Clothing company Stitch Fix has filed its S-1 paving the way for an IPO.
The firm is looking to raise somewhere in the region of $100m from the raise, though this may well be a placeholder with an exact amount to be confirmed at a later date. The company is planning on trading under the ticker ‘SFIX’ on the Nasdaq, with Goldman Sachs and J.P. Morgan acting as lead underwriters on the float.
Since it was founded in 2011 by Katrina Lake, Stitch Fix has seen user numbers grow to an impressive 2.2 million. The company uses a mixture of both human stylists and data science (which is what it states sets it apart from competitors) to find the perfect outfits for consumers. It also claims that the data science aspect, which also predicts future behaviour and optimises inventory ‘fuels the business’. The company now caters for men and women.
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The business model
Stitch Fix works a bit like an old school catalogue, where items of clothing are chosen for the customer and then sent to their house. In each ‘fix’ the user receives a package of five items. The company charges a $20 styling fee for each fix. This fee is used as a credit toward any clothing that the customer keeps, and any customer that keeps all five items also receives a 25 per cent discount on the transaction. Before receiving their first package, the customer creates a profile with details on their personal style, size and fit. It is free to return any item.
The company was profitable in both 2015 and 2016 and has a net loss of just under $1 million in fiscal 2017 on revenues of $977 million. It has previously raised $47 million in funding, with a valuation of $300m at its last funding round. Funds raised at IPO will be used to increase financial flexibility, capitalisation, general use and potentially for acquisitions in the future. The company recognises that it operates in a competitive space, so the additional finance to ensure it stays ahead of the game.