FinanceLooker

Excrept from filing document 2025-08-02

As of January 31 2025 the last business day of the registrant s most recently completed second fiscal quarter the aggregate market value of the registrant s voting Class A common stock and Class B common stock held by non affiliates of the registrant was approximately 508 798 833 and 20 513 199 respectively based on a closing price of 4 71 per share of the registrant s Class A common stock as reported on The Nasdaq Global Market
As of September 19 2025 the number of outstanding shares of the registrant s Class A common stock par value 0 00002 per share was 118 557 927 and the number of outstanding shares of the registrant s Class B common stock par value 0 00002 per share was 15 553 053
Portions of the registrant s definitive Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with the U S Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10 K are incorporated by reference in Part III Items 10 14 of this Annual Report on Form 10 K
This Annual Report contains forward looking statements that involve risks uncertainties and assumptions that if they never materialize or prove incorrect could cause our results to differ materially from those expressed or implied by such forward looking statements The statements contained in this Annual Report that are not purely historical including without limitation statements regarding our projected financial position and results business strategy plans and objectives of our management for future operations are forward looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended the Securities Act Section 21E of the Securities Exchange Act of 1934 as amended the Exchange Act and the Private Securities Litigation Reform Act of 1995 Forward looking statements are often identified by the use of words such as but not limited to anticipate believe can continue could estimate expect intend may might plan project seek should target will would and similar expressions or variations intended to identify forward looking statements These statements are based on the beliefs and assumptions of our management which are in turn based on information currently available to management Such forward looking statements are subject to risks uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward looking statements Factors that could cause or contribute to such differences include but are not limited to those discussed in the section titled Risk Factors included under Part I Item 1A below Furthermore such forward looking statements speak only as of the date of this Annual Report Except as required by law we undertake no obligation to update any forward looking statements to reflect events or circumstances after the date of such statements
In 2011 Stitch Fix Inc we our us the Company or Stitch Fix introduced an innovative approach to shopping for clothing and accessories We were inspired by the opportunity to create a client first styling experience offering an alternative to impersonal time consuming and inconvenient traditional shopping
Since inception our business has been grounded in our commitment to developing and fostering client relationships and making people happier and more confident in what they wear We help our clients discover and define their style We reduce their anxiety and stress when getting ready in the morning And we give them time back in their lives to invest in themselves
We do this through our unique business model that pairs expert Stylists with best in class artificial intelligence AI and recommendation algorithms It is this combination that enables us to help people discover the styles they will love without having to spend hours browsing stores or sifting through endless choices online
Clients primarily engage with us by 1 receiving a curated shipment of items informed by our algorithms and chosen by a Stitch Fix Stylist a Fix or 2 purchasing directly from our website or mobile app based on an individualized assortment of outfit and item recommendations Freestyle Clients choose to schedule regular shipments or order a Fix on demand Then after receiving a Fix they can purchase the items they want to keep and return the other items if any
Since our inception Stitch Fix has been powered by AI and data science and we continue to enhance these capabilities Our rich data set and our proprietary algorithms fuel our business by enhancing the client experience and driving business model efficiencies For example we currently leverage AI and data science to match our Stylists to our clients and aid our Stylists in creating Fixes help inform merchandise buying and inventory placement in our network and optimize our approach to pricing and markdowns Our large and growing data set provides the foundation for our proprietary algorithms The vast majority of our client data is directly shared by the client rather than inferred scraped or obtained from other sources We also gather extensive trend data as well as merchandise data such as inseam pocket shape silhouette and fit We believe that both the data we have as well as our algorithms give us a significant competitive advantage As our data set has grown our algorithms have become more powerful and we expect that to continue
Stitch Fix operates in the United States When Stitch Fix first launched we offered women s apparel Since then we have expanded our assortment to include Men s Kids Petite Maternity and Plus apparel as well as shoes and accessories We offer a wide selection of clothing and accessories across multiple price points and styles from our brand partners and our own private brands Many of our brand partners also design and supply items exclusively for our clients
At Stitch Fix we build trusted and long term relationships We have delivered over 100 million Fixes and as of August 2 2025 we had approximately 2 309 000 active clients Refer to the section titled Management s Discussion and Analysis of Financial Condition and Results of Operations Key Financial and Operating Metrics for information on how we define and calculate active clients
When clients first sign up for Stitch Fix they fill out an onboarding quiz through which they communicate their style fit and budget preferences Then to demonstrate to our clients that we get their style at the end of the sign up process we present them with their StyleFile a personalized snapshot that shares their individual style personality and the specific elements that contribute to it
A Fix is a Stitch Fix branded box containing a curated assortment of apparel shoes and accessories informed by our algorithms and chosen by Stitch Fix Stylists then delivered to the client to try on in the comfort of their own
home Clients can keep some all or none of the items in the Fix and easily return any items in a prepaid postage bag provided In each Fix a Stylist sends a client items from a broad range of merchandise recommended for the client by our algorithms These algorithmic recommendations are based on the client s individual style preferences and order behavior as well as the aggregate historical behavior of our client base and the aggregate historical data we have collected on each item of merchandise we have available
In addition to a personalized selection of apparel shoes and accessories each Fix also includes a personal note from the Stylist Women s and Men s clients will also receive a QR code to a digital Style Card that provides clients with personalized shoppable outfit ideas built around items sent in their individual Fix as well as previously purchased items
We charge clients a styling fee of 20 for each Fix which is credited toward any merchandise purchased For our Style Pass clients we charge a 49 annual fee which provides unlimited styling for the year and is credited toward any merchandise purchased over the course of the year If clients choose to keep a certain number of items chosen for them by their Stylist they receive a discount on the entire order
After clients receive their order they are invited to provide feedback about the fit price style and quality of the items This feedback informs both our algorithms and Stylists to improve each client s experience
With Freestyle a client can visit our website or mobile application and make direct purchases of apparel shoes and accessories from a set of curated items and outfits within a range of categories Freestyle purchases can be exchanged or returned using several prepaid shipping options No styling fee is charged for Freestyle purchases
Clients that complete our style profile provide us with meaningful data points including detailed style size fit and price preferences as well as unique inputs such as how often they dress for certain occasions or which parts of their bodies the clients like to draw attention to or cover up Over time through their feedback on Fixes and Freestyle orders they receive clients share additional information about their preferences as well as detailed data about both the merchandise they keep and return This feedback loop drives important network effects as our client provided data informs not only our personalization capabilities for the specific client but also helps us better serve other clients
We believe our proprietary merchandise data set is differentiated from other retailers We encode each of our SKUs with numerous attributes to help our algorithms make better recommendations for our clients The information we store for each SKU includes
