Shares of Stitch Fix Inc., an online clothing styling service, initially jumped in its stock market debut Friday but then lost most of its gains as the day continued. And the company sold fewer shares and at a lower price than it previously expected, a sign of weak demand for its initial public offering.
The San Francisco company, which has nearly 2.2 million active users, ships shoppers clothing to try on at home before they buy. Customers pay $20 to receive five items, and they can ship back whatever they don’t like. They’re charged for anything they keep, minus the $20 fee.
Stitch Fix was founded six years ago as an alternative to spending hours at the mall or sifting through several online retailers for an outfit.
“I knew there had to be another way,” Katrina Lake, Stitch Fix’s chief executive and founder, said in the company’s IPO filing.
Stitch Fix started out selling women’s clothes. It has expanded to men’s clothing and added options such as plus sizes. The company said it uses human stylists and data it collects from shoppers to pick out dresses, jeans and accessories it thinks customers would buy.
Stitch Fix has a lot of competition, including Trunk Club, owned by department store operator Nordstrom. Amazon.com Inc. is rolling out a similar service called Prime Wardrobe.
Meanwhile, another subscription service with a recent IPO has faltered on the stock market: Shares in meal-kit delivery company Blue Apron Holdings Inc. have lost nearly 70% of their value since they began trading at the end of June.
Unlike Blue Apron, Stitch Fix has been profitable in recent years. But it did report a loss of $594,000 for the year that ended July 29, as its costs rose. It had revenue in that period of $977.1 million, up 34% from the year before.
In its IPO, Stitch Fix sold 8 million shares at $15 each, below what it had expected. It previously had said it wanted to sell 10 million shares for between $18 and $20 each.
The stock, trading on the Nasdaq under the symbol “SFIX,” jumped more than 23% to $18.53 a share shortly after it began trading Friday morning. But the shares ended the day at $15.15, up only 1%.
1:35 p.m.: This article was updated with the stock’s movement and closing price.
11 a.m.: This article was updated throughout with additional information about the company and with the stock’s movement.
This article was originally published at 8:15 a.m.