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Integral service around a transaction
BY : Diego GutiérrezOctober Wed, 2019

Even the fashion industry, often seen as very traditional, is no stranger to technology.

Stitch Fix has recently acquired Finery, a technology platform for apparel shopping assistance.

We analyse this operation from a corporate finance point of view and assess the company's financial situation.


Stitch Fix is a American company offering an online shopping servicefounded in 2011 by Erin Morrison and Katrina Lake.

Initially, it was aimed at a female audience in order to save time and make it easier to shop for fashionable clothes.

To achieve this, it relied on so-called hybrid intelligence, which combines artificial and human intelligence to deliver its service.

Despite operating in the fashion sector, Stitch Fix does not follow the traditional fashion business model.

Thus, instead of focusing their efforts on the product (although they have an inventory of more than 1,000 brands), their differentiation is focused on the sales process, which they try to simplify and provide a totally different user experience.


As the company explains on its website, the purchase process has the following stages:

  1. Creation of a profile: the customer fills in a series of information regarding their style, price and brand preferences for the purchase of their garments.
  2. Presentation of options: the platform matches the specified preferences with a series of garments that match the customer's style and sends them to the customer's home.
  3. Buy whatever you want: Once the options are sent to the customer, the customer decides which ones to keep and only pays for those garments.
  4. Return the remainder: unselected garments are returned to Stitch Fix.

Despite the innovation in the purchasing process, where the customer receives a series of garments at home without having to go through the process of selecting them, the main novelty in this process is the use of algorithms, data processing and machine learning.

In this way, the garments received are not only the result of the selection made by more than 3,000 of the company's fashion experts, but are also based on the data provided by the customer and the use of a complex algorithm to find the products that best fit each customer.

Moreover, depending on the garments it returns or eventually buys, the process is able to learn, and over time make better and more accurate recommendations.


Stitch Fix has recently acquired Fineryon terms that have not been made public.

With this purchase, Finery was able to incorporate Finery's technology into its business model, which, through the data obtained from the receipts and online purchases made by customers and registered in their email, is able to digitise each user's wardrobe.

Although the company has not specified how it will integrate this technology into its service, it is clear that what it can offer fits perfectly with what Stitch Fix offers and its vision of simplifying the process of buying clothes.

With the addition of this platform, the company will be able to offer a much more complete and comprehensive service to its customers that will complement its current offering.


Despite being a relatively recent company, with only two years of history in the stock market, it is interesting to note that the company has been in the market for only two years. valuing the company and analyse its development and financial situation.


Stitch Fix


Like most startups Stitch Fix has been able to increase its sales in the last few years by double digits.

This growth is expected to continue in the future and is not expected to slow down. The explanation for this increase lies in its customer base, which has doubled since 2016 to more than 3M.

In addition to new customers, existing customers are becoming increasingly recurrent and continue to rely on the service that Stitch Fix provides on an even more regular basis.

It is noteworthy that it does not have a strong concentration of customers in one age range, but about 20% of them are distributed between the ranges under 30, 30-39, 40-49 and over 50 in equal parts.

At the same time, the company has maintained a stable gross margin over time, at around 44%, indicating the company's ability to continue its growth without incurring excessive costs and therefore the high scalability of the project.

This is also reflected in EBITDA and EBIT, which continue to grow and maintain good figures.


The company's strong financial position should be mentioned, with an increasing cash flow and the working capital positive, thanks to cash collection from customers and deferral of payments to suppliers.

Moreover, financing continues to be balanced between equity and borrowed funds, with no sign of concern or disproportionate increase in debt.



Despite its short history on the stock exchange, Stitch Fix has a fairly stable share price of around $25 per share.

The sharp rise in 2018 appears to be unjustified in view of the return of its price to pre-surge values and prospects that have not changed substantially since then.

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