hnnhcronin The online personal shopping and styling startup Stitch Fix has recently gone public, raising a total of $120 million; but Stitch Fix’s initial public offering has left many investors disappointed. Stitch Fix is able to select outfits specific to each individual user based on their previous purchases and through a system of computer-driven data as well as analysis by personal stylists. A user selects their size, style, and price preferences, and Stitch Fix sends 5 items in the mail with the guarantee that shoppers can send items back if they do not like them. The company has attracted a large following of fashion-conscious men and women and recorded sales of $1 billion for the fiscal year. Because of the company’s massive success over the past five years, naturally, investors expected a big IPO. However, the shares began at a price of $15 and closed at a disappointing $15.15 after reaching an intraday high of $18.63.
Stitch Fix initially set high expectations for their debut; the startup predicted shares to be priced between $18 and $20, with 10 million shares sold–much higher than the 8 million shares sold. The main concern of investors is Stitch Fix’s ability to stay relevant and continue their growth. Additionally, there are concerns with the business model of the company because of Stich Fix’s policy of accepting customer returns for any item they do not like. Too many returns and lack of purchasing clothing at the full price will cause problems for the company. The online startup realizes that in order to expand, it will need to spend more money on marketing campaigns other than word of mouth. Stitch Fix follows in the footsteps of Snapchat (NYSE: SNAP) with lower than expected initial share prices, but both companies remain optimistic about their futures on Wall Street.
