What happened
Shares of Stitch Fix (SFIX 3.69%) jumped 9.3% this week compared to where they closed last Friday, according to data from S&P Global Market Intelligence. This continued a run higher that began in mid-December but picked up the pace after the company announced that it was cutting 20% of its salaried jobs, the second round of layoffs in just a few months, and that the CEO was stepping down.
Stitch Fix stock is now up over 110% since the run higher began, though the shares remain 66% below their 52-week highs.
Image source: Getty Images.
So what
Although there was no company-specific news to account for the clothing subscription-box service to continue climbing this week, even stocks with the most tangential relationship to artificial intelligence have received a boost on the hype surrounding Microsoft-backed OpenAI's ChatGPT.
Stitch Fix uses proprietary data science and algorithms to match personal data entered by customers and the merchandise offered by merchants to create a personalized "Fix," a box of clothes for customers to try on. They can then keep what they like and send back what they don't.
The ChatGPT chatbox shows what is possible with AI, machine learning, and automation, as the general technology can help businesses become better and more efficient. While Stitch Fix uses a form of AI, it's not really related; it describes itself as still delivering a "very human experience." A large dose of human judgment is used to curate the personalized boxes of new clothes for customers.
Now what
The future for Stitch Fix is still very much founded on getting its business on the right foot again, rather than whether any computer-generated intelligence can choose a better fit of clothes.
The market is hoping that company founder Katrina Lake, who has returned as interim CEO, can inject some of the original magic back into the business and get the company back on track.
Stitch Fix has continuously expanded its target market, going first from just women to include men, and then incorporating children's clothes into the mix, while entering international markets, too. All the while, its growth has rapidly decelerated. Revenue fell 1.4% to $2.1 billion last year, and net profits of $28 million in 2021 turned into net losses of $96.3 million last year.
Maybe AI could do a better job of mixing and matching clothes, but that's not what's driving Stitch Fix today.
