What happened
Stitch Fix (SFIX -1.79%) investors had a good day on Thursday as their stock had gained 10% by 3:30 p.m. ET, compared to a 0.6% drop in the S&P 500. That rally erased only a small part of the losses that shareholders have seen in the e-commerce stock, though, which is down by over 80% in the past year.
Thursday's stock price jump came as the company announced the temporary return of Stitch Fix's founder and former CEO, Katrina Lake.
So what
The current CEO, Elizabeth Spaulding, is stepping down immediately, according to a press release today. "It is now time for a new leader to help support the next phase" of Stitch Fix's transformation process, Spaulding said in the announcement.
"The board and I have made the difficult decision that I will step down as CEO," Spaulding continued. Lake is stepping back into the CEO role, effective today, and will remain interim CEO for the next six months or until her successor is appointed.
Now what
Stitch Fix faces major challenges to its business model, including the fact that its client base has been leaving at a brutal pace. The company shed 11% of its active user base in the most recent quarter and is projecting accelerating sales losses in the fiscal second quarter as compared to the fiscal first quarter. Net losses have ballooned as well, in part because of price cuts and write-downs associated with excess apparel inventory.
Lake's immediate challenge will be to stem those shopper losses, which won't be easy as the company slashes costs. Stitch Fix may be hit with even worse demand pressure, too, if economic growth slows further in 2023. As a result, investors might want to watch this rebound story from the sidelines even though there's a new CEO.
