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Why Stitch Fix stock is up today

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Yahoo Finance Live anchors discuss the move in Stitch Fix stock after Bill Gurley bought 1 million shares of the company.

Video Transcript

BRIAN SOZZI: We are watching a spike in Stitch Fix shares that began during after hours trading yesterday with Bill Gurley buying up 1 million shares of the company. Gurley is a director at Benchmark capital and a Stitch Fix board member. OK, Bill Gurley. I mean, he's been riding this whole train right down into the drain. I mean, this has been a terrible story at Stitch Fix. And I went back to the company's recently filed 10-Q report just to familiarize myself on how bad things have gotten.

They've been losing customers, can't get clients. They're telling investors in that 10-Q that this will have a compounding effect over the next few quarters. I guess this is Gurley trying to put some type of, I guess, short-term bottom in the stock, but the fundamentals are absolutely dreadful for Stitch Fix. Worse, worse than Gap. Worse than Gap.

JULIE HYMAN: Wow, worse than Gap.

BRIAN SOZZI: Worse. Way worse. Way worse.

JULIE HYMAN: That is, like, the worst thing that Soz can say.

BRIAN SOZZI: Way worse.

JULIE HYMAN: Speaking of IPOs, right, this one was not a recent IPO. This was back in 2017. And you and I have been watching this one, Soz. $15 was where that IPO price was. Now it's trading at $5.48. So it hasn't fallen, like, as much, I suppose. But still, obviously, this has been a really tricky story. The company has been trying to pivot, right. Initially, the model was it would send you a box of stuff, you would pick the stuff you wanted to keep, and send back the rest.

Now it allows you to choose the stuff that you want--

BRAD SMITH: Freestyle.

JULIE HYMAN: --according to one of its models. I can't remember what they call that particular model. But it's had a hard time sort of selling that to customers.

BRIAN SOZZI: It's not that simple. It's a little more complicated. I don't know. It's just, it's not a fun experience.

BRAD SMITH: Well, it's-- yeah. And so, for the Stitch Fix Freestyle business, what they're really looking at there is a customer that's going to continue to return more in aggregate and over an extended period of time. But they pivoted to that far too late. They were looking at some of the styles that anybody could have walked into, dare I say, a Gap and gotten, should they so choose, or you could wait for it to come via Stitch Fix via their ability to curate what you wanted to or what they thought you might want to wear as well and then you send it back if you don't like it.

But I think for the number of people that were looking for that optionality, that were looking for the ability to say, you know what, I'm just going to outright pick what I want and stop waiting for you to send me these curated styles, that was a pivot that happened too late for Stitch Fix. And so, regardless of this purchase that's taking place, I think you would be hard pressed to find any bulls that are looking at Stitch Fix and extremely optimistic about the future for them.

BRIAN SOZZI: The stock price, the one-year stock chart, if we could pull it up here, it says, it is suggesting that this company may not have a place in the future of retail. It may not survive the cycle. And at the bare minimum, over the past six months, you have seen consumers invest in their closet as they go back to the office, and they're losing clients. That's terrible.