Our algorithms use our data set to match merchandise to each of our clients For every combination of client and merchandise we compute the probability the clients will keep that item based on their and other clients preferences and purchase history as well as the attributes and past performance of the merchandise
The pairing of data science and human judgment drives a better client experience and a more powerful business model Our advanced data science capabilities harness the power of our data for our Stylists and clients by generating predictive recommendations to streamline the curation process and in the case of Freestyle generate personalized items and outfit recommendations in near real time Our Stylists add a critical layer of contextual human decision making that augments and improves our algorithms selections and creates the ultimate personalized experience
Our clients love our service for many reasons We help clients find apparel shoes and accessories they will love in a way that is convenient and fun By pairing expert Stylists with best in class AI and recommendation algorithms we leverage our assortment of private and national brands to meet each client s individual tastes and needs so our clients can express their personal style without having to spend hours in stores or sifting through endless choices online
We believe that we are a preferred channel for our brand partners By introducing our clients to brands they may not have shopped for we help our brand partners reach clients they may not have otherwise reached Further we provide our brand partners with insights based on client feedback that help them improve and evolve their merchandise to better meet consumer demand
Having a wide range of styles and brands is essential to our success Our algorithms filter through our merchandise assortment to recommend a subset of relevant merchandise to our Stylists or clients who leverage the information to select or purchase merchandise We source merchandise from brand partners and also create our own merchandise to serve unmet client needs
We partner with established and emerging brands across multiple price points sizes and styles to make sure that every client can find clothes and accessories they love With many of our brand partners we develop third party branded items exclusively sold to Stitch Fix clients
These products are designed to address an unmet client need Our merchants use our rich data set to help identify and develop the new products for our Owned Private Label Brands We then pair our data with the expertise of our vendor partners to bring these new products to market
Owned Private Label Brands are a meaningful part of our business We do not have specific targets for the merchandise mix provided by our brand partners and our Owned Private Label Brands and expect it will fluctuate over time We will continue to develop products when we identify opportunities to meet client needs
For the production of our Owned Private Label Brands we contract with merchandise vendors some of whom operate their own manufacturing facilities and others subcontract the manufacturing to third parties
All of our Owned Private Label Brand merchandise is produced according to our specifications and we require that all of our vendors comply with applicable law and observe strict standards of conduct We have hired independent firms that conduct initial and ongoing audits of the working conditions at the factories producing our Owned Private Label Brands merchandise If an audit reveals potential problems we require that the vendor institute corrective action plans to bring the factory into compliance with our standards or we may discontinue our relationship with the vendor
We operate three fulfillment centers in the United States located in Arizona Georgia and Indiana In our fulfillment centers our algorithms increase efficiencies in processes such as allocation batch picking transportation shipping returns and ongoing process improvement We have a reverse logistics operation to manage returned merchandise Our specialist returns teams in our dedicated return intake areas accept process and reallocate returns to our inventory so the merchandise can be offered for another Fix or Freestyle order
The retail apparel industry is highly competitive We compete with eCommerce companies that market the same or similar merchandise and services that we offer local national and global retail stores specialty retailers discount chains and the online offerings of these traditional retail competitors and less traditional online retailers Additionally we compete for our clients consumer discretionary spending from other shopping categories and experiences
We compete primarily on the basis of client experience brand product selection quality convenience and price Few things are more personal than getting dressed but finding clothing that fits and looks great can be a challenge Stitch Fix solves that problem By pairing expert Stylists with best in class AI and recommendation algorithms we leverage our Owned Private Brands and national brands to meet each client s individual tastes and needs making it convenient for clients to express their personal style without having to spend hours in stores or sifting through endless choices online We believe that we are able to compete effectively because we offer clients a personalized and fun shopping experience that our competitors are unable to match
Seasonality in our business does not follow that of traditional retailers such as typical high concentration of revenue in the holiday quarter Historically our net sales have not been concentrated in a particular period or season and are generally weighted consistently throughout the year Our percentage of annual net sales for the first second third and fourth quarters of the fiscal year ended August 2 2025 were 25 25 26 and 24 respectively
We protect our intellectual property through a combination of trademarks domain names copyrights trade secrets and patents as well as contractual provisions and restrictions on access to our proprietary technology Our principal trademark assets include the trademarks Stitch Fix and Fix which are registered in the United States and some foreign jurisdictions our logos and taglines and multiple private label apparel and accessory brand names We have applied to register or registered many of our trademarks in the United States and other jurisdictions and we will pursue additional trademark registrations to the extent we believe they would be beneficial and cost effective
We are the registered holder of multiple domestic and international domain names that include stitchfix and similar variations We also hold domain registrations for many of our private label brand names and other related trade names and slogans
In addition to the protection provided by our intellectual property rights we enter into confidentiality and proprietary rights agreements with our employees consultants contractors and business partners Our employees are also subject to invention assignment agreements We further control the use of our proprietary technology and intellectual property through provisions in both our client terms of use on our website and mobile app and in our vendor terms and conditions
As with all retailers and companies operating on the internet we are subject to a variety of international and U S federal and state laws governing the processing of payments consumer protection the privacy of consumer information and other laws regarding unfair and deceptive trade practices
Apparel shoes and accessories sold by us are subject to regulation by governmental agencies in the United States These regulations relate principally to product labeling licensing requirements flammability testing and product safety Apparel shoes and accessories that we import are also subject to U S customs laws and regulations which include tariffs and other trade restrictions We are also subject to environmental laws rules and regulations Apparel shoes and accessories sold by us are subject to import regulations in the United States and other countries concerning the use of wildlife products for commercial and non commercial trade including regulations from the U S Fish and Wildlife Service We do not estimate any significant capital expenditures for environmental control matters either in the current fiscal year or in the near future
We value our employees feedback and conduct confidential employee engagement and satisfaction surveys at least annually which we use to determine what is important to our employees and to evolve Company practices and policies
We currently operate only in the United States and have one reportable segment Refer to Note 13 Segment Reporting within the Notes to the Consolidated Financial Statements in Part II Item 8 of this Annual Report for further details
In fiscal 2019 we launched operations in the United Kingdom UK including local Stylists and a dedicated fulfillment center In fiscal 2024 we ceased operations of our U K business and met the accounting requirements for reporting the UK business as a discontinued operation Refer to Note 15 Discontinued Operations within the Notes to the Consolidated Financial Statements in Part II Item 8 of this Annual Report for further details
