What happened
Shares of Stitch Fix (SFIX 3.69%) were climbing today, gaining by double digits for the second time this week, even though there was no major news about the company. There was, however, two items that seemed to help propel the gain.
First, Poshmark (POSH), the online apparel reseller, surged in its debut today, jumping 142%. Separately, Stitch Fix announced the first recipients of its new grant and membership program, Elevate, that it announced in October.
That news, along with a potential short squeeze, helped drive the stock up 13.8%.
Image source: Getty Images.
So what
The apparel industry has been hammered by the coronavirus pandemic, but Poshmark's whopping debut showed that investors are still hungry for growth stocks in the sector, which bodes well for Stitch Fix. Poshmark finished the day with a valuation of roughly $3 billion. The company operates an e-commerce marketplace for secondhand clothes and other items and posted $193 million in revenue in the first three quarters of 2020.
The announcement about Elevate is more exciting for Stitch Fix. The personalized styling service set up the program in October to support minority entrepreneurs in fashion and named six companies -- ranging from a women's lifestyle brand to an inclusive luxury line and an ethical fashion accessories company -- that will receive $25,000 grants and eight months of advisory support. In addition to giving the company credibility for progressive action around diversity, Stitch Fix also launched the program to help diversify its vendor base. It plans to sell wares from the winners, increasing their visibility and giving Stitch Fix a unique pipeline of new products.
Finally, with 37% of the stock still sold short, any positive news is likely to deliver a jump in the stock, which seems to be what happened today.
Now what
Stitch Fix was founded as an industry disruptor, and its data-science-based approach gives it a unique advantage in the industry. Programs like Elevate also show that the company continues to think like a disruptor, and its platform, which allows it to choose clothes to send to customers, makes it a perfect partner for up-and-coming apparel brands.
That disruptive approach should continue to pay off for the growth stock.
