Stitch Fix (NASDAQ:SFIX), the retail startup that’s aiming to revolutionize how customers pick and receive their outfits, made history on Friday as the first female-led tech IPO to see serious success in the market. While Stitch Fix’s IPO fell short of some expectations, closing with shares around its original $15 price instead of the $18-20 some enthusiast were expecting, its IPO raised some $120 million in capital for the company to leverage moving forward.
After the stock enjoyed a surge of nearly 20% in its pricing, originally trading at $16.90, it slowly settled back towards its starting price, ending the day up 1 percent. Stitch Fix has enjoyed a healthy dose of media attention to accompany its IPO, being the first female-led tech company going public for almost two years.
The San Francisco-based startup has ruffled some feathers in the fashion world with its unique approach to business; the company allows customers to order boxes of products specifically curated to their measurements, offering much more freedom than typical shopping experiences without as many obligations. Stitch Fix’s style just may be working out for the company; the company has enjoyed a spurt of growth in the last six years, pulling in some $977.1 million in annual revenue in that time period.
Investors are worried the company doesn’t necessarily have an entirely profitable future, however, and are looking for some changes before they dive all-in behind the would-be fashion mogul. The company originally planned to sell some 10 million shares, for instance, though it only ended up selling some 8 million, a move likely to turn some heads on Wall Street.
Stitch Fix’s embrace of the subscription box model has others worried, too, after seeing how Blue Apron's (NYSE:APRN) futures played out on the market with such a strategy. Stitch Fix’s fashion is a far reach from Blue Apron’s culinary approach to a subscription service, however, and the company’s algorithmic model for detecting new customers and servicing their existing ones may prove more fruitful in the long run.
Stich Fix’s CEO is undeterred by its doubters, however; in an interview with Recode, CEO Katrina Lake expressed her confidence in the company’s future, noting that it’s been underestimated before. After Lake sold off some $1 million worth of her stake in the company last year, however, investors may be paying little attention to her words, and a lot more attention to the financial results the company post.
The company’s future could perhaps be ensured by reaping in positive profits as it expands into new markets that it didn’t focus on in its formative years, such as menswear or sports apparel. Stitch Fix is valued at roughly $1.63 billion with share prices of $16.90, and after its IPO it certainly has the funds necessary to expand and spread its apparel services farther.
A data-driven approach towards selling clothes could be just what todays’ tech-savvy investors are looking for; as terms such as big data, algorithmic modeling, and artificial intelligence become common household staples in the era of Alexa and Google (NASDAQ:GOOGL) Home, investors may be keen to back a company that’s eagerly embracing a 21st century business model. Nonetheless, Stitch Fix needs to do more to ensure its long-term profitability if the company hopes to be amount to anything other than a temporary headline.
Being the first female-led tech IPO in such a long time may help it attract feminist-minded investors, too, though Stitch Fix would be unwise to expect such a label to bring it anything more than congratulations. Investors are more interesting in turning profits on property deals than they are in making history, after all, and Lake’s ambitious startup won’t be defined by her gender, but rather by the financial reaping it can bring in.
It would be foolish to downsize the significance of Stitch Fix’s accomplishment, however; only 3 percent of American companies that went public from 1996 to 2013 were spearheaded by women, for instance, meaning the company can stand as a beacon of diversity in a male-dominated tech sector for investors who are socially conscious.
After a hard round of funding in 2014 that saw the company struggle to inspire investor’s confidence, Friday’s IPO must have come as welcome news. The money raised from its offering won’t hurt it either, particularly as it expands its focus to bring in more men as customers.
Stitch Fix may not have gotten the share pricing it was dreaming for, but ending the day up and with a healthy $120 million in its pocket certainly isn’t a bad thing for the fashion company. Investors should keep a close eye on the company’s profitability as they decide whether to back it, but Stitch Fix’s digital approach towards the fashion industry may just reap dividends for years to come if they pull it off properly.