NEW YORK–(BUSINESS WIRE)–#Action–Bragar Eagel & Squire, P.C., a nationally recognized stockholder rights law firm, announces that a class action lawsuit has been filed against Stitch Fix, Inc. (“Stitch Fix” or the “Company”) (NASDAQ: SFIX) in the United States District Court for the Northern District of California on behalf of all persons and entities who purchased or otherwise acquired Stitch Fix securities between December 8, 2020 and March 8, 2022, both dates inclusive (the “Class Period”). Investors have until October 25, 2022 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
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Stitch Fix sells a range of apparel, shoes, and accessories through its website and mobile application. Traditionally, Stitch Fix sold products as a “Fix,” through which the customer would receive a monthly box of items chosen by a personal stylist. The customer would not know specifically which items they were receiving but would have the option to return whichever items it did not want. The customer paid a $20 “styling fee” per Fix, and that fee would be applied to any of the items the customer chose to buy.
Prior to the Class Period, in 2019, Stitch Fix announced a new direct-buy retail component, eventually named “Freestyle.” The Freestyle program allowed customers to shop the site for specific products, giving the customer more control over what items they received, but also removing the curation element that differentiated Stitch Fix from other e-retailers. The Freestyle program was first made available to a subset of existing Stitch Fix customers in 2020, and incrementally rolled out to all existing customers in early 2021. In September 2021, the Freestyle program was formally launched to new customers.
On December 7, 2021, Stitch Fix announced a loss for its first quarter of 2022, cut its full-year revenue projections, and admitted, for the first time, that, as a result of the “expansion into Freestyle,” the Company “may experience short-term impacts of cannibalization.” As a result of these disclosures, Stitch Fix’s share price declined by $5.97 per share, or 24%, from a closing price of $24.97 per share on December 7, 2021, to a closing price of $19.00 per share on December 8, 2021. However, Stitch Fix continued to assure investors that this was a short-term problem.
Then, on March 8, 2022, when Stitch Fix reported earnings for its second quarter of 2022, the Company offered a weak outlook for its third quarter of 2022 and cut its guidance for the full year. Stitch Fix attributed the guidance cut to “friction” between the Freestyle and Fix businesses.
As a result of this disclosure, the price of Stitch Fix stock declined by $0.67 per share, or 6%, from $11.01 per share to $10.34 per share.
The complaint alleges that, throughout the Class Period, Stitch Fix made numerous false and misleading statements to investors concerning the synergy between the Company’s Fix and Freestyle programs, and repeatedly denied claims that the Freestyle program could cannibalize the Company’s legacy Fix business. Specifically, Stitch Fix repeatedly assured investors that the Company’s Freestyle business was “an additive experience” and “complimentary” to the Fix business, that “the combination of those two things will allow us to address many more types of clients,” and that “we see solid growth in both sides of the business.” In truth, throughout the Class Period, Stitch Fix concealed the fact that these programs were not complementary or additive. Stitch Fix knew that the Freestyle program would be much preferred to the Company’s original Fix model, and that the Freestyle program would inevitably cannibalize the Company’s legacy Fix business. As a result of these misrepresentations and omissions, Stitch Fix’s Class A common stock traded at artificially inflated prices during the Class Period.
If you purchased or otherwise acquired Stitch Fix shares and suffered a loss, are a long-term stockholder, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Melissa Fortunato by email at email@example.com, telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.
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Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York, California, and South Carolina. The firm represents individual and institutional investors in commercial, securities, derivative, and other complex litigation in state and federal courts across the country. For more information about the firm, please visit www.bespc.com. Attorney advertising. Prior results do not guarantee similar outcomes.