OAKLAND, Calif. (Legal Newsline) - Two law firms have filed to lead shareholder class action litigation against Stitch Fix over a drop in the company's stock value.
Barrack, Rodos & Bacine filed a motion to be appointed lead counsel on Oct. 25 in California federal court, as did Bernstein Litowitz. Litigation against the company, which sells apparel like shoes and accessories, is brought on behalf of those who bought stock from Dec. 8, 2020, to 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.
The Barrack firm represents the New Mexico State Investment Council, which it asks to be named lead plaintiff. The NMSIC has assets of about $34 billion.
"NMSIC is a sophisticated institutional investor, the type of plaintiff explicitly encouraged by Congress to seek appointment as lead plaintiff," the motion says.
Bernstein Litowitz wants Retail Wholesale Department Store Union Local 338 named lead plaintiff. Its funds lost $1.9 million from its investment in more than 100,000 shares of Stitch Fix stock.