High-end fashion was put on the back burner during the pandemic because everyone was working from home, thus everyone felt comfortable enough to wear their pajamas. Rent the Runway (NASDAQ: RENT), a recently IPO'd firm, hopes to benefit from the relaxation of COVID-19 restrictions and capitalize on the resurgence of social events. There are rumors that it's giving Stitch Fix (NASDAQ: SFIX) a tough fight, which has made numerous changes to its business lately. Amid all the excitement, let's see which stock is a better investment for the holiday season.

Rent the Runway: Bull v.s. Bear arguments

Co-founded by Jennifer Hyman and Jennifer Fleiss in 2009, Rent the Runway is a rapidly growing e-commerce website that allows customers to lease, subscribe or buy designer fashion items.

The business pioneered the notion of 'Closet in the Cloud'; also known as a digital closet to pick and choose from. Instead of buying new garments for every occasion, the firm lowers waste by giving rental options which can extend the shelf life of existing pieces, thus making more sustainable choices. Over 750 designer labels are presently collaborating with Rent the Runway.

Valued at approximately $1 billion prior to COVID-19, the sustainable business saw its value fall to $750 million during the pandemic. Management had to lay off a large number of employees and shut down a number of its retail locations in order to stay in business before IPOing in October at a value of $21 per share.

Despite decreasing sales and rising losses, Rent the Runway witnessed an increase in subscribers in Q1 of this year. In the first six months of 2021, Rent the Runway had 126,841 subscribers, up from 108,752 a year earlier. 

In the past, the organization's creations have been seen on a number of high-profile models, but things changed when star Gywneth Paltrow joined as a board member, offering huge potential for company growth through her industry experience and connections.

Stitch Fix: Bull v.s. Bear arguments

Stitch Fix is one of the world's most popular web-based styling service. By integrating data analytics with human logic, it was able to provide clothes, boots, and accessories tailored to the user characteristics, lifestyles, and finances of each client. Founded by Katrina Lake in 2011, Stitch Fix was valued at $1.6 billion when it went public in 2017. The business has made significant progress and now has a market capitalization of approximately $3.9 billion.

Due to the pandemic, the company was forced to lay off employees and suffer losses caused by shipping delays and a 7% decrease in customer purchasing. The company made waves in August 2021 when founder and CEO Katrina Lake stepped down, appointing Elizabeth Spaulding as her replacement.

Spaulding has since renamed the direct-buy option to "Stitch Fix Freestyle," and greatly extended the core crowd that Stitch Fix targets. Users can now purchase particular products on the portal without first placing an order for a Fix, making it similar to an online clothing store but with the added benefit of having all of the data necessary to provide customers with exactly what they want.

According to the firm's fiscal Q4 report, revenue increased by 19% to $571 million year-over-year (YoY). There are now 4,165,000 active customers, an 18% increase from the previous year.

So, which is a better investment?

Stitch Fix appears to have a more promising future because of its global brand recognition, new CEO, and financial plan. Despite, the company's difficulties, it is one of the long-standing businesses with a solid reputation. There is little doubt that Stitch Fix has a larger market and a worldwide reputation, but its financial growth is limited. When it comes to making an investment, Stitch Fix is the clear winner.

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