Stitch Fix Investors Fear The “Blue Apron Flu”

Stitch Fix had a tough day, with its first earnings report after its IPO sending its shares went into a tailspin.

According to Tech Crunch, Stitch Fix closed up just 1 percent on its first day of trading, but did not have a good week after its IPO. While the company initially downsized its IPO and struggled right after its public debut, Stitch Fix’s shares swung back and were up more than 50 percent in less than a month.

Stitch Fix shares rose around another 4 percent, but today’s report put a stop to that growth.

Despite building a sizable business over the course of a few years, Stitch Fix went public under the specter of Blue Apron, which collapsed after its IPO.

One of the key concerns for investors is likely customer retention, with Stitch Fix COO Mike Smith revealing that the company is deploying data science so it can re-engage its customers so they come back to the service after taking a break. The company said it has 2.4 million active clients and turned a net income of $13.5 million. There are also plans to expand into new markets like Plus and Men’s.

“Generally we feel really good about retention and our ability to re-engage clients when they’ve taken a break from us,” Smith said. “The difference is we’re now looking at better ways to use data science as it relates to optimizing on both acquiring clients as well as looking at re-engagement activities. With all the data we have we think we can be best-in-class for personalized mentions for bringing them back when they have great products.”

The company’s revenue fell roughly in line with Wall Street’s estimates, which was looking for around $295 million in revenue. That’s a more than 25 percent jump when compared to the same quarter a year earlier. The company said it expects to bring in between $287 million and $294 million in revenue in the quarter ending in January.

Smith went on to say that Stitch Fix isn’t really a business that centers around the holidays and that the company is countercyclical. In fact, it doesn’t spend a lot on marketing for the quarter or see a big jump in sales.

“We are not dependent on our Q4, we deliver client experiences,” he said.