We were incorporated in Delaware in 2011 under the name rack habit inc We changed our name to Stitch Fix Inc in October 2011 Our principal executive offices are located at 1 Montgomery Street Suite 1500 San Francisco California 94104 and our telephone number is 415 882 7765 Our website is located at www stitchfix com and our investor relations website is located at investors stitchfix com
We file or furnish electronically with the U S Securities and Exchange Commission the SEC annual reports on Form 10 K quarterly reports on Form 10 Q current reports on Form 8 K and amendments to those reports filed or furnished pursuant to Section 13 a or 15 d of the Exchange Act We make copies of these reports available free of charge through our investor relations website as soon as reasonably practicable after we file or furnish them with the SEC The SEC maintains a website at www sec gov that contains reports proxy and information statements and other information regarding Stitch Fix and other issuers that file electronically with the SEC From time to time we use our investor relations website and the Stitch Fix Newsroom newsroom stitchfix com as a means of disclosing information about the Company including information which could be deemed material to investors
Information contained on or accessible through our websites is not incorporated into and does not form a part of this Annual Report or any other report or document we file with the SEC and any references to our websites are intended to be inactive textual references only
Our business is subject to numerous risks The following summary highlights some of the risks you should consider with respect to our business and prospects This summary is not complete and the risks summarized below are not the only risks we face You should review and consider carefully the risks and uncertainties described in more detail in the Risk Factors below which includes a more complete discussion of the risks summarized here
We have in the past been and may in the future be unable to retain clients or maintain a high level of engagement with our clients and maintain or increase their spending with us which has and could continue to harm our business financial condition or operating results
If we fail to attract and retain key personnel effectively manage succession or hire develop and motivate our employees our business financial condition and operating results could be adversely affected
Our client metrics are subject to inherent challenges in measurement and real or perceived inaccuracies in such metrics may reduce the perceived usefulness and reliability of the metric and harm our stock price
Any failure by us or our vendors to comply with product safety labor or other laws or our standard vendor terms and conditions or to provide safe factory conditions for our or their workers may damage our reputation and brand and harm our business
Our use of personal information personal data and sensitive information subjects us to numerous and evolving privacy and security laws and other obligations such as cybersecurity and data protection in contracts and our compliance with or failure to comply with such obligations could harm our business
If the use of cookie tracking technologies is further restricted regulated or blocked or if changes in technology cause cookies to become less reliable or acceptable as a means of tracking consumer behavior the amount or accuracy of internet user information we collect would decrease which could harm our business and operating results
We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our clients would have to pay for our offering and adversely affect our operating results
The market price of our Class A common stock may continue to be volatile or may decline steeply or suddenly regardless of our operating performance and we may not be able to meet investor or analyst expectations You may lose all or part of your investment
The dual class structure of our common stock concentrates voting control with certain significant shareholders including our current and former directors executive officers and their affiliates and may depress the trading price of our Class A common stock
We do not currently intend to pay dividends on our Class A common stock and consequently your ability to achieve a return on your investment will depend on appreciation of the value of our Class A common stock
Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger tender offer or proxy contest difficult thereby depressing the trading price of our Class A common stock
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States are the exclusive forums for substantially all disputes between us and our stockholders which could limit our stockholders ability to obtain a favorable judicial forum for disputes with us or our directors officers or employees
If we are unable to maintain effective internal control over financial reporting investors may lose confidence in the accuracy of our reported financial information and this may lead to a decline in our stock price
Investing in our Class A common stock involves a high degree of risk You should consider and read carefully all of the risks and uncertainties described below as well as other information included in this Annual Report on Form 10 K this Annual Report and in our other public filings The risks described below are not the only ones facing us The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business financial condition or results of operations In such case the trading price of our Class A common stock could decline and you may lose all or part of your investment This Annual Report also contains forward looking statements and estimates that involve risks and uncertainties Our actual results could differ materially from those anticipated in the forward looking statements as a result of specific factors including the risks and uncertainties described below
We have in the past been and may in the future be unable to retain clients or maintain a high level of engagement with our clients and maintain or increase their spending with us which has and could continue to harm our business financial condition or operating results
If our existing clients no longer find our service and merchandise appealing or appropriately priced they may make fewer purchases or may stop using Stitch Fix altogether Even if our existing clients continue to find our service and merchandise appealing they may decide to receive fewer Fixes or purchase fewer items from their Fixes or through Freestyle as their demand for new apparel declines due to macroeconomic conditions or for other reasons A high proportion of our revenue comes from repeat purchases by existing clients especially those existing clients who are highly engaged and purchase a significant amount of merchandise from us If clients who receive Fixes most frequently or purchase a significant amount of merchandise from us make fewer or lower priced purchases or stop using our service altogether our financial results will be negatively affected For instance as of the end of fiscal 2023 fiscal 2024 and fiscal 2025 our number of active clients decreased compared to the prior year period due to our inability to attract new clients and retain existing clients This negatively affected our revenue for these periods and is expected to continue to negatively affect our revenue
We seek to attract high quality clients who will remain clients for the long term but our efforts may not be successful or produce the results we anticipate For example if we are not able to engage new clients effectively so they continue receiving Fixes after their first few tries our number of active clients will continue to suffer Our inability to attract and keep high quality clients engaged a continued decrease in our number of active clients or a decrease in client spending has in the past negatively affected and could continue to negatively affect our operating results
Our success depends on our ability to attract new clients in a cost effective manner To expand our client base we must appeal to and acquire clients who have historically used other means to purchase apparel shoes and accessories such as traditional brick and mortar retailers or other online retailers We currently utilize both digital and offline channels to attract new visitors to our website or mobile app and convert them into clients At any given time our marketing and advertising efforts may include client referrals social media marketing keyword search campaigns affiliate programs partnerships campaigns with celebrities and influencers display advertising television radio video content direct mail email mobile push communications SMS and search engine optimization Our marketing expenses have varied from period to period and we expect this trend to continue as we evolve our marketing strategies and employ a disciplined approach to marketing spend We cannot be certain that increases in marketing spend will yield more clients achieve meaningful payback on our investments or be cost effective We may also adjust our marketing strategy or decrease spend within a period if we are not achieving the intended results or if we believe the return on investment is not favorable which may result in faster or slower rates of active client growth in any given period
