As shares of newly public e-retailer Stitch Fix climbed on Wednesday, CNBC's Jim Cramer backtracked to its quiet initial public offering to see if the fresh-faced stock was worth buying.
"Here's a company that occupies a very interesting niche: Stitch Fix provides monthly curated shipments of apparel, shoes and accessories to their customers — called fixes, hence the name — and these shipments are supposedly put together with great care by the company's excellent stylists," the "Mad Money" host explained.
Founded in 2011, Stitch Fix is part of a cohort of services that shop for consumers so that they don't have to, charging fees for each package and offering free returns for unwanted items.
While its pitch may not sound attractive to the traditional brick-and-mortar lover, the company serves some 2.2 million active clients with a repeat rate of roughly 86 percent, meaning that customers tend to come back after using the service.
"Now, Stitch Fix bills itself as the solution to all of the problems created by brick-and-mortar retail," Cramer said. "As we've seen over and over again, not many retailers seem to understand that we live in a brave new world where consumers hate shopping."
For a lot of consumers, buying clothing often beckons a trip to a physical store (however excruciating) because they can't properly gauge the right size or how the clothing will fit.
So rather than scouring department stores filled with intrusive sales associates to find the perfect fit, Stitch Fix customers can get a personalized shopping experience with a few taps, Cramer said.
Online shopping presents its own set of problems. E-shoppers who don't know what they want are swarmed with overwhelming options, only customizable to an extent.
"If you want to buy, say, a dress online, running a search with a bunch of filters is the best you can do, and the results can be pretty unreliable," Cramer said.
That's where Stitch Fix comes in, using client data analytics to forecast their customers' buying behavior, predict levels of demand, manage inventory and personalize their clients' options. Customers provide over 85 different data points ranging from size to price preferences to how often they dress up.
"Basically, Stitch Fix is trying to combine data science with human judgment to get a better edge over other purveyors of apparel and accessories," the "Mad Money" host said. "The value proposition is straightforward: rather than spending hours of your life searching the web to find stuff you might like, Stitch Fix is like having a budget-rate personal shopper who understands your fashion needs and sends you a bunch of personalized items every month."
But at the end of the day, Cramer knows that it all comes down to the numbers. After seeing explosive, 113 percent revenue growth in 2016, Stitch Fix's numbers have sharply declined, growing by only 33 percent in fiscal year 2017.
Moreover, after turning profitable in 2015 and becoming even more profitable the year after, the company's 2017 results put it back in the red as it poured money back into the business.
"Slowing revenue growth and rising expenses — that's not what I'm looking for in a company. It's not good-looking on anyone," Cramer quipped, adding that the company's growing number of competitors gave him pause.
"My view? I think you need to skip this stock until these guys prove themselves and show us they have a solid plan to keep expanding and have the revenues go higher," the "Mad Money" host concluded. "Stitch Fix's stock may have caught fire in the week and a half since it came public, but there's just too much uncertainty here for me to give it my blessing. I say use Stitch Fix as a service, but the stock? Too risky for this guy."
WATCH: Cramer plays 'Know Your IPO' with e-retailer Stitch Fix
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