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Stitch Fix shares fall when the company lays off 15% of its employees

The Stitch Fix logo on a smartphone held in Hastings-on-Hudson, New York, USA, on Saturday, June 5, 2021. Stitch Fix Inc. is scheduled to launch on June 7.

Tiffany Hagler-Geard | Bloomberg | Getty pictures

Stitch Fix lays off 15% of paid positions in its workforce, mostly in corporate roles and styling management positions, according to an internal memo seen by CNBC.

The company̵[ads1]7;s shares fell around 8% on Thursday, to a turnover of around 7.97 dollars. The stock traded as high as $ 68.15 a year ago.

The job cuts come as the online styling service has struggled with higher expenses on everything from the supply chain to marketing to labor, and it has also struggled to get new users.

“We have taken a fresh look at our business and what it takes to build our future,” said Stitch Fix CEO Elizabeth Spaulding in the note. “While this was an incredibly difficult decision, it was one we had to make to position ourselves for profitable growth.”

The around 330 people were notified of the cuts on Thursday morning, the memo states. This figure represents approximately 4% of the company’s total workforce.

The cuts at Stitch Fix fit into a broader trend shaping the US job market, as pandemic celebrities such as Peloton, Netflix and Wayfair become more conservative with hiring, but airlines, restaurants and hospitality chains are still struggling to fill roles.

The redundancies come three months after Stitch Fix cut its revenue guidance for the year and withdrew its earnings forecast. Spaulding said the company’s active customer base was not where she wanted it to be. As of January 29, Stitch Fix had approximately 4 million active customers.

Stitch Fix’s business is exclusively online, and it was seen as a bright spot during earlier stages of the Covid pandemic, as spending was moved online. Recently, the roll-out of a direct-purchase alternative known as Freestyle did not go as well as the company had hoped. And more and more buyers are returning to spend their money in stores as pandemic restrictions are lifted.

Stitch Fix is ​​set to report financial results for the second quarter after the market closes.

The market value has fallen below 1 billion dollars, as the share has fallen around 55% this year.

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