The beatdown that the novel coronavirus handed to the retail sector early in 2020 won’t be soon forgotten. Stitch Fix (NASDAQ:SFIX) stock has particularly suffered. The pandemic cut its share price in half, but thankfully, clear heads have prevailed. Now, the downturn looks like a U-turn.
What does this mean? Well, a world in recovery can now take a second look at SFIX stock as the retailer appears to similarly be in recovery mode.
SFIX stock remains a tough sell, though, as not everyone wants to take a stake in the struggling retail sector. Even prior to the spread of the coronavirus, the American retail space faced persistent challenges amid shifting consumer trends.
Does Stitch Fix provide a truly unique value proposition for picky traders? Delving into this unusual company, you might just come to appreciate its atypical approach to wresting funds from pandemic-battered apparel shoppers.
Stitch Fix Is Tailor-Made for the Digital Age
Today’s retail consumers have come to expect certain things from the shopping experience. The ability to shop and pay online is an absolute necessity, for example.
But people really want more than just a basic digital shopping experience. While there’s no expectation of actually being able to touch the merchandise before buying it, a certain level of customization is expected in the modern digital marketplace.
In other words, just because something is purchased online, doesn’t mean that the products and the experience should be standard. Some retailers may have been slow to adapt to this new standard, leading to fiscal struggles as consumers migrated to more tailored online shopping experiences.
Few retail outlets have adapted to this milieu better than Stitch Fix, which matches shoppers with stylists to provide custom-made apparel, shoes and accessories. Founded in 2011, the company has a pool of 125 data scientists and an army of over 5,100 employee stylists ready to help you shop ’til you drop.
Prospective investors would probably also like to know that Stitch Fix has $397 million in cash and investments and claims 3.5 million active clients. So apparently the marriage between the retail and data science domains is working out quite well, at least so far.
Try This on for Size
Stitch Fix certainly wasn’t immune to the economic ravages of the coronavirus. As a result, like many retail-sector companies, Stitch Fix has had to make some hard decisions.
Thus, the company recently announced that it will lay off approximately 1,400 of its stylists in California. That number equates to around 18% of the company’s total staff, and the majority of the layoffs are set to take place in September.
On the other hand, some of those layoffs might end up just being relocations. Starting this summer, Stitch Fix plans to hire roughly 2,000 stylists in a number of comparatively low-cost cities. These include Minneapolis, Dallas, Cleveland, Austin and Pittsburgh.
“All of our California-based stylists will be offered the opportunity to relocate to the new roles in other states,” stated Stitch Fix CEO Katrina Lake.
In actuality, then, this is less of a downsizing than an expansion into more cost-efficient regions. It’s disruptive to the company’s California-based stylists, no doubt, but it’s a smart move for Stitch Fix.
Again, the company is modeling what could be the 21st century’s most crucial business trait: adaptivity. Knowing this, investors who might be fearful of the retail market ought to give SFIX stock a chance.
One analyst who’s definitely giving SFIX stock a chance is Telsey Advisory Group analyst Dana Telsey. This analyst recently raised her price target on the shares from $20 to $29.
Citing “continued commitment from high engagement clients,” Telsey also reaffirmed her rating of “outperform” on the stock. That’s a rightfully deserved accolade as Stitch Fix remains a dominant player in a highly specific niche.
My Takeaway on SFIX Stock
It’s a sign of the times that an apparel company can garner so many customers by leveraging data science. But prospective SFIX stock investors shouldn’t just marvel at how much the retail landscape has changed.
With the company proving its ability to adapt, traders can consider Stitch Fix a uniquely custom-made investment.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.