Nasty Gal Founder Hands Over CEO Role at Cutting-Edge Online Fashion Retailer

Sophia Amoruso will always be the #GirlBoss. But she’s giving up the official boss title at Nasty Gal.

Amoruso — founder of the Los Angeles-based online fashion retailer and author of a bestselling advice book titled “#GirlBoss” — is stepping down as CEO of the company that she nurtured from a side project on eBay nine years ago into an e-commerce powerhouse, she told her staff today.

Sheree Waterson, who has been Nasty Gal’s president, has been named as the new CEO and is also joining the company’s board alongside Amoruso and Index Ventures partner Danny Rimer.

Amoruso, who said in an interview with Re/code that the decision was hers alone, will stay on at Nasty Gal as executive chairman and remain a daily presence at the company leading its creative and brand marketing teams in a full-time capacity.

“While I find myself really capable of leading our customer,” Amoruso said, she thought the company needed a CEO with operational expertise and the ability to take Nasty Gal to the next level of maturity.

“I’m not even a parent,” the 30-year-old Amoruso joked, adding, “I hope to someday be the leader that Sheree is.”

Amoruso hired Waterson last winter as president and chief product officer, with the belief that she might some day take over as CEO. After stints at Speedo and Levi’s, Waterson most recently spent five years as chief product officer of Lululemon, before departing in 2013 in the wake of a controversy over how see-through some of the company’s yoga pants were.

“I actually see myself as support to Sophia so we can unleash her genius,” Waterson said. “Taking over the operation of the company allows Sophia to be out and connecting the brand with our customer and all the other amazing people she meets.”

Rimer said the move is the right one for the company now. “In terms of the decision, it really was something that Sophia wanted to do. She said to me, ‘I see that there are two customers of Nasty Gal. The customer that is girl and customer that is employee. I want to focus on the girl,'” he said. “It shows a level of maturity that she knows what she can do well and what others can do better than her.”

The leadership shuffle at Nasty Gal is happening as it comes off the most tumultuous year in its young history. The company laid off around 10 percent of its staff this past summer and saw revenue growth begin to stall after several years of rapid growth had pushed sales over $100 million.

Sources said Amoruso told potential investors in the fall that 2014 revenue would be flat from 2013 at worst, and 10 percent higher at best. Amoruso declined to comment on those numbers, but said Nasty Gal is profitable and has 255 employees. Sources said the company, which has seen explosive growth in the past, has been trying to manage margins more than top-line growth, by growing its revenue more healthily.

It is probably a good impulse, since it is not uncommon for fast-growth e-commerce sites to face headwinds around $100 million in revenue. On Monday, Modcloth, a women’s e-commerce site, said it was bringing in a new CEO to replace one of its co-founders. The once fast-growing site (which caters to a different customer than Nasty Gal) had sales of about $100 million in 2012, but its growth has since slowed, according to people with knowledge of the matter. In other words, explosion of revenue followed by a sales plateau is not uncommon in the space.

Meanwhile, newer women’s retail sites such as Dolls Kill and Tobi have targeted a similar cutting-edge female customer to Nasty Gal’s.

Amoruso’s discussions with investors focused on raising money in large part to build out Nasty Gal’s physical store presence, according to a source. Nasty Gal opened a flagship store on Melrose Avenue in Los Angeles in November and will open another in nearby Santa Monica in March, Waterson said.

Waterson called the two stores “laboratories,” but made it clear that physical retail stores are going to be crucial to the company’s strategy to reignite growth. Amoruso acknowledged the investor talks, but said the company has shelved them for now. Nasty Gal has previously raised $49 million from Index Ventures.

“It definitely wasn’t as easy as showing up in 2012 uneducated with an uber-profitable $28 million business,” Amoruso said of the investor discussions she had in the fall. “E-commerce is in a different place and money is in a different place.”

Amoruso created Nasty Gal in 2006 as a vintage shop on eBay tightly curated to her tastes. Over the years, her fashion sense attracted a 20-something set of female customers that were seeking edginess without forfeiting style. That millennial customer set has translated into a powerful advantage on social media, where Nasty Gal enjoys followings of more than one million people on Facebook and Instagram. It also gave Amoruso an audience to target with her motivational tome “#GirlBoss,” which was published last year and currently ranks in the top 500 books on Amazon.

In 2012, Nasty Gal introduced its own lines of clothing to the site, and Amoruso said the company’s brand now accounts for about 35 percent of sales. In the future, she wants to push that ratio even higher.

“Competing on keywords for other people’s brands was not what I set out to do,” she said.

Even as Nasty Gal hits this inflection point, e-commerce entrepreneurs and investors consistently refer to it as one of the most powerful fashion brands to have been created in the last decade. If it can maintain that position for another decade, Amoruso’s decision will have been a big reason why.

Which is why Amoruso said she is stepping aside, to focus on what she does best and allow Waterson to take over. “What got you here can’t get you there,” she said.