Stitch Fix shares fell more than 5% Tuesday afternoon after the company announced that founder Katrina Lake would step down as CEO.
The company’s president, Elizabeth Spaulding, will start as chief executive on Aug. 1, according to a news release.
Lake founded the online styling service a decade ago when she was a student at Harvard Business School. The company adds a personal touch to e-commerce by having employees pick out clothing and accessories for customers who subscribe to the service or sign up for a “Fix.” The items, tailored to each person’s style, are delivered by mail and include a pre-paid envelope for returns. Customers only pay for what they keep and the styling fee is applied to their purchases.
Since Lake started Stitch Fix, it has grown into a business with about 4 million clients in the U.S. and United Kingdom and roughly 8,000 employees. At the time when Stitch Fix debuted on the stock market three years ago, she was the youngest woman to take a company public. (That distinction now belongs to Bumble CEO Whitney Wolfe Herd.)
However, the company has had an often tumultuous ride on Wall Street. Its earnings reports frequently prompt selloffs, even as its stock price has ultimately risen through the years. Its shares debuted on the Nasdaq at $16.90 in 2017 and were $49.49 at market close on Tuesday. Its market value is $5.26 billion.
Stitch Fix has struggled recently with shipping delays and reduced spending by customers. In March, it missed analysts’ revenue expectations for the fiscal first quarter. It said its active clients spent an average of $467, down 7% compared with the same time a year ago.
It also laid off 1,400 stylists in California, or about 18% of its workforce, last year. At the time, the company said it planned to hire 2,000 stylists in other parts of the U.S. with a lower cost of living, such as Dallas or Minneapolis.
The company has expanded beyond its personal styling and subscription-based model to drive sales, too. Customers can now buy individual items, including some suggested based on prior purchases or recommended to complete an outfit.
Shares of the company are down nearly 16% so far this year.
Stitch Fix said in a news release that Lake will remain involved in the company as executive chairperson of its board. It said she will also focus on the personal styling service’s sustainability efforts and its marketing.
In a company-wide email, Lake said it is a fitting time for a transition as more customers shop online for clothing and other goods.
“Apparel retail is undergoing a reinvention, and Stitch Fix is exceedingly well-positioned to lead through it,” she said. “This moment of transformation in our business and our industry makes it the right time to think about the next generation of leadership at our company.”
Prior to joining Stitch Fix, Spaulding was a partner at consulting firm Bain & Company.