Stitch Fix’s CEO inherited a broken tech darling. He’s fixing it like a traditional retail exec

A decade ago, Stitch Fix was a hot tech company promising to revolutionize how consumers shopped for clothes. Its personal shopping subscription service used algorithms to determine customers’ preferences with enough accuracy that they would keep most of the items shipped to them in a so-called fix. 

But its profile as a tech-driven disruptor of apparel retail couldn’t sustain a business ultimately undermined by weak merchandising fundamentals. Now its CEO Matt Baer, three years into his tenure, is using his big-box and department store background to reset Stitch Fix—and prove its pioneering model still works when rooted in retail 101. 

“Transformations take time, and we had the appropriate amount of patience through this process because the goal is for durable profitable growth,” Baer told Fortune this week.

The rise, and unraveling, of a data-driven bet

Stitch Fix was founded in 2011 by retail consultant Katrina Lake. (She still serves as chair of the company’s board.) Her idea was to mix data and remote personal stylists to customize a wardrobe suited to a shopper’s unique tastes and send them the clothes in a subscription box.

In the early days, the company found a clientele among Americans who simply didn’t like shopping or didn’t feel confident building outfits. Its data analytics and algorithms beat traditional clothing brands to the punch in personalized shopping for the digital age. Revenue tripled between 2016 and 2021 to $2.1 billion, helped in part by a pandemic that led more people to shop from home. The company became a Wall Street darling, and Stitch Fix’s market cap hit an all-time high that year of $11 billion.

But after the pandemic, the bottom fell out. Shoppers left in droves, bored by what they saw as predictable assortment—a sign its data edge wasn’t translating into compelling merchandising—and a site that was slow to evolve. That was on top of new subscription service competitors, improved apparel offerings at big retailers like Walmart and Target, and natural attrition due to many consumers returning to physical stores post-COVID. Existing customers weren’t sticking around, and Stitch Fix was spending a fortune attracting new ones, only for them to disappear quickly. In the first year following its COVID boom, the company lost 400,000 users, reflecting a business in decline. From peak to trough, between 2021 to 2025, revenue dropped 40% to $1.27 billion.

“You can acquire a really large absolute number of clients but that doesn’t mean you’re building a healthy business,” Baer says.

Back to retail basics

In 2023, Stitch Fix hired Baer, a former Walmart and Macy’s e-commerce executive, to stabilize the business and refocus the company. 

Baer’s new emphasis on retail fundamentals is recasting Stitch Fix’s identity from a tech company that sold clothing to an apparel company that’s tech-forward.

“What we’ve been leaning into is how to take that DNA of tech and innovation and marry that with retail’s best practices,” says Baer. 

That has meant leaning into classic retail levers like strengthening its private label; Stitch Fix’s in-house brands now account for about 40% of sales and carry higher margins.

It has also meant improving the shopping experience, in part, by expanding Stitch Fix further into new categories like active wear, footwear, and accessories like handbags and eyewear, where Baer thinks the company can command a similar market position to what it has in apparel. “We were leaving a billion dollars of market share on the table,” he says. 

He has also given shoppers more flexibility in how they build a ‘fix,’ including item selection and delivery cadence. 

Stitch Fix has rolled out tech updates too, but they’re all in the service of the retail experience. It recently launched AI-backed technology that allows customers to superimpose an item of clothing on a photo of themselves to see what it would look like. The company is deploying AI to identify trends, cutting the design time for its private label brands to weeks from months.

Proving the model still works

There are plenty of green shoots that suggest Stitch Fix has not only stabilized but has set itself up for longer-term growth. In its most recent quarter, Stitch Fix reported a fifth straight three-month period of year-over-year revenue growth, rising 4.7%. It posted a record revenue per active client of $578, which supports the idea that Stitch Fix is getting more business out of its regular customers. More crucially, Stitch Fix’s active client count has risen for several quarters and stood at 2.39 million at the end of last quarter. That follows a painful period in which the company cut $500 million from its cost structure, an effort that included steps such as ending full-time employment for stylists.

Still, Stitch Fix has a lot to prove to Wall Street, with its market capitalization of about $500 million only 5% of what it was at its peak five years ago, despite the recent improvements. But Baer says the company is getting there by zeroing on what it does best. “Our transformation is rooted in understanding what made us unique and special initially and unlocking that opportunity even further with the most recent technology,” he says.

At its core, Stitch Fix aimed to ease Americans’ shopping fatigue; it’s a problem that still needs solving. “The data is pretty clear: you’ve got 90% of the U.S. population that isn’t excited about shopping for apparel in stores,” he says. “There is a significant population of people out there who need help with style and want to understand what is on trend.”

This story was originally featured on Fortune.com