In addition we seek to attract and retain clients by offering new products services and ways to engage with our platform If such new products or services are not timely or successfully launched or are not successful in attracting new clients our sales may fall short of expectations our brand and reputation could be adversely affected and our results of operations may suffer Developing new offerings requires significant investments of resources and time and if a new offering is not successful or is delayed or not executed well our operating results could be negatively impacted Expansion of our offerings may also strain our management and operational resources which could damage our reputation limit our growth and have an adverse effect on our operating results
We currently source nearly all of our merchandise from third party vendors many of whom use manufacturers in the same geographic region with the majority of manufacturing in China As a result we are subject to price increases or fluctuations inflationary pressures tariffs demand disruptions increased shipping or freight costs or shipping delays in connection with our merchandise Increased shipping or freight costs or shipping and freight delays could be caused or exacerbated by labor disputes shortages or strikes inclement weather fire flood power loss earthquakes public health crises such as a pandemic acts of war or terrorism and periods of high e commerce volume Our operating results have been negatively impacted by increases in the cost of our merchandise and costs may rise further
Recent trade policies and uncertainty related thereto including with respect to tariffs and other restrictions particularly with respect to China in addition to other countries from which we source our merchandise and raw materials have created a dynamic and unpredictable trade landscape which has and may continue to adversely impact our business and operations For example since May 2025 the U S government has imposed significant incremental tariffs on a broad range of goods imported from China including the apparel we source Certain of these tariffs are subject to legal and other challenges the outcome of which could further change the tariff rate including with respect to China Tariffs and international trade arrangements will continue to change potentially without warning and to an extent or duration that is difficult to predict Changing tariff rates and shifting trade policies have created significant uncertainty for vendors consumers and us If tariffs from countries from which we source products are sustained at heightened levels it will further increase our merchandise costs may result in increased prices for our clients and may negatively impact our margins and consumer demand for our products and services any of which could harm our competitive position or otherwise negatively impact our operating results Moreover tariff and other trade related cost pressures and supply chain disruptions may lead to reputational harm if we are unable to deliver our products or services on expected timelines We may not be able to forecast such impacts accurately Further our efforts to mitigate the impacts of tariffs which include diversifying the countries of origin for our inventory are time consuming and costly and may not be effective
Additionally the fabrics used by our vendors are made of raw materials including but not limited to petroleum based products linen and cotton Significant price increases or fluctuations trade policies including tariffs and trade restrictions currency volatility or fluctuation shortages increases in shipping or freight costs or shipping delays of petroleum cotton linen or other raw materials could significantly increase our cost of goods sold or affect our operating results We have also experienced increased costs of goods due to increases in the price of raw materials inflationary pressures rising fuel and other energy costs and currency volatility Any additional price increases will affect our operating results
Other factors such as natural disasters have in the past increased raw material costs impacted pricing with certain of our vendors and caused shipping delays for certain of our merchandise Also the U S government s ban on cotton imported from the Xinjiang region of China the source of a large portion of the world s cotton supply has and may further impact prices and the availability of cotton for our merchandise Additionally our products and materials including potentially non cotton materials could be held for inspection by the United States Customs Border Protection the U S CBP which would cause delays and unexpectedly affect our inventory levels In addition the labor costs to produce our products have and may continue to fluctuate In the event of a significant disruption in the supply of fabrics or raw materials used in the manufacture of the merchandise we offer our vendors might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price Any delays interruption damage to or increased costs in raw materials or the manufacture of the merchandise we offer could result in higher prices to acquire the merchandise or non delivery of merchandise altogether and could adversely affect our operating results
In addition we cannot guarantee that merchandise we receive from vendors will be of sufficient quality or free from damage or that such merchandise will not be damaged during shipping while stored in one of our fulfillment centers or when returned by clients While we take measures to ensure merchandise quality and avoid damage we cannot control merchandise while it is out of our possession We may incur additional expenses and our reputation could be harmed if clients and potential clients believe that our merchandise is not of high quality or may be damaged
Promoting awareness of our service is important to our ability to grow our business drive client engagement and attract new clients At any given time our marketing and advertising efforts may include client referrals social
media marketing keyword search campaigns affiliate programs partnerships campaigns with celebrities and influencers display advertising television radio video content direct mail email mobile push communications SMS and search engine optimization External factors beyond our control including general economic conditions and decreased discretionary consumer spending have impacted and may in the future impact the success of our marketing initiatives or how much we decide to spend on marketing in a given period We adjust our marketing activity from period to period or within a period as we launch new initiatives or offerings run tests or make decisions on marketing investments in response to anticipated rates of return such as when we identify favorable cost per acquisition trends
e have seen increased costs in certain digital marketing channels and our marketing initiatives may become increasingly expensive generating a meaningful return on those initiatives may be difficult Even if we successfully increase revenue as a result of our paid marketing efforts it may not offset the additional marketing expenses we incur
We currently obtain a significant number of visits to our websites via organic search engine results Search engines frequently change the algorithms that determine the ranking and display of results of a user s search which could reduce the number of organic visits to our websites in turn reducing new client acquisition and adversely affecting our operating results Social networks are important as a source of new clients and as a means by which to connect with current clients and their importance may be increasing We may be unable to effectively maintain a presence within these networks which could lead to lower than anticipated brand affinity and awareness and in turn could adversely affect our operating results
Further mobile operating system and web browser providers such as Apple and Google limit the ability of advertisers to collect and use data to target and measure advertising For example Apple requires apps to get a user s opt in permission before tracking a user or sharing the user s data across apps or websites owned by companies other than the app s owner Google has also taken actions to give users the option to accept cookies or not These changes have reduced and will continue to reduce our ability to efficiently target and measure advertising in particular through online social networks making our advertising less cost effective and successful We expect to continue to be impacted by these changes
With respect to our email marketing efforts if we are unable to successfully deliver emails to our clients or if clients do not engage with our emails whether out of choice because those emails are marked as low priority or spam or for other reasons our business could be adversely affected
To ensure timely delivery of merchandise we generally enter into purchase contracts well in advance of a particular season and often before apparel trends are confirmed by client purchases As a result we are vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise purchases We rely on our merchandising team to order styles and products that our clients will purchase and we rely on our data science to recommend which styles to re buy and the depth of those re buy purchases We have not always predicted demand and clients preferences with accuracy which has negatively impacted revenue or resulted in significant write offs when we have sub optimal inventory assortment For instance in the fourth quarter of fiscal 2022 we experienced weaker consumer demand which caused us to have higher inventory levels and increased inventory reserves that affected our financial results
