One of today’s big movers on the positive side of the ledger is Stitch Fix (NASDAQ:SFIX). Specifically, an announcement of Stitch Fix layoffs has sent shares of SFIX stock surging more than 7% as of this writing.
This round of layoffs will impact roughly 20% of the company’s staff. Stitch Fix appears to be intent on reining in costs, as inflation remains hot and the outlook for the future remains uncertain.
Also included in this round of layoffs is an executive shuffle. Current CEO Elizabeth Spaulding will reportedly step down, starting the search for a new chief executive.
As has been seen with other layoff announcements, this move is positively impacting SFIX today. Now, investors may be asking the question — is this move sustainable?
Let’s dive into what to make of the Stitch Fix news today.
Are Stitch Fix Layoffs What the Doctor Ordered?
Like other major players in the “growthier” areas of the market, Stitch Fix has found itself in a difficult position. The post-pandemic growth the company saw, spurred by fiscal and monetary policy, is a thing of the past. Now, most companies in high-growth areas are focused on preserving margins ahead of what could be a bumpy market moving forward.
Stitch Fix will undoubtedly take a short-term financial hit as a result of these layoffs. However, ongoing savings should be accretive in the medium term. Thus, for investors seeking a more streamlined and focused operation, that’s what the company’s board appears to want to provide.
As companies and investors look forward to 2023 and beyond, we may see more layoffs. From here, investors will want to see how Stitch Fix’s margins hold up in its bid to become profitable. For now, investors are viewing this news positively, but we’ll have to see if the rally can be sustained. After all, SFIX stock is down 80% over the past year alone.
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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.