Stitch Fix, Inc.
The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Northern District of California on behalf of those who acquired Stitch Fix, Inc. (“Stitch Fix”) (NASDAQ: SFIX) publicly traded securities between December 12, 2020 through March 8, 2022, inclusive (the “Class Period”). Investors have until October 25, 2022 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
Stitch Fix, Inc. is an online personal styling platform that offers one-to-one personalization to clients through the combination of data science and human judgment.
On December 8, 2020, Stitch Fix launched the “Freestyle” program—a new, direct buy program where customers could choose from the outset which items to purchase. In connection with that announcement, Stitch Fix touted the Freestyle program as a way to “expand our addressable market, deepen client engagement and grow wallet share over time.”
On December 7, 2021, however, Stitch Fix admitted for the first time that the Company had downplayed the magnitude of its transition from the subscription-based Fix model to the retail-based Freestyle model. Stitch Fix further admitted that the Company saw some “short term cannibalization” from new customers who chose to use the new direct-buy Freestyle option rather than the traditional Fix option. In addition, Stitch Fix announced a loss for its first quarter of 2021 and cut its full-year revenue projections. On this news, the price of Stitch Fix shares declined by $5.97 per share, or approximately 23.91%, from $24.97 per share to close at $19.00 on December 8, 2021.
On March 8, 2022, Stitch Fix offered a weak outlook for its third quarter of 2022 and cut its revenue guidance for the full year. In addition, Stitch Fix announced a self-inflicted friction between the Freestyle program and the Fix program. On this news, the price of Stitch Fix shares declined by $0.67 per share, or approximately 6.09%, from $11.01 per share to close at $10.34 on March 9, 2022.
The lawsuit alleges that throughout the Class Period, Defendants made materially false and misleading statements and/or failed to disclose that: (i) the Company’s Freestyle business was neither an additive experience nor complimentary to the Fix business; (ii) the combination of those two things did not allow Stitch Fix to address many more types of clients; (iii) the Company was not seeing solid growth in both sides of the business; (iv) the Freestyle program would inevitably cannibalize the Company’s legacy Fix business.; and (v) as a result, the Company’s common stock traded at artificially inflated prices during the Class Period.