Can Katrina Lake save Stitch Fix? The founder of the nearly 13-year-old, subscription-based online personal shopping service is going to try, returning today to her role as CEO 17 month after stepping down from the position.
Indeed, as first reported by CNBC, it was Lake who today informed the company’s 1,700 salaried employees in a company-wide email that 20% of them are getting cut in a drastic cost-saving measure. Stitch Fix further confirmed to CNBC that the brand’s Salt Lake City distribution center will also be closing and that employees at that center will be laid off, though it declined to disclose how many people work there.
TechCrunch separately reached out to Stitch Fix for comment and was sent a press release stating that Lake plans to “serve in an interim capacity for six months or until her successor is appointed, unless otherwise agreed by Ms. Lake and the Board of Directors.”
The bearer of bad news may have surprised some. Lake founded Stitch Fix in late 2010 and took the company public in 2017. At the time, she was the youngest woman to do so. But in August of 2021, she relinquished her day-to-day oversight of the company to become its executive chairperson, a role Lake said at the time she would use to focus on Stitch Fix’s sustainability efforts and its marketing. In her stead, Stitch Fix promoted to the role of CEO Elizabeth Spaulding, who joined the company as president in 2020 and worked previously as a partner at Bain & Company.
Spaulding oversaw one layoff already, in June of this year when Stitch Fix confirmed that it was shedding 330 jobs, or 15% of its salaried workforce, owing to its changing fortunes. To wit, while shoppers actively used Stitch Fix while trapped in their homes during the pandemic, the business suffered as Covid-related restrictions were lifted and those same customers ventured out to spend some of those discretionary dollars. Further, says CNBC, a direct-buy option instituted during Spaulding’s brief tenure, wherein Stitch Fix invited customers to buy single items without signing up for a plan or paying a styling fee, appears not to have panned out.
No word yet on Spaulding’s next moves, but Lake, who said today that Spaulding will be stepping down immediately, states in the company’s press release she is “grateful for Elizabeth’s many contributions as President and then as CEO, and am thankful for her leadership during what has been an unprecedented time for our business and the world.”
In her note to the company, Lake told employees that those impacted by today’s layoff will receive at least 12 weeks of pay, and more with tenure.
Stitch Fix’s stock is currently trading at roughly $4 per share. During its peak, in January 2021, shares were trading at more than $96 apiece.
Lake has long been listed as Stitch Fix’s sole founder, but as reported in 2017 by the WSJ, a footnote in one of Stitch Fix’s pre-IPO regulatory filings named a cofounder, Erin Morrison Flynn, who sued Lake and eventually settled with her.
According to a lawsuit filed in the Superior Court of California in 2012 by Flynn (and surfaced in that same WSJ article), the pair started the company, originally called Rack Habit, in October 2010; by 2012, according to the lawsuit, their relationship deteriorated after Lake allegedly asked Flynn to give up some of her ownership to distribute the shares to new hires.
Among the challenges that Lake — and her next successor — will face in turning around Stitch Fix are economic headwinds, as well as so-called box fatigue, with customers looking to pare down the number of products and services to which they are currently subscribed.