Plaintiff's law firm issued a press release on October 11, 2018, announcing the filing of the lawsuit. According to the press release, Stitch Fix is an online retail fashion subscription service. For subscription businesses like Stitch Fix, an important business metric for investors is the number and growth rate of its “active clients.” During 2017 and 2018, Stitch Fix’s active client base had grown dramatically, reaching 2.7 million by the end of the third quarter of 2018. This growth was due, in large part, to the Company’s prolific television advertising campaign, which it had launched in 2017.
The Complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements and/or failed to disclose adverse information about Stitch Fix’s business and prospects, including that its active client growth had slowed dramatically and that Defendants had shut down Stitch Fix’s television advertising campaign for much of the fourth quarter of 2018. As a result of Defendants’ false statements and/or omissions, the price of Stitch Fix common stock was artificially inflated during the Class Period.