SAN FRANCISCO (Legal Newsline) - A union has hired Bernstein Litowitz to sue Stitch Fix over a drop in the company's stock value.
The Retail Wholesale Department Store Union Local 338 filed suit Aug. 26 in California federal court against the company, which sells apparel like shoes and accessories. The class action would cover all who bought stock in the company from Dec. 8, 2020, and March 8, 2022.
The start date reflects the launch of Stitch Fix's Freestyle program, which allowed customers to choose which items they wanted to purchase directly. Before then, customers purchased a monthly box of items chosen for them by a personal stylist.
"On Dec. 7, 2021, however, Stitch Fix admitted for the first time that the company had downplayed the magnitude of its transition from the subscription-based Fix model to the retail-based Freestyle model," the suit says.
"Stitch Fix further admitted that the company saw some 'short term cannibalization' from new customers who chose to use the new direct-buy Freestyle option rather than the traditional Fix option."
The stock dropped from $24.97 per share to $19 after that news, but the company allegedly led investors to believe it was a short-term problem.
On March 8, 2022, Stitch Fix disclosed a "weak outlook" caused by its app and site directing customers to the Freestyle program, the suit says. The stock price dropped even further, to $10.34 per share.
Other firms have filed similar shareholder class actions against Stitch Fix, which continued to see its stock price drop to the $5 range.