In fiscal 2024 we closed two fulfillment centers as we believe our inventory is better optimized across a smaller network of warehouses and allows us to deliver a better client experience with access to a greater breadth inventory for a given Fix while at the same time operating with lower more cash efficient inventory levels This smaller inventory base and our focus on inventory efficiency creates increased risk related to inventory assortment If we experience sub optimal inventory assortment to meet demand it may affect revenue in current and future quarters If we do not predict client demand accurately do not reorder or write off the right products in a timely manner or otherwise do not effectively manage our inventory we may experience significant inventory write offs or insufficient inventory to meet demand which would adversely affect our operating results
Additionally many of our inventory vendors utilize third parties to provide financing and credit protection that enables them to produce and ship our items While we do not manage the relationships with our vendors and their financial intermediaries the tightening of credit markets as well as our recent operating results have put pressure on some of our vendors ability to secure that financing and credit protection and may continue to do so in the future This may impact our ability to receive inventory and manage our assortment
Our inventory levels also may be affected by product launch delays consumer demand fluctuations due to macroeconomic factors uncertainty or otherwise disruptions in our systems due to upgrades launches or otherwise freight delays vendor relationships capacity constraints and our inability to predict demand with respect to categories or products For example freight delays caused by lockdowns due to COVID 19 port closures port
congestion and shipping container and ship shortages have caused us to experience delays in receiving inventory Freight delays caused by these issues or new issues including labor disruptions or shortages or surges in cargo shipments in response to changing trade policy may affect us in future quarters Also in the past we have experienced challenges managing our inventory within the fulfillment centers given storage capacity constraints and challenges hiring fulfillment center employees Any future such challenges could affect the amount and types of inventory we have available to offer to clients and therefore negatively affect our operating results
We currently receive and distribute merchandise at three fulfillment centers Prior to the closures of our Dallas Texas and Bethlehem Pennsylvania fulfillment centers we operated five fulfillment centers in the United States While we believe three fulfillment centers is the appropriate number to provide the greatest breadth and depth of inventory to our clients and Stylists and will allow us to service the same number of existing clients with lower inventory levels this decreased fulfillment system could cause operational constraints or decreased capacity that could affect our client experience or revenue Additionally we may experience operational issues as we continue to transition to our new fulfillment center model which could affect our client experience and financial results
Severe weather events including earthquakes hurricanes tornadoes floods fires storms extreme winter weather and other adverse weather events and climate conditions could also cause operational constraints or temporarily reduce our ability to ship merchandise to clients For instance the severe winter weather and temperatures experienced in Texas and other parts of the country in February 2021 caused us to temporarily close two of our fulfillment centers and affected the shipping of merchandise in and out of our fulfillment centers Future weather events which we expect to become more frequent and more severe with the increasing effects of climate change could have a significant impact on our operations and results of operations Additionally the impact of such weather events affecting one or more fulfillment centers may be exacerbated due to the fact that we have fewer fulfillment centers to continue operations during such a closure and therefore each individual fulfillment center represents a larger portion of our overall business Moreover following our move to three fulfillment centers each of our Men s and Kids lines are shipped out of one fulfillment center only If a fulfillment center that houses the entirety of one of those lines is forced to close or is damaged it would affect shipments to all of those clients and negatively affect our client experience and operating results Further in response to the COVID 19 pandemic we temporarily closed three of our fulfillment centers and implemented changes that resulted in operational constraints which in turn temporarily reduced our ability to ship merchandise to clients and earn revenue Any future pandemics may negatively affect capacity at our fulfillment centers
We have experienced difficulty hiring and retaining employees in our fulfillment centers which in the past we attributed to COVID 19 concerns and to increased competition and rising wages for eCommerce fulfillment center workers To address this we increased wages in our fulfillment centers and implemented other policies in order to be more competitive in hiring and retaining employees These wage increases impacted our operating results Hiring and retention of employees in our warehouses is a continuing challenge as demand for eCommerce fulfillment center workers remains high We may have to increase wages for our fulfillment center employees or spend money on additional employee recruiting or retention programs which would impact our operating results In the past these hiring difficulties caused capacity constraints in our fulfillment centers and could in the future cause capacity constraints Capacity constraints in our fulfillment centers could affect the amount and types of inventory we have available to offer to clients which will affect our results of operations Any capacity constraints due to hiring difficulties may be exacerbated due to the fact that we have fewer fulfillment centers than we once did If we are unable to adequately staff our fulfillment centers to meet demand or if the cost of such staffing is higher than projected due to competition mandated wage increases regulatory changes or other factors our operating results will be further harmed
In addition operating fulfillment centers comes with potential risks such as workplace safety issues and employment claims for the failure or alleged failure to comply with labor laws or laws respecting union organizing activities Furthermore if we fail to comply or allegedly fail to comply with wage and hour laws for our nonexempt employees many of whom work in our fulfillment centers we could be subject to legal risk including claims for back wages unpaid overtime pay and missed meal and rest periods which could be on a class or representative basis Any such issues may result in delays in shipping times reduced packing quality or costly litigation and our reputation and operating results may be harmed
If we are not able to negotiate acceptable pricing and other terms with our client facing shipping vendors or our freight vendors or our shipping or freight vendors experience performance problems or other difficulties it could negatively impact our operating results and our clients experience In addition our ability to receive inbound inventory efficiently ship merchandise to clients and receive returned merchandise from clients may be negatively affected by inclement weather fire flood power loss earthquakes public health crises labor disputes shortages or strikes acts of war or terrorism periods of high eCommerce volume such as holiday seasons port congestion and similar factors Due to our business model and the fact that we recognize revenue from Fixes when a client checks out items rather than when Fixes are shipped we may be impacted by shipping delays to a greater extent than our competitors Additionally delays in shipping may cause an auto ship client s subsequent Fixes to be scheduled for a later date as their next Fix is not scheduled until their checkout is complete In the second quarter of fiscal 2021 we experienced carrier and client shipping delays due to the COVID 19 pandemic and the increased strain on our shipping partners during the holiday season These delays affected our ability to recognize revenue within the quarter and we may in the future experience these delays and the resulting impact to our financial results including potentially during future holiday seasons In the past strikes at major international shipping ports have impacted our supply of inventory from our vendors and severe weather events have resulted in long delivery delays and Fix cancellations Additionally some of our merchandise may be damaged or lost during transit with our shipping vendors If a greater portion of our merchandise is not delivered in a timely fashion or is damaged or lost during transit it could adversely affect our operating results or could cause our clients to become dissatisfied and cease using our services which would adversely affect our business
