By Jennifer Williams

Fashion company Stitch Fix is giving priority to quality over quantity when it comes to customers.

The online personal-styling-services company has seen its user count fall in recent years. But Stitch Fix believes it can accelerate sales growth by catering to customers who keep coming back to the site instead of chasing shoppers purely to boost its number of active users.

And it is turning to new artificial-intelligence tools to enhance the shopping experience for customers and help keep them engaged and spending. "We're being very methodical in our approach to bringing in new clients," said Stitch Fix Chief Financial Officer David Aufderhaar.

"This isn't a vanity metric for us," he said of user growth. "This is a metric that we want to make sure drives long-term sustainable growth."

The stronger focus on quality customers over quantity hasn't always been part of Stitch Fix's approach, and it comes as part of the company's multiyear turnaround effort. Stitch Fix has cut around $500 million in costs in the past few years, in part through layoffs, and has worked to improve the customer experience with better inventory and more flexible shopping options. The San Francisco company now offers a la carte shopping -- a departure from its traditional, stylist-curated subscription-box service -- and gives customers more options on the number of items that are in a box, as examples.

The price per box starts with a set $20 styling fee that is applied to any goods purchased and then varies depending on the brands shoppers want, with items ranging from around $30 to roughly $350.

Stitch Fix wasn't always poised for a transformation. The company set out to make shopping easier for busy consumers who either didn't have the time or desire to select their outfits. Customers are paired with a stylist who then picks out tops, pants, dresses and more and sends them in a box. Shoppers ate it up, with Stitch Fix gaining clients every year from 2017 to 2021 and expanding into men's clothing. The pandemic only boosted its success: Many who were stuck at home and forced to shop online found Stitch Fix, which propelled the company's market cap to around $11 billion in 2021, up significantly from when the company went public in 2017 with a valuation of around $1.5 billion.

That momentum changed first when workers stuck at home during the pandemic began dressing more casually and then when many shoppers returned to bricks-and-mortar stores when Covid-19 shutdowns lifted. In the 12 months starting in July 2021, Stitch Fix lost more than 400,000 customers and reported declining users in the last 16 consecutive quarters. Active clients for the three months ended Aug. 2 were down 7.9% compared with a year earlier.

But the rate of active client decline has slowed year over year. According to Stitch Fix's recent earnings report, average order value was up 12% for the quarter ending in August compared with a year earlier. Net revenue per active client increased year over year for the sixth consecutive quarter, up 3% for the latest three-month period. Revenue for the quarter was up 4.4% when adjusting for an extra week of sales in the year-ago period, the second consecutive quarter of growth.

Stitch Fix's approach to acquiring customers relied on spending marketing dollars to bring in new ones, without focusing on who was being targeted or ensuring they turned into repeat users, said Dylan Carden, an analyst at investment bank William Blair. Now, Stitch Fix wants the meaningful ones, or repeat shoppers who spend more over time, which is important to getting sustainable growth. "The flip side of that is that it's just maybe a little slower growth," Carden said.

Stitch Fix originally positioned itself as a tech company that happened to sell clothes, which didn't work well, analysts said. Now, it operates more like a fashion company that leans heavily on tech.

For instance, the company in recent months rolled out an artificial-intelligence stylist assistant to help the human stylists. A new AI tool called Vision allows shoppers to see a personalized image of themselves wearing Stitch Fix offerings in various environments. AI is also being used to design certain items for Stitch Fix's private-label brands including Montgomery Post and We Wander, which cuts design time down to weeks from months.

"With every investment we're looking at, it's really in the lens of, with our clients, are we driving increased personalization and engagement to make their lives easier?" said Aufderhaar, who declined to share how much the company has spent on its AI developments.

Analysts are waiting to see customer growth that's both sustainable and good for margins, meaning shoppers who keep using Stitch Fix. The company is moving in the right direction, said Jay Sole, a managing director at investment bank UBS. "It's not a perfect story, not that every single metric is going in the direction they want it," he said. "But overall, they are making progress."

Write to Jennifer Williams at jennifer.williams@wsj.com

(END) Dow Jones Newswires

October 22, 2025 05:30 ET (09:30 GMT)

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