This may very well be one of the key investing theses to consider when you look at SFIX. This is a company that started out in 2011 for women only (and targeting younger women in sizes below a 12). Since then it has expanded to include: all women, men, accessories (shoes, bracelets, necklaces, socks & undergarments) and most recently; kids.
Will they be able to scale this business to sell to 10% of the US population? I don’t know. But considering that they’re growing their client base 30% annually, and they’re at nearly 3M clients (2.7M reported in June), they’re on track to reach (and blow past) 1% of the US population within 3 months. We’ll know the actual results when they report out on that quarter (expect the earnings release in late Nov or early Dec).
Don’t forget the secular shift of department stores and strip mall operators closing their doors. All of the dollars that people spent this year at JC Penny, Macy’s, Anne Taylor, are likely going to be replicated when those same people need new clothes. But there will be fewer JC Penny’s, Macy’s, Anne Taylor stores next year at this time than today. And fewer still in 2020 than in 2019. SFIX stands to be one of many companies who have adopted an internet retail model to gain from all of these clothing dollars that used to be spent at stores that are no longer around.
So I would say that the opportunity for them is more along the lines of: well beyond 1%, but could it be 2%, 4%, 10%? I’m not sure, but I don’t think there is any question that well over 1% of the US population will become their customer: nearly that many already are today.
JMac
I do think this seems to be a perfect idea for this board (a small cap growth stock with excellent growth). I also like its concept.
But I don’t have confidence in their moat. They don’t seem to be doing anything somebody else can do. And it seems that there are some drawbacks which may threaten their customer retention. I still like their story and if managed well, there’s a lot of potential. I had a small position and sold for a short term gain. I think we should keep this on the radar though. If customer retention is good for the next 12 months or more then it might be worth another investment.
dave