Apparel is probably the last thing on your mind these days, and that's fair. When you're largely staying at home over the past five months you don't exactly need to spice up your wardrobe. Even if you happen to be working in public, your social calendar probably isn't what it used to be -- and that's another reason for you to be spending less on clothing these days.

Stitch Fix (SFIX 0.45%) is the leading brand in the nascent realm of online personal styling. Amazon (AMZN -1.14%) entered this niche last summer when it rolled out its Personal Shopper by Prime Wardrobe service. The two services are similar. A shopper will answer a few questions to gauge fashion preferences, and then a tech-assisted stylist will go to work in curating items that get shipped out to the customer. The shopper then has a few days to return any of the items they don't want to keep in a postage-paid box. 

This was a booming niche before the COVID-19 crisis, and it should continue to be a growth market in the near future. Is the better fit for your portfolio Stitch Fix, as a young pure play, or the more well-rounded Amazon? Let's play stylist. Let's try on both stocks to see which one we'll keep. We'll send the other one back. 

A Stitch Fix box left in front of a front door.

Image source: Stitch Fix.

A Stitch Fix in time

Stitch Fix was on a roll before the pandemic derailed its momentum. Net revenue rose 29% in fiscal 2019, up from its 26% climb a year earlier. Revenue would go on to decelerate but still manage to grow by better than 20% through the first half of fiscal 2020. It then went on to stumble in its latest quarter that ended in early May. 

Stitch Fix has grown its active client base by 9% to 3.4 million over the past year, even if it was a slight sequential dip. Net revenue per active client took a hit, and the quarter's net revenue of $371.7 million was 9% lower than the same fiscal period a year earlier. 

A lot has gone on at Stitch Fix in recent months. Some of it is by design, as it pared back its marketing budget in this climate marred by weak apparel demand. It also had to temporarily close a pair of distribution centers shortly after the pandemic began and shuffle up its stylist pool to shift its data science-backed workforce to lower-cost markets.

Stitch Fix is no longer providing guidance, but it did point out in early June that it expected to generate positive year-over-year net revenue growth for the fiscal fourth quarter after adjusting for the one fewer week in its cycle this year. If Stitch Fix has truly bottomed out before sales started to recover in May this could be a big winner for opportunistic investors, with the shares currently trading slightly lower in 2020.

Dressing like a leader

Amazon isn't throwing a lot marketing muscle behind its Stitch Fix knock-off, and it doesn't have to. Amazon is the undisputed champ of online retail. The $1.7 billion that Stitch Fix has generated in revenue over the trailing four quarters is just 0.5% of the $322 billion that Amazon has delivered. This may be shaping up to be a David vs. Goliath kind of battle, but the numbers should bust any preconceived notions you may have of big old Amazon and a seemingly nimble Stitch Fix.  

As big as Amazon may be, it's actually growing faster than Stitch Fix. Net sales rose 40% in its latest quarter. Amazon's latest report was inflated as a result of pandemic factors, just as Stitch Fix has seen its business deflate during the COVID-19 crisis. However, if we look at the two previous quarters combined, it's fairly even, with Amazon's top line growing slightly better than 23% and Stitch Fix clocking in just below 22%. Amazon still holds the edge.

When it comes to valuations, you may think that Stitch Fix is the one trading at the loftier revenue multiple. It's significantly smaller, and bulls would argue that the ceiling is theoretically higher from a capital appreciation percentage basis. Well, here's another twist. Stitch Fix commands an enterprise value that is just 1.4 times its trailing revenue. Amazon's multiple checks in at 5 over the past four quarters. We're going with revenue multiples given the limited profitability at Stitch Fix, but neither one would be cheap on a bottom-line basis. 

Amazon is worth the premium. Stitch Fix may have a slight edge in gross margin, but there's too many cost layers bleeding the personal stylist model. Amazon is a well-diversified leader across several proven different businesses. Stitch Fix is a worthy consideration for risk-tolerant investors, but when it comes to picking the better buy, the call for me here is Amazon as the mother of all retail stocks