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Stitch Fix CEO: We're not like traditional retailers

  • "The way we combine data science and humans is ... unique," Stitch Fix CEO Katrina Lake told CNBC.
  • The online styling service will continue to expand into new categories outside of women's, having recently launched a men's and plus-size division.
  • In the near term, though, these investments will hamper profit margins.

With Stitch Fix shares down more than 8 percent following its first earnings report as a public company, CEO Katrina Lake said investors are still learning about its business.

"We're really not worried about the day-to-day fluctuations in the stock price," Lake told CNBC's "Squawk Alley" Wednesday. She said some "education" is required in order to understand how the San Francisco-based digital apparel business is run.

"The way we combine data science and humans is ... unique, to deliver our kind of personalization, and I see [it] as a significant competitive advantage" against a company such as Amazon, she said.

Stitch Fix's stock has been very volatile since it debuted on Nov. 17. Shares were trading higher Tuesday ahead of the earnings report, but after its release shares plummeted more than 10 percent in after-hours trading.

Wall Street wasn't enthused to see lower gross margins, steep advertising costs and other challenges, such as higher shrink, which is the loss of its apparel and accessories inventory through theft or damage during the returns process.

Hoping to grow its user base, Stitch Fix said it will continue to expand into new categories outside of women's, having recently launched a men's and plus-size division. In the near term, though, these investments will hamper profit margins, management told analysts and investors Tuesday.

"I think we have a diverse set of ways to acquire new customers," Lake said.

Looking ahead, Lake also explained there's opportunity for Stitch Fix to grow in selling lower-priced items, under $50 apiece, which can be more difficult to find online. It will also experiment with other trends, such as athleisure, and consider growing some of its own private-label fashion lines.

But investors will need to understand that it may not follow the same patterns as traditional retailers.

"Stitch Fix is a 365-day-a-year business," Lake said. "We are not a holiday business ... [and] not just for a special occasion."