Elizabeth Spaulding has stepped down as chief executive officer and board member of Stitch Fix, the apparel box retailer said Thursday. Spaulding arrived at Stitch Fix in 2020 from consultancy Bain & Co. to become president and replaced founder Katrina Lake as CEO the following year.
Lake has returned to take the CEO reins for six months or so as the company searches for Spaulding’s replacement, according to a company press release.
In a memo to employees announcing Spaulding’s departure, Lake said the company will also lay off 20% of its salaried workforce and close its Salt Lake City distribution center.
When Spaulding took over at the helm, the focus was supposed to be on growth.
But the company has struggled instead as its revenue, profits and client base have all slid. In its most recent fiscal year, net revenue fell 1.4% to $2.1 billion, as net loss widened to $207.1 million from $8.9 million the previous year, and the e-retailer had lost 370,000 customers, or 9% of its active client base.
In recent months the company has instituted several changes, including layoffs and the closure of a sewing facility and the inclusive label made there. Also, months after establishing a more conventional e-commerce site dubbed Freestyle to great fanfare, allowing anyone to shop its assortment, Stitch Fix recently again limited such purchases to those who had ordered a curated box.
“While recent issues are not the sole fault of Elizabeth Spaulding, many of them have arisen on her watch. Some of the decisions under her leadership, such as that to introduce the Freestyle service, have also been questionable and do not seem to be bearing fruit,” GlobalData Managing Director Neil Saunders said in emailed comments. “Indeed, it could be argued that they have simply caused other problems such as cannibalizing from the core service.”
The problem may be with the box approach itself, which is proving to appeal to a limited consumer segment. Nordstrom shuttered its similar Trunk Club business last year, and ThredUp ended its version in 2021. In a statement posted to LinkedIn, Spaulding said she believes in the company’s future.
“While it has been a wild and often unexpected ride over the course of these last 3 years, the constant has been the integrity and grit of the Stitch Fix team, the belief in our future vision, and rising to the occasion in the most challenging times,” she said.
Lake has served as executive chairperson of the board since she left her post as chief executive and “does not have ambitions to become the company's permanent CEO given the business has changed meaningfully since then,” MKM Partners Executive Director David Bellinger said in emailed comments, following a discussion with the company on Thursday.
“From our standpoint, [Stitch Fix] is likely to continue its current focus on liquidity and profitability before any significant changes are announced,” Bellinger said.
Indeed, the layoffs announced Thursday reflect a realization that Stitch Fix’s problems are stubborn and not easily solved, including by Lake, according to Saunders.
“It is not immediately clear what Katrina Lake will do differently,” he said. “However, as the founder of the company she probably has a much clearer view of its future direction which inspires more confidence with the board and investors. She is also likely to bring the focus back to improving products and marketing in a bid to win more customers.”