C-Suite Transitions – Elizabeth Spaulding Steps Down as CEO of Stitch Fix

  • January 19, 2023

Welcome to edition 24 of  C-Suite Transitions, a weekly series on InsideArbitrage that tracks appointments and departures at publicly traded companies during the prior week. We highlight five appointments and departures each week by picking the largest companies from the full list of management changes.

Sudden Departures

  1. Brookdale Senior Living (BKD): On January 10, 2023, Steven E. Swain, current Executive Vice President, and Chief Financial Officer, will be terminated without cause effective February 24, 2023.
  2. Lakeland Financial (LKFN): On January 10, 2023, Michael E. Gavin, Executive Vice President, Chief Credit Officer, announced his long-standing plan to retire on January 27, 2023.
  3. Sarcos Technology and Robotics (STRC): On January 11, 2023, Benjamin G. Wolff resigned as Executive Chairman, effective February 1, 2023.
  4. Cognizant Technology Solutions (CTSH): On January 12, 2023, Cognizant announced that Brian Humphries steps down as Chief Executive Officer, effective immediately.

Stitch Fix (SFIX)

Founded in 2011 and headquartered in San Francisco, Stitch Fix is an online personal styling service launched by Katrina Lake while pursuing a MBA at Harvard. Stitch Fix allows you to try on handpicked apparel at home from over a thousand brands, including Nike, Under Armour, and UGG.

How it Works

Stitch Fix customers submit a Style Profile, and one of the Stitch Fix team’s personal stylists hand-selects items based on their preferences and price limit based on a combination of algorithms and data science, offering tailored recommendations. A stylist then chooses five items for the user to try on. The customer only pays for the items they want to keep. Customers can pick from one-off delivery, a monthly subscription or a quarterly subscription.

Another Short-Lived Pandemic Success Story

When Stitch Fix went public in November 2017, the company had a market valuation of more than $1.6 billion. It currently has a market cap of less than $500 million. In the last two years, the internet styling service has seen its stock crumble, dropping from a peak of $96 per share in January 2021 to around $4 right now.

Elizabeth Spaulding Steps Down as CEO

Elizabeth Spaulding
Elizabeth Spaulding

On January 5, 2023, Stitch Fix announced that Elizabeth Spaulding will step down as Chief Executive Officer and as a member of the Board of Directors, effective immediately.

In January 2020, Stitch Fix appointed Spaulding as President, and she became CEO in August 2021, when Lake stepped down to become the company’s Executive Chair.

There were numerous concerns throughout Spaulding’s tenure as CEO of the online personal styling business. Prior to joining Stitch Fix, Spaulding had served as a consultant for Bain. Since joining Stitch Fix, she changed the company’s focus from using human stylists to data driven algorithms.

Stitch Fix saw a significant increase in revenue during the pandemic and it is now headed in the opposite direction. Despite the increase in revenue, the company started posting losses and free cash flow was a mixed bag, swinging from positive to negative from one quarter to the next.

Katrina Lake
Katrina Lake

Along with the CEO’s departure announcement, Stitch Fix is also letting go 20% of its paid staff, according to a blog post by founder and former CEO Katrina Lake.

Katrina, Founder, and current interim CEO

Katrina Lake, the company’s founder and former CEO, has been named interim CEO, effective immediately, for a period of six months or until a replacement is chosen.

I look forward to stepping back in to lead the business and working closely with the board of directors to identify a successor going forward,” Lake said.

Despite the challenging moment we are in right now, the board and I still deeply believe in the Stitch Fix business, mission and vision. We know because of the hard work and foundation laid by this team that there is a great future available for this company and we are committed to getting the company on a path to achieve it” Lake wrote.

Although Lake has long been credited as Stitch Fix’s sole founder, a co-founder named Erin Morrison Flynn was included in a footnote in one of the company’s pre-IPO regulatory filings. Flynn sued Lake and ultimately reached a settlement with her, as reported by the WSJ in 2017.

According to a lawsuit filed by Flynn in the Superior Court of California in 2012, the pair had founded the business in October 2010 under the name Rack Habit. The lawsuit claims that their relationship had deteriorated after Lake allegedly asked Flynn to give up some of her ownership in order to distribute the shares to new hires.

Other Departures

Minesh Shah, the COO, resigned from Stitch Fix on August 26, 2022, after four years with the company, joining a growing list of notable departures.

Competitors

Companies swarmed into the clothing-as-a-subscription segment but the results were not encouraging, Similar to Stitch Fix, Nordstrom struggled and announced the closure of Trunk Club, another styling service it had acquired. ThredUp, an online consignment and thrift store also ended its subscription box service.

