Why is Stitch Fix’s share price rising today?

Stitch Fix impressed investors with an earnings beat on Monday, but is it still on track for a leadership and business model shakeup?

Following a dramatic fall from all-time highs in January, things are looking up for Stitch Fix (NASDAQ: SFIX).

And with a new CEO on the way, the company may be poised for revolutionary growth. 

What’s Stitch Fix working on?

While investors sent shares soaring in after-hours trading thanks to a narrower-than-expected loss of $18.8 million — or $0.18 per share — they should be looking a bit deeper. 

Following the announcement back in April that founder and CEO Katrina Lake would be stepping down as CEO, we knew change would be afoot. Incoming CEO, Elizabeth Spaulding, will be spearheading a completely new business model for the company when she assumes her post on August 1:

A direct-buy service for all.

Currently, only subscribers can use Stitch Fix’s direct-buy service, which allows customers to purchase items individually from its app rather than relying on the company’s data team to pick clothes for you. Stitch Fix now plans to open that direct-buy service to all customers. 

Using years of gathered data to offer full outfit ranges and categories, non-subscribed shoppers will be able to select individual items themselves for the first time. Using its data science-backed model, Stitch Fix will essentially be creating the most advanced personalized online shopping experience ever seen. This could massively increase its revenue and growth potential.

Of course, the service actually has to go live first. With plans to go live before the end of Stitch Fix’s fiscal year — which only leaves June — Spaulding was optimistic about the upcoming launch. During the call, she cited her belief that this upcoming change could fully unlock the company’s $0.5 trillion total addressable market. 

As a man who struggles to find clothes online that fit my taste, I’m very excited for the future of fashion.

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