Shares of subscription fashion retailer Stitch Fix (SFIX -3.04%) have nearly doubled since the company's huge Q3 earnings beat in July. Will the company smash Wall Street's expectations again when it reports Q4 results on Monday? Last quarter, Stitch Fix CEO Katrina Lake outlined three categories that will drive the company's future growth. Investors should keep an eye on them.

Expanding customer relationships, rising wallet share

Stitch Fix seeks to earn more sales from customers from two new programs, both launched earlier this year. Stitch Fix Extras allows customers to add items such as undergarments and hosiery to their box, and Style Pass draws customers in for the long term with a $49 annual styling fee, as opposed to a $20-per-fix styling fee. Each of these initiatives could help Stitch Fix increase the total value and frequency of customer purchases.

Lavender door next to teal door frame with Stitch Fix box on doorstep.

Image source: Stitch Fix.

New clients

Increasing the number of active Stitch Fix customers is critical to the company's growth. A referral program, active internet and YouTube communities, and recent ad spending all drive customer growth. Customer retention versus churn is another critical factor that will affect long-term performance. So far, the number of active clients has been steadily increasing. Will the number of active Stitch Fix users reach 3 million clients in Q4? 

Q1 2018 Q2 2018 Q3 2018
2.4 million 2.5 million 2.7 million

Data source: Stitch Fix. 

Expanding markets

One of the key drivers of Stitch Fix's future earnings growth is its expansion into new categories to serve more people, including men's, women's plus-size, and kids' apparel.

Stitch Fix Men launched in September 2016. While the men's market is large, men's subscription services are plentiful, and Stitch Fix competes with other providers such as Bombfell, Menlo Club, Nordstrom's (NYSE: JWN) Trunk Club (for men and women), and Trendy Butler. Other men's clothing subscription services have already come and gone in the subscription box melee, but one competitor in the space with standout survival skills is (NASDAQ: AMZN) and its Prime Wardrobe. Will Stitch Fix keep up with the big daddy of internet retail? 

Women's plus-sizes is another high-demand growth area for Stitch Fix. Stitch Fix's careful use of size and fit data will help the company learn customers' specific preferences and needs and successfully develop clothing for plus- and mixed-size clients. The average American woman's clothing size is now plus, and Stitch Fix has an outstanding opportunity to delight the more than 50% of American women who seek attractive clothing in larger sizes. The company launched its plus-size offerings this past February, with nearly 75,000 women on a waiting list for the service.

Stitch Fix Kids is the newest addition, launched on June 7, just in time for the busy back-to-school shopping season. Consumer surveys from the National Retail Federation indicated that 2018 back-to-school spending would be "a very strong season," with average clothing purchases of $236.90 for elementary and high school students and $153.32 for college students. It's a great market for Stitch Fix, and while it's too soon to expect an impact on revenue, this is a category to watch for the long term.

Stitch Fix doesn't currently break down its revenue into sub-categories, probably because they're still new, but the company's total revenue has been steadily rising:

2016 2017 2018 YTD Trailing 12 Months Full-Year Estimate
$730 million $980 million $910 million $1.17 billion $2.22 billion to $2.23 billion

Data sources: Morningstar, Stitch Fix.

Stitch Fix is nearing its first year as a public company, and with multiple growth drivers at work, the future looks bright. Shares have been volatile recently, because of analyst rating changes and increased pressure from Amazon Fashion. Depending on Monday's earnings report, the stock may experience additional volatility as investors review their latest delivery and decide whether to keep or return their Stitch Fix.