Our past revenue growth and profitability should not be considered indicative of our future performance Our revenue decreased by 5 3 in fiscal 2025 compared to fiscal 2024 decreased by 16 0 in fiscal 2024 compared to fiscal 2023 and decreased by 21 1 in fiscal 2023 compared to fiscal 2022 Although our net revenue increased 0 7 year over year in Q3 of fiscal 2025 there is no guarantee that we will return to full year revenue growth or maintain such growth Our revenue may decline in future periods due to a number of factors which may include our inability to attract and retain clients general economic conditions including a recession or decreased discretionary consumer spending decreases in marketing spend a decreased demand for our merchandise and service increased competition decreases in the growth rate of our overall market or our failure to capitalize on growth opportunities
We announced a restructuring plan in June 2022 which we expanded throughout fiscal 2023 fiscal 2024 and fiscal 2025 intended to reduce our future fixed and variable operating costs While we have realized some cost savings from the restructuring plan our efforts may not adequately reduce expenses or impact our results as we anticipate Moreover our expenses may increase particularly as we develop and introduce new merchandise offerings including the re imagination of our client experience need to hire and retain personnel or increase investment in our marketing initiatives We may not always pursue short term profits but are often focused on long term growth which may impact our short term financial results If our revenue does not increase to offset increases in our operating expenses we may not be profitable in future periods
We must continue to implement our operational plans and strategies and improve our infrastructure of people and technology Additionally we expect to continue to introduce new offerings business strategies and initiatives and improve on existing offerings We are in the midst of a transformation to strengthen the foundation of our business and to reimagine the client experience This includes embedding retail best practices across the enterprise identifying operational efficiencies and ensuring we have the right organizational structure in place to enable our future success We are also taking a holistic approach to rethink how our clients engage with Stitch Fix which includes introducing more flexibility into our service through new features This transformation requires investments of time and resources and has included and will continue to include changes in our website branding mobile apps information technology systems and processes We cannot guarantee that we will successfully implement all aspects of our transformation plan in the expected timeframe or at all or that we will achieve or sustain the expected financial and operational results of our transformation plan Additionally if our reimagined client experience new offerings or rebranding does not resonate with current or future clients it could cause us to lose clients and may negatively impact our financial results If we do not realize the expected benefits of these transformation initiatives or experience additional unexpected costs in connection with the transformation our business financial condition results of operations and cash flow could be negatively impacted
Additionally as we continue to implement these changes and introduce future business strategies and initiatives our operations vendor base fulfillment centers information technology systems or internal controls and procedures may not be adequate to support our changing operations Any change or upgrade to our systems to support the increasing complexity of our business involves risk and we may experience problems or delays as we make upgrades or changes to our systems For example in the first quarter of fiscal 2022 we experienced technical issues following a systems upgrade to our procure to pay processes which affected the transmission receipt and reconciliation of purchase orders and payments with many of our apparel and accessory vendors Additionally if the impact of these initiatives is more or less successful than we expected it could affect our inventory management resulting in inventory shortages or excess inventory in the case of significant underperformance If we are unable to manage the transformation and potential growth of our organization effectively or if our strategies do not produce the anticipated results or cause unanticipated issues our business financial condition and operating results may be adversely affected
If we fail to attract and retain key personnel effectively manage succession or hire develop and motivate our employees our business financial condition and operating results could be adversely affected
Our success depends in part on our ability to attract and retain key personnel on our management team and in our merchandising algorithms engineering marketing styling and other organizations We do not currently maintain key person life insurance policies on any member of our senior management team or other key employees
We do not have long term employment or non competition agreements with any of our personnel We have had senior employees leave Stitch Fix including the departure of our Chief Merchandising Officer and Chief Accounting Officer in 2024 and cannot necessarily anticipate when this will happen in the future and whether we will be able to promptly replace such employees Additionally in January 2023 the Company and Elizabeth Spaulding the Company s then current Chief Executive Officer agreed that she would step down from her employment with the Company The Board of Directors appointed Katrina Lake the Company s Founder and Executive Chairperson of the Board of Directors as interim Chief Executive Officer Ms Lake served in that position until Matt Baer joined as Chief Executive Officer in June 2023 Additional changes in our management team and senior leadership could cause retention and morale concerns among current employees as well as operational risks Such risks could impact the Company s ability to effectively implement the Company s strategic plans including our transformation strategy it could disrupt our business affect our Company culture cause employee retention issues and affect our financial condition and operating results Additionally the loss of one or more of our key personnel or the inability to promptly identify a suitable successor to a key role could have an adverse effect on our business
We have experienced and may in the future experience increased employee turnover as a result of the general market conditions and a competitive talent market within the U S as well as Company specific factors such as share price decline business performance and leadership changes We announced a restructuring plan in June 2022 that reduced our workforce and announced a further reduction in force in January 2023
n January 2024 we implemented an organization realignment that resulted in the further elimination of styling leadership and corporate positions as well as moved all of our Stylists into part time positions In October 2024 we implemented an additional organizational realignment which further eliminated certain corporate positions These reductions in workforce and changes in our operations may cause additional attrition and affect employee morale including in our Stylist organization Additionally as we are operating our business with fewer employees we face additional risk that we might not be able to execute on our strategic plans and product roadmap which may have an adverse effect on our business financial condition and operating results
We also face significant competition for personnel particularly in our technology and product organizations To attract top talent we have had to offer and believe we will need to continue to offer competitive compensation and benefits packages before we can validate the productivity of those employees
We cannot be sure that we will be able to attract retain and motivate a sufficient number of qualified personnel in the future or that the compensation costs of doing so will not adversely affect our operating results Additionally we may not be able to hire and train new employees quickly enough to meet our needs If we fail to retain employees and effectively manage our hiring needs our efficiency ability to meet forecasts employee morale productivity and the success of our strategic plans transformation strategy and product roadmap could suffer which may have an adverse effect on our business financial condition and operating results
We believe that maintaining the Stitch Fix brand and reputation is critical to driving client engagement and attracting clients and merchandise vendors Building our brand will depend largely on our ability to continue to provide our clients with an engaging and personalized client experience including valued personal styling services high quality
and appealing merchandise and appropriate price points which we may not do successfully Client complaints or negative publicity about our styling services merchandise delivery times or client support especially on social media platforms could harm our reputation and diminish client use of our services the trust that our clients place in Stitch Fix and vendor confidence in us
