Stitch Fix shares fall as company's founder Katrina Lake steps down as CEO

• Stitch Fix founder Katrina Lake is stepping down as CEO.
• She founded the online styling service a decade ago and took the company public in 2017.
• As of Aug. 1, she will be succeeded by Stitch Fix president Elizabeth Spaulding.

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Stitch Fix shares fell more than 4% Tuesday afternoon after the company announced that founder Katrina Lake would step down as CEO.

The company's president, Elizabeth Spaulding, will start as chief executive on Aug. 1, according to a news release.

Lake founded the online styling service a decade ago when she was a student at Harvard Business School. The company adds a personal touch to e-commerce by having employees pick out clothing and accessories for customers who subscribe to the service or sign up for a "Fix." The items, tailored to each person's style, are delivered by mail and include a pre-paid envelope for returns. Customers only pay for what they keep and the styling fee is applied to their purchases.

Since Lake started Stitch Fix, it has grown into a business with about 4 million clients in the U.S. and United Kingdom and roughly 8,000 employees. At the time when Stitch Fix debuted on the stock market three years ago, she was the youngest woman to take a company public. (That distinction now belongs to Bumble CEO Whitney Wolfe Herd.)

However, the company has had an often tumultuous ride on Wall Street. Its earnings reports frequently prompt dramatic selloffs, even as its stock price has ultimately risen through the years. Its shares debuted on the Nasdaq at $16.90 in 2017 and were $49.49 at market close on Tuesday.

Stitch Fix has struggled recently with shipping delays and reduced spending by customers. In March, it missed analysts' revenue expectations for the fiscal first quarter. It said its active clients spent an average of $467, down 7% compared with the same time a year ago.

The company also laid off 1,400 stylists in California, or about 18% of its workforce, last year. At the time, it said it planned to hire 2,000 stylists in other parts of the U.S. with a lower cost of living, such as Dallas or Minneapolis. 

Shares of the company are down nearly 16% so far this year.

The company has expanded beyond its subscription model to drive sales, such as suggesting individual items that customers can buy or recommending accessories, tops or bottoms that complete an outfit.

Stitch Fix said in a news release that Lake will remain involved in the company as executive chairperson of Stitch Fix's board. It said she will also focus on the personal styling service's sustainability efforts and its marketing.

In a company-wide email, Lake said it is a fitting time for a transition as more customers shop online for clothing and other goods.

"Apparel retail is undergoing a reinvention, and Stitch Fix is exceedingly well-positioned to lead through it," she said. "This moment of transformation in our business and our industry makes it the right time to think about the next generation of leadership at our company."

Prior to joining Stitch Fix, Spaulding was a partner at consulting firm Bain & Company.

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