Stitch Fix goes public

Bonobos CEO on retail industry

Stitch Fix (SFIX) started life as a public company with a bang before tailing off by the end of trading. 

Shares in the online clothier closed on Friday at $15.15, just above the initial public offering price of $15, after opening strong at $16.90 and hitting $18.50 in the first hour of trading. Stitch Fix raised $109.8 million in the IPO.

Stitch Fix, an apparel company that straddles the line between tech and retail, is one of several mail-order shopping services. Its competitors include Rent the Runway, Trunk Club (owned by Nordstrom) and Le Tote. Amazon Prime also recently introduced a wardrobe service.

"We have entered a new world of retail where the traditional leaders are faced with unconventional channel competition, and subscription services are the newest player," Marshal Cohen, chief industry analyst for retail at NPD Group, said in a note.  

Stitch Fix works by sending subscribing customers a box of items. The shopper can try them on at home send back anything she doesn't like, paying just for items she keeps.

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Mail-order clothiers businesses can be more profitable than traditional retail because their ease of use can spark tremendous customer loyalty. Stitch Fix subscribers spend 30 percent of their online apparel "shopping wallet" with the service, according to NPD. For Trunk Club, that figure is 40 percent.

The potential for growth in the subscription-clothing sector is high, as more than half of apparel customers still haven't heard of such services, according to NPD research. And, since mail-order companies can avoid the expense of maintaining storefronts, they are somewhat insulated from the real-estate costs that have helped push many brick-and-mortar stores out of business this year.

Stitch Fix, based in San Francisco, reported a loss of $594,000 in the fiscal year that ended July 29, as its expenses rose. The year before it reported a profit of $33.2 million; in the same period, its revenue rose 34 percent, to $977.1 million.

Founded six years ago by Katrina Lake, who is the company's CEO, Stitch Fix focused first on clothing for women. But it has added men's clothing and added options like plus sizes and maternity clothes. The company said it uses human stylists and the data it collects from shoppers to pick out dresses, jeans or shirts the company thinks customers would buy.

The Associated Press contributed to this report.