Stitch Fix shares fell more than 5% on Tuesday afternoon after the company announced that founder Katrina Lake would step down as CEO.
According to a press release, the company’s president, Elizabeth Spaulding, will start as CEO on Aug. 1.
Lake founded the online styling service ten years ago when she was a student at Harvard Business School. The company adds a personal touch to e-commerce by letting employees select clothing and accessories for customers who subscribe to the service or sign up for a ‘Fix’. The items, tailored to each person’s style, are delivered by mail and include a prepaid envelope for returns. Customers only pay for what they keep and the styling fee is applied to their purchases.
Since starting Stitch Fix, Lake has grown into a company with approximately 4 million customers in the US and UK and approximately 8,000 employees. When Stitch Fix debuted on the stock exchange three years ago, she was the youngest woman to make a company public. (That distinction now belongs to Bumble CEO Whitney Wolfe Herd.)
However, the company has had an often tumultuous ride on Wall Street. The earnings reports often sell off even if the stock price has eventually risen over the years. Its shares debuted on the Nasdaq for $ 16.90 in 2017 and were $ 49.49 at the close of the market on Tuesday. Its market value is $ 5.26 billion.
Stitch Fix has been struggling with shipping delays and reduced customer spend lately. In March, it missed analysts’ revenue expectations for the fiscal first quarter. It said its active customers spent an average of $ 467, down 7% from the same time a year ago.
It also fired 1,400 stylists in California last year, or about 18% of the workforce. At the time, the company said it planned to hire 2,000 stylists in other parts of the US with a lower cost of living, such as Dallas or Minneapolis.
The company has gone beyond its personal styling and subscription-based model to drive sales as well. Customers can now purchase individual items, including some suggested based on previous purchases or recommended to complete an outfit.
Shares of the company are down nearly 16% so far this year.
Stitch Fix said in a press release that Lake will remain involved with the company as executive chairman of the board of directors. It said she will also focus on the sustainability efforts of the personal styling service and its marketing.
In a company-wide email, Lake said it is an appropriate time for a transition as more shoppers shop online for clothing and other goods.
“The apparel retail is undergoing a reinvention and Stitch Fix is extremely well positioned to lead through it,” she said. “This moment of transformation in our business and industry makes this the right time to reflect on the next generation of leadership within our company.”
Before joining Stitch Fix, Spaulding was a partner at consulting firm Bain & Company.