Dive Brief:
- Stitch Fix's Bethlehem, Pennsylvania, fulfillment center will close in February, resulting in 393 employees losing their jobs, according to a Worker Adjustment and Retraining Notification (WARN) Act notice filed last month by the apparel retailer.
- Layoffs will begin on Sept. 8 and then occur in phases until Feb. 2, 2024, when the warehouse's operations are slated to end, per the notice. The Bethlehem location is one of five U.S. warehouses the styling service provider currently uses to receive and distribute merchandise.
- Stitch Fix notified employees of the planned closure in June. The majority of workers impacted are warehouse associates, but managers and supervisors are also included in the layoffs.
Dive Insight:
Closing the Pennsylvania warehouse is one way Stitch Fix plans to make its operations more efficient while maintaining profitability. In Q3, which ended April 29, the struggling company saw net revenue decline 20% YoY and active clients decrease 11% YoY.
Stitch Fix also plans to close its Dallas warehouse in 2024, reducing its number of U.S. fulfillment centers to three locations. The remaining warehouses in Atlanta, Indianapolis and Phoenix will be able to serve the company even if its client base grows, as Stitch Fix could expand their existing capacity, Founder and Executive Chairperson Katrina Lake said on a June 6 earnings call.
"We believe our inventory will be better optimized across a smaller network of warehouses in the U.S.," Lake said. "Understanding this, we have developed a three-node strategy that will allow us to more optimally serve the entire country and simultaneously showcase the greatest breadth and depth of inventory to our clients and stylists."
Stitch Fix expects to realize around $15 million in annual cost savings once its three-node strategy is complete, Lake said.
However, closing the Bethlehem and Dallas locations will come at a short-term cost. Stitch Fix expects to incur $5 million to $7 million for separation-related payments, benefits and related taxes, according to a June securities filing. It's also planning for $2 million to $3 million in costs related to redistributing inventory to other fulfillment centers.
"While there are a number of moving parts to these operational changes, we know they are the right decisions to make," Lake said.
