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Stitch Fix beats earnings estimates, CFO outlines the next the 10 years

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Stitch Fix CFO, Dan Jedda, joins Yahoo Finance to discuss its plans to capitalize on people rebuilding their closets and how the company plans to continue to outperform expectation post-pandemic with a new CEO and CFO guiding the company.

Video Transcript

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- Stitch Fix is out this week with much better than expected quarterly earnings as consumers began to rebuild their closets after a year of being quarantined. Company will enter post pandemic life with a new CEO and CFO at the helm, both tasked with improving the online retailer's execution. Dan Jedda is Stitch Fix's new CFO and he joins us now. Dan, good to talk with you here. I think a lot of those folks on the street really focused in on active client growth up 20% in the most recent quarter. What's driving that and how sustainable is that?

DAN JEDDA: Hi, happy to be with you guys. Thanks for having us. Yeah, we ended the quarter with 4.1 million active customers. We added 234,000 quarter on quarter, which is our second highest quarter addition ever. And we're seeing customers come back and we're seeing new customers arrive. They want help in dressing. We see more-- more attire for going out. And customers want that personalized curated service that we give them at Stitch Fix.

- Hey, Dan, it's Julie here. I noticed rompers and jumpsuits up 60% year over year, midi dresses up 80% year over year. And we've talked about this trend a lot on the show, people getting excited about going out into the world again and buying clothes accordingly. You guys have been switching a little bit to less of a so-called surprise model for what's in the boxes and giving customers more choice. Talk to me about how that's working through and kind of what percentage that is now and what you expect that to look like going forward.

DAN JEDDA: Yeah, Stitch Fix was started with the idea of five items in a box highly curated. We use data science and creative judgment. And we're expanding that to a direct buy model where you can come to the site or to the app and get a highly curated and personalized experience just for you through direct buy.

So it's gone are the days of the endless scrolling or walking into a dressing room with five, six pairs of jeans and they don't fit and walking out with nothing. We're only going to show you items that we think you're going to love and we're going to show you items that fit you. And you get that with the direct buy experience. It's growing very rapidly. It makes up a meaningful part of our business and we're very excited about it. Right now, it's available to Fix only customers, but very soon we'll be opening up for everyone.

- Dan, you're about six months into the CFO position at the company, joining Stitch Fix from Amazon. Now that you've had some time here, got to meet everyone, what are some of your biggest priorities in the back half of the year?

DAN JEDDA: Our biggest priority is to continue to innovate on behalf of our clients in the Fix business. It's-- it's--it's a big business for us. It's very successful. It's like 4.1 million active clients. But we're also very excited to roll out the shop experience to everyone and let everyone come in and get that highly personalized experience that our current Fix customers get. So that's a big focus for us.

We're going to open that up later this-- later this fiscal year, our fiscal Q4, which ends in July. And we're going to start to market it in our fiscal year '22 starting in our Q1. So we're very excited about that. It's a big priority for us. It really does open up the addressable market for us to the entire apparel and footwear market in the US and the UK, which are the two countries that we're in. So we're very excited-- very excited to launch that direct buy business.

- Dan, have you started to explore the rental and the second-hand market? Those markets are exploding. Why isn't Stitch Fix involved in there yet?

DAN JEDDA: Yeah, there are a lot of interesting business models out there in fashion. You know, we're very focused on the direct buy experience and the Fix business. Eventually we may look at that, but our priorities right now are to launch that direct buy business, which, again, we think is huge and is something that's going to expand our addressable market. So again, this is something we're always looking at, always thinking about. Stitch Fix has-- has-- has had over $7 billion, tens of millions of Fixes out there. We're in a lot of people's closets. And so that's an interesting model that we'll look at. But for now, the direct buy and our Fix business is our focus.

- Hey, Dan, I want to ask you about shipping delays and sort of supply chain because I know you talked on the call about how things are getting better at the West Coast ports, it's easier to get stuff in. So what does that trajectory look like for you? Is it smooth sailing, pardon the pun, from here on out? And what are your input costs looking like as well?

DAN JEDDA: Yeah, it's a great question. You know, we-- we-- we have seen some delays at our ports but nothing material, nothing that's impacted us. We-- we planned for this. We knew the economy and these-- the states would be opening up, so while we've seen some delays, it hasn't impacted our client experience like it has to many others. So we're very happy with that.

With respect to input cost, like-- like many others, we are seeing costs increase, specifically with competition in the warehouse and fulfillment center workers. We announced in our last quarter that we are increasing our wages to over $15 an hour and we're going to continue to look at that and be competitive. You know, our fulfillment centers are basically the front line for the client experience. And we continue to invest in ensuring we have-- we-- we can attract and retain our fulfillment center workers for the best customer experience possible.

- And you know, Dan, one of the other things that we've talked a lot about is companies raising prices as a result of the increase in wages and other input costs. Is that something you guys are doing or considering also?

DAN JEDDA: You know, we're always looking at the market. We're very price competitive. We look at what we have multiple price points and we'll continue to look at it. But as of right now, we feel very good. We have not raised prices. We feel very good with where we're at.

- Dan, it's Myles here. I want to ask just about the stock and the volatility you've seen. And we've seen a lot of companies-- for a time, Stitch Fix was kind of caught in that first wave of the short squeeze meme back in the early winter. And I'm just curious, as a CEO, CFO, sorry, you know, of a company and you see that kind of volatility in your stock, do you ever think about coming to market or do you just try to keep your head down and not think too much about that, particularly as more executive teams have started to lean into that part-- that part of their story?

DAN JEDDA: Yeah, it's definitely an interesting time with stock volatility in the market in general. We're less focused on short-term volatility. We're very fortunate to have long-term investors that are focused on the long-term. So we continue to be heads down focused on the client experience, not focused on the short-term volatility, really focused on the long-term output, outcome. And again, focused on generating more free cash flow over the long-term.

- Dan, as I mentioned earlier, you came from Amazon. I look down in Texas right now and there is GameStop. They've recruited five executives from Amazon. So my question to you is, why did you leave Amazon and what type of experience does that Amazon culture bring when you go change to another organization?

DAN JEDDA: Amazon is a great company. And what I saw at Stitch Fix is this incredible runway ahead of it. Stitch Fix is really innovating and disrupting a space, meaning fashion, which is ripe for innovation. And when I-- when I-- when I actually experienced the product and I actually signed up and became a Fix customer and then became a direct buy purchase, I saw how they could curate, and tailor, and personalize an experience in the fashion world and that is incredibly exciting.

The next 10 years at Stitch Fix are very exciting. And I think it's going to be a really fun ride. I think it's going to be a big business. We have a huge addressable market in the fashion space. And Stitch Fix is well positioned. We've got a 10 year head start in using data science and creative judgment. And it's a really exciting time for the company.

- Dan, great to get some time with you today. Thanks for coming to see us. Dan Jedda is the CFO at Stitch Fix.

DAN JEDDA: Thank you.

- Appreciate it.