Insider Transactions by Bill Gurley 

Before the pandemic hit, noted venture capitalist Bill Gurley purchased over $3 million worth of Stitch Fix.

We wrote the following in one of our weekly Insider Weekends articles titled, ‘Insider Weekends: Bill Gurley Purchases Over $3 Million Worth Of Stitch Fix

When I first saw this purchase, I thought that Bill Gurley probably acquired the shares indirectly and that the actual investment was through San Francisco based venture capital firm Benchmark. Upon closer inspection of the form 4 filing it became evident that the purchase was a direct purchase and that partially explains the nearly 7% increase in Stitch Fix stock last week after this purchase was filed with the SEC.

Bill Gurley ranked third on Forbe’s Midas List for 2019 thanks to his successful investments in GrubHub, Nextdoor, Zillow, Stitch Fix and more notably Uber. When a successful venture capitalist with a CFA and a background that includes a four year stint on Wall Street as a research analyst purchases stock in a company that he has been involved with for several years, it piques my curiosity. This has been the only insider purchase at the company since it went public on November 17, 2017 at $15 per share.

On October 20, 2019, Bill Gurley acquired 150,000 shares of Stitch Fix, paying $20.83 per share for $3.12 million. Mr. Gurley increased his stake by 27.55% to 694,507 shares with this purchase.

During the pandemic, on March 12, 2020, Gurley acquired another 250,000 shares during the dip paying $12.76 per share for $3.19 million.

The next month he bought another 1 million shares paying $15.80 per share for $15.8 million.

Gurley insider transactions
Source: Inside Arbitrage

Almost after two years on July 8, 2022, Gurley acquired 1 million shares paying $5.43 per share for a total amount of $5.42 million.

on July 8, 2022, Gurley acquired 1,000,000 at $5.43 per shar
Source: Inside Arbitrage

You can view the list of recent insider transactions for Stitch Fix, Inc. here.

Earnings

On December 6, 2022, Stitch Fix announced results for the first quarter of the fiscal year 2023. Revenues declined 22% in the first quarter of the company’s fiscal year, marking six consecutive quarters of sluggish revenue growth. The company anticipates a similar decline in revenue for the current fiscal year.

3,709,000 active clients were reported in FQ1, down 471,000  from the previous year or 11% YoY. The number of active clients dropped slightly from 3,795,000 in the previous quarter. The company also reported a net loss of $55.9 million, diluted loss per share of $0.50, and adjusted EBITDA loss of $7.4 million

Share Repurchase Program

On January 6, 2022,  Stitch Fix, announced that its Board of Directors has authorized a share repurchase program where it may purchase up to $150 million of its Class A common stock.

Appointments

1.  Advanced Micro Devices (AMD): $70.53

On January 11, 2023, Advanced Micro Devices announced that Jean Hu was appointed as Chief Financial Officer of the company effective January 23, 2023.

MarketCap: $115.43B Avg. Daily Volume (30 days): 49,725,728 Revenue (TTM): $22.83B
Net Income Margin (TTM): 9.96% ROE (TTM): 7.37% Net Debt: $2.7B
P/E: 46.35 Forward P/E: 18.55 EV/EBIDTA (TTM): 20.32
P/S (TTM): 4.58 P/B (TTM): 2.10 52 Week Range: $54.57 – $134.57

2. Alliant Energy (LNT): $53.71

On January 13, 2023, Alliant Energy Corporation announced the appointment of Lisa M. Barton, as President and Chief Operating Officer of Alliant Energy, effective February 27, 2023.

MarketCap: $13.83B Avg. Daily Volume (30 days): 1,073,626 Revenue (TTM): $4.07B
Net Income Margin (TTM): 16.37 ROE (TTM): 10.71 Net Debt: $8.2B
P/E: 20.70 Forward P/E: 19.27 EV/EBIDTA (TTM): 14.20
P/S (TTM): 3.42 P/B (TTM): 2.22 52 Week Range: $46.79 – $64.08

3. First Financial Bankshares (FFIN): $33.72

On January 10, 2023, First Financial Bankshares announced the appointment of Michelle S. Hickox, as Executive Vice President and Chief Financial Officer effective on or about January 9, 2023.

MarketCap: $4.88B Avg. Daily Volume (30 days): 394,344 Revenue (TTM): $514.81M
Net Income Margin (TTM): 44.90% ROE (TTM): 16.13% Net Debt: $407.15M
P/E: 21.28 Forward P/E: N/A EV/EBIDTA (TTM): N/A
P/S (TTM): P/B (TTM): 52 Week Range: $32.53 – $51.44

4. Cognizant Technology Solutions  (CTSH): $60.99

On January 12, 2023, Cognizant announced that its Board of Directors has named Ravi Kumar S as Chief Executive Officer and a member of the Board, effective immediately.

