Stitch Fix is close to becoming a billion-dollar brand

Stitch Fix
Source: Stitch Fix
Stitch Fix

In case you haven't noticed, retail is in the dumps.

The past year has been a brutal one for clothing companies struggling with slumping sales, bankruptcies, and layoffs, but one company has been raking it in — and no, it's not Amazon.

The stylist-in-a-box start-up Stitch Fix has been around since 2011 — and it's been quietly making a killing. Earlier today, the company shared its financials online, revealing that it made a whopping $730 million in 2016. It's had a busy year, expanding from womenswear into categories like menswear and plus-size. Now, with plenty of IPO potential, as Racked sister site Recode previously reported, Stitch Fix is on its way to becoming a billion-dollar clothing company, all in the midst of what many consider the category's worst environment since the recession.

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How is this clothing company killing it? CEO Katrina Lake, a Harvard Business School grad, has blended professional styling, data science, and personal taste into a winning, if unsexy, formula. Stitch Fix members fill out a style profile, which stylists then use to handpick a "Fix" of five items — clothing, shoes, and accessories from the company's 250 brands it carries. Customers choose what they like and send back the rest for free. The catch is there's a $20 styling fee, but it can be applied to clothes that are bought. (On the flip side, there is a 25 percent discount for shoppers who keep all five items, which of course incentivizes shoppers to keep the haul.)

If this sounds a whole lot like the subscription box craze, that's because it is. Except Stitch Fix has developed a cult following of sorts by targeting women who don't know how or don't care to shop. The company points to a joint effort of its algorithm manned by 75 data scientists, and the 3,000 stylists it employs as the reason behind its success. Personalization here has been key; Stitch Fix users can add links to their social media pages so stylists can really get to know them, and they can even create Pinterest boards to display their full style preferences.

"Our partnership between data science and expert human styling is core to what we do. It's also what allows us to drive personalization at scale," the company wrote earlier today. "And we've been able to apply data science to many other challenges in retail, including inventory management, warehouse management, product development and supply chain — to name just a few."

Stitch Fix has raised some $42 million in three rounds of funding, which isn't a whole lot for Silicon Valley wunderkinds. But there's no doubt the company will continue to expand. Is brick and mortar next?