Our brand depends in part on effective client support which requires significant personnel expense Failure to manage or train our client support representatives properly or inability to handle client complaints effectively could negatively affect our brand reputation and operating results
As of August 2 2025 approximately 1 710 of our employees were Stylists In January 2024 we moved to a part time only Stylist model and all of our Stylists now work on a part time basis and are paid hourly The Stylists track and report the time they spend working for us These employees are classified as nonexempt under federal and state law If we fail to effectively manage our Stylists including by ensuring accurate tracking and reporting of their hours worked and proper processing of their hourly wages then we may face claims alleging violations of wage and hour employment laws including without limitation claims of back wages unpaid overtime pay and missed meal and rest periods Any such employee litigation could be attempted on a class or representative basis or other form of multi plaintiff litigation For example in August 2020 a representative action under California s Private Attorneys General Act was filed against us alleging various violations of California s wage and hour laws relating to our current and former non exempt Stylist employees While we were able to settle this matter and we no longer employ Stylists in California future litigation concerning our styling employees could be expensive and time consuming regardless of whether the claims against us are valid or whether we are ultimately determined to be liable and could divert management s attention from our business We could also be adversely affected by negative publicity litigation costs resulting from the defense of these claims and the diversion of time and resources from our operations
We offer merchandise from both established and emerging brands In order to continue to attract and retain quality merchandise brands we must be a promising retailer of their products If we do not continue to acquire new merchandise vendors or retain our existing merchandise vendors on acceptable commercial terms we may not be able to maintain a broad selection of products for our clients and our operating results may suffer
In addition our Owned Private Label Brands are sourced from third party vendors and contract manufacturers The loss of one of our Owned Private Label Brand vendors for any reason or our inability to source any additional vendors needed for our Owned Private Label Brands could require us to source Owned Private Label Brands merchandise from another vendor or manufacturer which could cause inventory delays impact our clients experiences and otherwise harm our operating results
Our client metrics are subject to inherent challenges in measurement and real or perceived inaccuracies in such metrics may reduce the perceived usefulness and reliability of the metric and harm our stock price
We track key operating metrics including active clients and net revenue per active client to evaluate our business and for our investors to evaluate our performance While our key operating metrics are based on what we believe to be reasonable calculations there are inherent challenges in measuring such metrics across our large client base and changing product offerings
Our active client metric is calculated at the account level and may not accurately reflect the number of unique individuals using our service For example there may be individuals who create multiple accounts to access our service In addition our family accounts feature allows a client to create accounts for other household members A single individual who accesses our service or on whose behalf our service is accessed through multiple accounts and checks out a Fix or is shipped a Freestyle item from multiple accounts during the relevant period would be counted as multiple active clients
This potential duplication may affect the comparability of our active client metric over time and may also impact our net revenue per active client metric which is based on the number of active clients If investors do not perceive our metrics to be accurate representations of our client base or if we discover material inaccuracies in our metrics our stock price could decline
We have in the past incurred and may in the future incur losses from various types of fraud including theft of merchandise stolen credit card numbers claims that a client did not authorize a purchase merchant fraud and clients who have closed bank accounts or have insufficient funds in open bank accounts to satisfy payments Our clients may re use their login information i e username and password combination across multiple websites and therefore when a third party website experiences a data breach that information could be exposed to bad actors and be used to fraudulently access our clients accounts In addition to the direct costs of such losses if the fraud is related to credit card transactions and becomes excessive it could result in us paying higher fees or losing the right to accept credit cards for payment In addition under current credit card practices we are typically liable for fraudulent credit card transactions Our failure to adequately prevent fraudulent transactions could damage our reputation result in litigation or regulatory action and lead to expenses that could substantially impact our operating results
We lease our Company headquarters in San Francisco and four fulfillment centers The original terms of our leases are between 6 and 12 5 years We currently sub lease a fulfillment center in Salt Lake City Utah to multiple sub tenants We have entered into sub leases for portions of our San Francisco headquarters space and may decide to sub lease additional portions of our San Francisco headquarters and other fulfillment centers If we are unable to sub lease additional space in our Company headquarters or other leased space on favorable terms or at all it will affect our cash flow and may affect our results of operations Additionally if our sub tenants fail to make lease payments or otherwise default on their obligations to us we could incur unanticipated payment obligations which could affect our free cash flow and other results of operations
We accept payments online via credit and debit cards and online payment systems such as PayPal and certain Buy Now Pay Later services such as Affirm Klarna and Afterpay which subject us to certain regulations and fraud We may in the future offer new payment options to clients that would be subject to additional regulations and risks We pay interchange and other fees in connection with credit card payments which may increase over time and adversely affect our operating results While we use a third party to process payments we are subject to payment card association operating rules and certification requirements including the Payment Card Industry Data Security Standard and rules governing electronic funds transfers If we fail to comply with applicable rules and regulations we may be subject to fines or higher transaction fees and may lose our ability to accept online payments or other payment card transactions If any of these events were to occur our business financial condition and operating results could be adversely affected
Our business and operating results are subject to national and global economic conditions and their impact on consumer discretionary spending Some of the factors that may negatively influence consumer spending include high levels of unemployment higher consumer debt levels reductions in net worth and declines in asset values macroeconomic uncertainty increased inflationary pressures recessionary concerns home foreclosures and reductions in home values fluctuating interest rates and credit availability rising fuel and other energy costs rising commodity prices and general uncertainty regarding the overall future political and economic environment We have experienced many of these factors including current inflationary pressures which may be increasing due to tariffs on imports into the U S and have experienced negative impacts on client demand and discretionary spending as a result Consumer purchases of discretionary items including the merchandise that we offer generally decline during recessionary periods or periods of economic uncertainty when disposable income is reduced or when there is a reduction in consumer confidence Furthermore economic conditions in certain regions may also be affected by natural disasters such as hurricanes tropical storms earthquakes and wildfires public health crises and other major unforeseen events
Adverse economic changes could reduce consumer confidence and could thereby negatively affect our operating results In challenging and uncertain economic environments we cannot predict whether or when such circumstances may improve or worsen or what impact such circumstances could have on our business Additionally a volatile and uncertain macroeconomic environment has reduced and may continue to reduce our ability to forecast our future operating results
Trade disputes trade restrictions tariffs and other political tensions between the U S and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures foreign exchange volatility financial market instability and economic recessions or downturns which may negatively impact customer demand for our products or services delay purchases limit expansion opportunities with customers limit our access to capital or otherwise negatively impact our business and operations Ongoing tariff trade restrictions and macroeconomic uncertainty has and may continue to contribute to volatility in our stock price
