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Stitch Fix investors don't believe growth reports

New York - Earlier this month, online personal styling service Stitch Fix reported its remarkably positive fourth quarter earnings. The quarter, which ended July 28, 2018, saw a 25 percent increase in active clients and a net income of 18.3 million dollars. These figures bring Stitch Fix’s active clients to 2.7 million and a 23 net revenue increase percent year over year. Along with this news, Stitch Fix announced its expansion into the UK market.

Investors still have concerns

While business seems to be doing well for Stitch Fix, the company has reportedly since been served with lawsuits alleging their statements about growth prospects are untrue. According to Retail Dive, investors of Stitch Fix have felt concerns around the company’s consumer retention rate and some had dropped shares in the fourth quarter as signs had shown that customer acquisition would be expensive for the styling service. Stitch Fix has experienced struggles with customer retention for most of this year, with both new and existing consumers spending less compared to consumer behaviors in previous years.

Last week, three shareholder lawsuits from the were filed alleging that Stitch Fix violated federal securities laws in that the company made misleading statements about its client growth, advertising plans and impact of plans on growth prospects.

Stitch Fix went public just under a year ago. It was founded in San Francisco by Katrina Lake with the intention to offer personalized styling on a cadence that works for individual consumers.

"In our first year as a public company, we have demonstrated our ability to transform the shopping experience while consistently delighting our clients across women’s, men’s and kids. I’m proud of our results, and excited for the future. This is just the beginning for Stitch Fix,” Lake had written in the Q4 earnings report.

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