Deal Chasers Dent Stitch Fix Subscriptions

As shoppers continue to mind their budgets due to inflation, online clothing and styling service Stitch Fix is struggling to bring in sales, especially as it battles aggressive discounting measures taken on by retailers looking to offload inventory.

Consumers are not only shifting their spending habits due to inflation but also because of their focus on quality over quantity. According to the PYMNTS’ Consumer Inflation Sentiment study, “The False Appeal of Deal-Chasing Consumers,” more than two-thirds of consumers — 69% — have been changing their shopping habits in a trade-off that focuses on quantity over price and quality. However, they prefer a la carte versus bulk.

Stitch Fix shares dropped almost 8% Tuesday (March 7) following the company’s weak sales forecast.

During a call discussing the company’s earnings, interim CEO Katrina Lake noted that while the company did not feel the need to offer significant markdowns, excessive discounting in the retail landscape has already made it more difficult to attract customers.

“My hypothesis is that it probably impacts conversion more,” Lake said. “Refreshing your wardrobe might not be as high a priority as it might have been 10 months ago.”

Stitch Fix saw its active clients, users who checked out or bought clothes over the past 52 weeks, decline by 11% to 3.57 million.

The company’s chief financial officer, Dan Jedda, who will be stepping down to pursue another opportunity beginning April 3, attributed the sales results to “lower net active clients and higher promotional activity in the quarter” and noted that subscribers across the board are spending less than in prior years.

Jedda and Lake largely attributed the company’s disappointing results to the same reasons that former CEO Elizabeth Spaulding cited in December. Spaulding had noted that the company’s Freestyle offering, which allows users to buy clothing directly from Stitch Fix online based on personalized recommendations, had been struggling to take off due to excess discounting measures taken by other retailers and consumers prioritizing their spending on basic necessities over discretionary items.

In the coming months, the company plans to return its focus to personalization and styling — key attributes of its business that differentiate Stitch Fix from other brands and retailers.

“Looking forward, we will continue to invest in the advanced data science and machine learning capabilities combined with personalized styling expertise that have set us apart for more than a decade,” Lake said on the call. “This strategic re-focusing on our styling-first model will deliver clarity to the client experience and drive efficiency in our marketing spend.”

The approach might bring Stitch Fix much-needed respite as PYMNTS found that a more tactical approach entails offering reasonable prices, good service, the right products and other amenities. According to the study, 68% of loyal retail shoppers are motivated by factors other than price.

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