Stitch Fix has filed for an IPO, and the numbers look good

Stitch Fix has filed to go public, finally revealing the financial guts of the startup which will be a test of modern e-commerce businesses that are looking to hit the market — and the numbers look pretty great!

Let’s start off really quick with profits: aside from the last two quarters, Stitch Fix posted a six-quarter streak of positive net income. We talk a lot about companies that are planning to go public that show pretty consistent (or even increasing) losses, but Stitch Fix looks like a company that has actually managed to build a healthy business. The company finally lost money in the last two quarters, but even then, its losses decreased quarter-over-quarter — with the company only losing around $4.5 million in the second quarter this year.

Let’s get to the chart!

(A quick note on the above: Stitch Fix considered its fiscal 2017 year beginning in July of 2016, while the above chart is labeled based on dates, with Q2 2017 meaning the quarter ended July this year.)

So, as we can see, profits! Stitch Fix is a modern spin on e-commerce where the company gathers your interests and information about your personal style, and then delivers a bunch of options to your door. You can pick the articles you want to buy, and the ones you want to return, and in theory, it’s a product that helps take away some of the anxiety around choices when it comes to online shopping. Instead of clicking around on Amazon, Stitch Fix tries to understand what you like and stick a bunch of options in front of you, as well as make it really easy to buy.

TechCrunch reported in July that the company had filed confidentially to go public. Stitch Fix is part of a wave of try-before-you-buy startups like Le Tote, MM.LaFleur, as well as others. So, naturally, it’s an area that’s going to be competitive — the most obvious one being Amazon. The company is experimenting with its recent launch of Prime Wardrobe, and the company is well known for bulldozing into segments where it sees an opportunity. Stitch Fix, as we can see, exposed a business that has a run rate of nearly $1 billion counting the year between July 30, 2016, and July 30, 2017.

Founded out of CEO Katrina Lake’s apartment in Massachusetts in 2011, Stitch Fix’s financials clearly expose a massive business that continues to scale methodically while keeping its burn under control. The last financing round in 2014 valued the company at $309.31 million, according to data from PitchBook, and it was widely pegged to be a big consumer IPO this year.

This IPO is also going to be another pretty big win for Benchmark Capital and Baseline Ventures, each of which have a more than 25 percent stake in the company. Lightspeed Venture Partners has an 11.8 percent stake, while Lake has a 16.6 percent ownership stake in the company. What’s very much worth noting, however, is that Stitch Fix in its entire lifetime has only raised $42.5 million in venture financing.

Here’s the full cap table:

We won’t dig into all of the risk factors, but Stitch Fix is in kind of a unique position as both an e-commerce startup and a brand built around fashion. As such, it faces a pretty unique set of challenges, one of which is keeping up with modern fashion trends. Here’s one of the risk factors below:

We must successfully gauge apparel trends and changing consumer preferences.

Our success is, in large part, dependent upon our ability to identify apparel trends, predict and gauge the tastes of our clients and provide merchandise that satisfies client demand in a timely manner. However, lead times for many of our purchasing decisions may make it difficult for us to respond rapidly to new or changing apparel trends or client acceptance of merchandise chosen by our merchandising buyers. We generally enter into purchase contracts significantly in advance of anticipated sales and frequently before apparel trends are confirmed by client purchases. In the past, we have not always predicted our clients’ preferences and acceptance levels of our merchandise with accuracy. Further, we use our data science to predict our clients’ preferences and gauge demand for our merchandise, and there is no guarantee that our data science and algorithms will accurately anticipate client demand and tastes. To the extent we misjudge the market for the merchandise we offer or fail to execute on trends and deliver attractive merchandise to clients, our sales will decline and our operating results will be adversely affected.

The next steps for Stitch Fix will be to begin the process of convincing investors to buy into the IPO before it makes its public debut in the coming weeks. Goldman Sachs is once again running the show in the coveted “lead-left” position on the IPO, and the company will be listing on the NASDAQ. The ticker: SFIX.

In the meantime, we’ll leave you with its prospectus, which was clearly shot through an Instagram filter: