Katrina Lake, the founder of Stitch Fix, has told staff 20 percent of the company’s salaried employees are to be laid off.
The start-up garment company is continuing to struggle with low sales, a diminishing customer base, and a decreased market cap,
Lake stated she will take the position of CEO.
Elizabeth Spaulding, the company’s current CEO will resign with immediate effect, according to Lake.
Spaulding joined the company in 2020 as president before becoming CEO in August of that same year.
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Lake said: “I will be stepping in as interim CEO and leading the search process for our next CEO.”
“Despite the challenging moment we are in right now, the board and I still deeply believe in the Stitch Fix business, mission and vision.”
Following the announcements, the company’s shares rose by almost nine percent, and its market valuation was roughly $386 million. At $3.50, shares closed more than nine percent higher.
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When the Covid epidemic hit, Stitch Fix, which provides curated bundles of apparel on a subscription basis, made a killing as people stranded at home and newly wealthy used the service to upgrade their outfits.
Sales fell as customers returned to the outside world, and Spaulding’s new tactics were a failure.
Soon after becoming CEO, Spaulding oversaw the launch of a direct-buy option called Freestyle that allowed clients to buy goods directly from the business in the hopes that they would become loyal customers.
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The project, however, hit a roadblock, and the company announced in June that it would be firing 330 people or 15 percent of its paid workforce.
As of June, after the layoffs, Stitch Fix had around 1,700 salaried workers.
Neil Saunders, managing director of GlobalData and a retail analyst, said in a statement Thursday that the company looks to have “lost its way” and that the issues it’s facing are neither temporary nor immediately solvable.
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Saunders said: “This is one of the reasons why the company has announced the termination of around 20 percent of its salaried positions – an action it hopes will help to stem losses and put the company on a better financial footing,”.
Stitch Fix employees learned about the job cuts Thursday morning and were told the brand’s Salt Lake City distribution center, which has been open for just over a year, will also be shuttering.
Roughly 150 employees at that center will also be laid off, according to an employee at the facility.
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Staff at the Utah distribution center, which opened three months after Freestyle was launched in December 2021, got the news during their all-hands monthly meeting on Thursday morning, the worker said.
Staff were “caught off guard” and surprised to hear about the layoffs because the facility hadn’t been open that long, the employee said.
“They did good in my opinion. We had [an] all hands right before work and [they] gave us a packet with all the info we needed from final dates to severance. They even had a translator for our Spanish speakers,” the worker told CNBC, adding they felt “overwhelmed” by the news.
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When Stitch Fix shut down another distribution center in the past, some workers were given the option to relocate to different facilities within the company.
It wasn’t an option this time around for workers at the Salt Lake City center, the worker said.
Salaried employees affected by the cuts will obtain at least 12 weeks of pay, which enhances with tenure, and health care and mental wellness support will last through April 2023, Lake said.
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Lake told employees she was “truly sorry” for the cuts and express gratitude for their “hard work” and “dedication.”
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