Stitch Fix will reappoint founder Katrina Lake to her former post as CEO on an interim basis and lay off 20% of its salaried workforce as the retailer seeks to turn around its business following weak sales and a declining customer base. Current CEO Elizabeth Spaulding has stepped down from both the CEO position and as a member of the Board of Directors, and the company is searching for a permanent replacement.
“Stitch Fix continues to embark on an ambitious transformation, and in the immediate term the focus for the team is squarely on creating a leaner, more nimble organization to set the company up for a return to profitability,” said Spaulding in a statement. “First as President and then as CEO, it has been a privilege to lead in an unprecedented time and to chart the course for the future with the Stitch Fix team. It is now time for a new leader to help support the next phase. With that context, the Board and I have made the difficult decision that I will step down as CEO.”
The retailer also is closing its Salt Lake City distribution center, which will affect workers employed there. All departing employees will receive at least 12 weeks of pay, healthcare and mental wellness support through the end of April, as well as assistance with finding new roles.
“To those impacted: you took a chance on Stitch Fix, trusted us with your time and investment of yourself, and I am sincerely sorry that we are parting ways with you in this way today,” said Lake in a letter to employees. “Thank you for your hard work, dedication and the many moments of joy and meaning that you brought to your teams, our community and our clients. Your contributions will have a lasting impact on our business and our culture, and for that we are all grateful.”
This marks the company’s second mass layoff in just over six months. In June 2022 Stitch Fix eliminated 15% of its jobs, mostly in non-tech positions, following a nearly 8% drop in year-over-year net revenue and a 5% decrease in its number of active clients in Q3 2022. The declines continued into Q4 2022, when net revenue fell 22% year-over-year to $455.6 million and active clients dropped to 3.7 million, down 11%.
The news of Lake’s return and further workforce streamlining caused Stitch Fix’s stock price to jump 9%; however, it is still down more than 80% year-over-year.