MarketCap: $32.36B Avg. Daily Volume (30 days): Revenue (TTM): $19.37B
Net Income Margin (TTM): 12.11% ROE (TTM): 19.95% Net Debt: $1.21B
P/E: 14.02 Forward P/E: 13.62 EV/EBIDTA (TTM): 8.75
P/S (TTM): 1.73 P/B (TTM): 2.75 52 Week Range: $51.10 – $92.32

5. Broadstone Net Lease (BNL): $17.51

On January 11, 2023, the Broadstone announced that the Board elected the company’s Executive Vice President and Chief Operating Officer, John Moragne, to succeed Mr. Czarnecki as Chief Executive Officer, effective February 28, 2023.

MarketCap: $3.26B Avg. Daily Volume (30 days): 877,853 Revenue (TTM): $388.02M
Net Income Margin (TTM): 30.33% ROE (TTM): 4.36% Net Debt: $1.83B
P/E: 25.34 Forward P/E: N/A EV/EBIDTA (TTM):
P/S (TTM): 8.04 P/B (TTM): 1.15 52 Week Range: $14.73 – $22.59

 Departures

1. SEMrush Holdings (SEMR): $8.09

On January 16, 2023, Delbert Humenik, Chief Revenue Officer of Semrush Holdings, informed the company that he intends to retire as of February 15, 2023.

MarketCap: $1.14B Avg. Daily Volume (30 days): 157,489 Revenue (TTM): $239.28M
Net Income Margin (TTM): -9.95% ROE (TTM): -13.18% Net Debt:
P/E: -47.65 Forward P/E: N/A EV/EBIDTA (TTM):
P/S (TTM): 4.87 P/B (TTM): 5.56  52 Week Range: $7.16 – $19.41

2. Cognizant Technology Solutions  (CTSH): $60.99

On January 12, 2023, Cognizant announced that Brian Humphries will step down as CEO, effective immediately.

MarketCap: $32.36B Avg. Daily Volume (30 days): Revenue (TTM): $19.37B
Net Income Margin (TTM): 12.11% ROE (TTM): 19.95% Net Debt: $1.21B
P/E: 14.02 Forward P/E: 13.62 EV/EBIDTA (TTM): 8.75
P/S (TTM): 1.73 P/B (TTM): 2.75 52 Week Range: $51.10 – $92.32

3. Lakeland Financial (LKFN): $74.31

On January 10, 2023, Michael E. Gavin, Executive Vice President, Chief Credit Officer, formally announced his long-standing plan to retire on January 27, 2023.

MarketCap: $1.95B Avg. Daily Volume (30 days): 83,264 Revenue (TTM): $231.69M
Net Income Margin (TTM): 44.08% ROE (TTM): 16.99% Net Cash: $199.36M
P/E: 19.34 Forward P/E: 17.83 EV/EBIDTA (TTM): N/A
P/S (TTM): 8.96 P/B (TTM): 3.74 52 Week Range: $63.35 – $83.57

4. First Financial Bankshares (FFIN): $33.72

On January 10, 2023, First Financial Bankshares announced that James R. Gordon resigned as the company’s Executive Vice President and Chief Financial Officer effective January 9, 2023.

MarketCap: $4.88B Avg. Daily Volume (30 days): 394,344 Revenue (TTM): $514.81M
Net Income Margin (TTM): 44.90% ROE (TTM): 16.13% Net Debt: $407.15M
P/E: 21.28 Forward P/E: N/A EV/EBIDTA (TTM): N/A
P/S (TTM): P/B (TTM): 52 Week Range: $32.53 – $51.44

5. Brookdale Senior Living (BKD): $2.45

On January 10, 2023, the Board of Directors of Brookdale Senior Living announced Steven E. Swain, the company’s current Executive Vice President and Chief Financial Officer, will be terminated without cause effective February 24, 2023.

MarketCap: $474.49M Avg. Daily Volume (30 days): 1,862,203 Revenue (TTM): $2.55B
Net Income Margin (TTM): -11.57% ROE (TTM): -45.77% Net Debt: $4.72B
P/E: -1.61 Forward P/E: 6.37 EV/EBIDTA (TTM): 27.09
P/S (TTM): 0.19 P/B (TTM): 1.04 52 Week Range: $2.51 – $7.61

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