Investors were pleased with the latest operating update from Stitch Fix (SFIX 4.02%). The stock, which had been battered through most of 2021, bounced higher following the fourth-quarter earnings report, which was released last week and included data showing surprisingly fast sales growth and record gross profitability.

CEO Elizabeth Spaulding, who just took over the top spot, held a conference call with Wall Street analysts that was packed with valuable information on the business. Let's look at three highlights from that presentation.

A young woman removes clothing from a box.

Image source: Getty Images.

1. Stitch Fix grabbed a bigger piece of a growing pie

Stitch Fix ended the year on a great note, with sales growth edging past the upgraded outlook that management issued back in June. Revenue rose 29% compared to its 21% forecast, allowing the company to easily sail past its wider 2021 prediction.

Stepping back, Spaulding said Stitch Fix gained market share even as the apparel industry saw its most dramatic shift in modern times, with online sales soaring to 40% of the industry's volume compared to around 25% before the pandemic struck.

"We intentionally and successfully captured an outsized piece of the disrupted apparel market by leveraging new product innovations, evolving our assortment, and using our personalized experience to migrate more clients into our ecosystem," Spaulding said. She highlighted the company's ability to ramp up inventory for activewear and athleisure to respond to booming demand in that niche.

2. Stitch Fix managed some financial wins

Stitch Fix is still firmly in growth mode, which means executives are not shying away from making investments in the business. Advertising spending should jump next quarter, and fiscal 2022 will also include aggressive outlays in areas like the supply chain and inventory management.

But the business is supporting these bets on future growth. Annual spending per client touched a new all-time high above $500 this quarter, and gross profit margin also set a record. That success, CFO Dan Jedda noted, came despite soaring transportation costs and rising wages. "Quarter over quarter, these gains were largely driven by higher product margins," Jedda said.

3. The 2022 outlook

Management saw no shortage of reasons to be excited about the long-term growth opportunities. Stitch Fix has a tiny foothold in niches like dresses, accessories, and footwear, for example, compared to its core areas of tops and bottoms. There are major demographics and markets outside of the U.S. to target as well. And the company's new direct-buy feature could dramatically expand its competitive posture. This year will include major initiatives to attack each of these opportunities.

Still, the company is taking a conservative approach to the short-term outlook, citing variables like the ongoing pandemic and cloudy demand trends. Despite the "huge upside" management sees to its current $2.1 billion annual sales footprint, growth should slow in 2022, to around 15%.

Executives are optimistic about accelerating gains in the future, but it might take a few more quarters before its expansion bets, like the recently rolled-out direct-buy option, start moving the sales needle. In the meantime, look for Stitch Fix to work hard at extending the premium (but relatively small) market share position it established during the past few years.

"Fiscal year 2022 will set us up to scale beyond where we are today," Spaulding said.