription business.
Early on, Stitch Fix sold women’s clothes only but last year added a men’s offering. According to its IPO filing, Stitch fix offers 700 brands in addition to its own brands, a growing part of its business. Lake currently controls 16.6% of voting shares. Other major investors include Baseline Ventures, Benchmark Capital Partners and Lightspeed Venture Partners.