What happened

Online clothing retailer Stitch Fix (SFIX -1.67%) stock trailed the market last month by losing 19% compared to a 1% uptick in the S&P 500, according to S&P Global Market Intelligence. That decline didn't threaten broader returns, though, as shareholders remain up more than 30% so far in 2019 compared to a 14% increase in the S&P 500.

A customer receives an online order.

Image source: Getty Images.

So what

July's drop occurred following a second-quarter earnings report that initially found approval on Wall Street that was quickly overwhelmed by bearishness. There were plenty of good signs for the business in that report, including rising revenue per customer and improved renewal rates. These wins suggest the company might continue gaining market share in its core niche while expanding into new categories like men's and kids' clothing.

Now what

CEO Katrina Lake and her team are bullish about their prospects in these other apparel segments and in new markets like the U.K. The attractiveness of the industry is bringing bigger rivals to the scene, though, with Amazon putting lots of resources toward a similar service. Yet if Stitch Fix can establish its brand more firmly in its customers' budgets, as it has in recent quarters, then it will be difficult for any competitor to knock it from its impressive growth pace.