The retail apparel industry is highly competitive We compete with eCommerce companies that market the same or similar merchandise and services that we offer local national and global retail stores specialty retailers discount chains the online offerings of traditional retail competitors and less traditional online retailers Additionally we experience competition for consumer discretionary spending from other product and experiential categories We believe our ability to compete depends on many factors within and beyond our control including
Many of our current competitors have and potential competitors may have longer operating histories larger fulfillment infrastructures greater technical capabilities faster shipping times lower cost shipping larger databases more purchasing power higher profiles greater financial marketing institutional and other resources and larger customer bases than we do Mergers and acquisitions by these companies may lead to even larger competitors with more resources These factors may allow our competitors to derive greater revenue and profits from their existing customer bases acquire customers at lower costs or respond more quickly than we can to new or emerging technologies such as AI changes in apparel trends and consumer shopping behavior and changes in supply conditions These competitors may engage in more extensive research and development efforts enter or expand their presence in the personalized retail market undertake more far reaching marketing campaigns and adopt more aggressive pricing policies which may allow them to build larger customer bases or generate revenue from their existing customer bases more effectively than we do If we fail to execute on any of the above better than our competitors our operating results may be adversely affected
Natural disasters such as earthquakes hurricanes tornadoes floods fires severe winter weather and other adverse weather events and climate conditions which we expect to become more frequent and more severe with the increasing effects of climate change unforeseen public health crises such as the COVID 19 pandemic or other pandemics and epidemics political crises such as terrorist attacks war and other political instability including the ongoing international conflicts or other catastrophic events whether occurring in the United States or internationally could disrupt our operations or cause us to close one or more of our offices and fulfillment centers or could disrupt delay or otherwise negatively impact the operations of one or more of our third party providers or vendors For instance the severe winter weather and temperatures experienced in Texas and other parts of the country in February 2021 caused us to temporarily close two of our fulfillment centers and affected the shipping of merchandise in and out of fulfillment centers These types of events could impact our merchandise supply chain including our ability to ship merchandise to or receive returned merchandise from clients in the impacted region and
In fact the COVID 19 pandemic disrupted our operations in and caused us to temporarily close our offices and require that most of our employees work from home disrupted our operations in and caused us to close fulfillment centers required us to implement various operational changes to ensure the health and safety of our employees had a range of negative effects on the operations of our third party providers and vendors including our merchandise supply chain and shipping partners and negatively impacted consumer spending and the economy generally due to measures taken to contain the spread of COVID 19 such as government mandated business closures office closures and travel and transportation restrictions We experienced reduced capacity in the third quarter of fiscal 2020 as we temporarily closed three of our fulfillment centers and we implemented additional safety protocols These efforts resulted in significantly less capacity in our fulfillment centers during the third quarter of fiscal 2020 which resulted in delayed Fix shipments a significant Fix backlog delayed inventory and return processing extended wait times for clients and inventory management challenges The COVID 19 pandemic and resulting economic disruption also led to significant volatility in the capital markets Since the COVID 19 pandemic most non fulfillment center employees continue to work in a remote capacity with some in a hybrid of in person and remote work Remote working environments present additional risks uncertainties and costs that could affect our performance including increased operational risk uncertainty regarding office space needs heightened vulnerability to cyber attacks potential reduced productivity changes to our Company culture potential strains to our business continuity plans and increased costs to ensure our offices are safe and functional as hybrid offices that enable effective collaboration of both remote and in person colleagues The COVID 19 pandemic caused many risks as described above and throughout these risk factors to materialize and adversely affected our business and operating results Any future natural disasters pandemics or crises could disrupt our operations or negatively impact consumer spending adversely affecting our business and results of operations
The satisfactory performance reliability integrity and availability of our website mobile application internal applications and technology infrastructure and those of our third party vendors and service providers are critical to our business We rely on our website and mobile application to engage with our clients and sell them merchandise We also rely on a host of internal custom built applications to run critical business functions such as styling merchandise purchasing warehouse operations and order fulfillment In addition we rely on a variety of third party cloud based solution vendors for key elements of our technology infrastructure These systems are vulnerable to damage or interruption and we have experienced interruptions in the past Additionally the launch of new client experiences or offerings requires investments in and the development of new technology which may be more susceptible to performance issues or interruptions Interruptions caused by a variety of events including human error our failure to update or improve our proprietary systems cyber attacks fire flood earthquake power loss or telecommunications failures would disrupt our systems Any failure or interruption of our website mobile application internal business applications or our technology infrastructure including any such issues with our third party vendors and service providers would harm our ability to serve our clients which would adversely affect our business and operating results
In the ordinary course of our business we and our vendors and service providers collect process and store certain personal information and other data relating to individuals such as our clients and employees which may include proprietary confidential and sensitive data including personally identifiable information such as but not limited to name address social security numbers client payment card information client physical attributes photos and client style preferences We rely substantially on commercially available systems software tools and monitoring to provide security for our processing transmission and storage of personal information and other confidential information There can be no assurance that we or our vendors will not suffer a data compromise that malicious actors will not gain access to personal information or other sensitive data including payment card data or confidential business information or that any such data compromise or unauthorized access will be discovered in a timely fashion The techniques used to obtain unauthorized access or to sabotage systems are constantly evolving and can include but are not limited to social engineering attacks including through deep fakes phishing vishing voice phishing and smishing SMS phishing malicious code such as viruses and worms denial of service attacks credential stuffing attacks credential harvesting personnel misconduct or error ransomware attacks
supply chain attacks software bugs server malfunctions software or hardware failures attacks enhanced or facilitated by AI and other similar threats These threats change frequently and generally are not identified until they are launched against a target and we and our vendors may be unable to anticipate these techniques or to implement adequate preventative measures We and many of our vendors and other business partners have moved to a more remote and hybrid work force and as a result we and our partners may be more vulnerable to cyber attacks In addition security measures may be circumvented accidentally or intentionally by our employees contractors vendors or other third parties with whom we do business Such parties may seek to misappropriate such personal information confidential information or other data or may inadvertently release or compromise such data
It may be difficult and or costly to detect investigate mitigate contain and remediate a security incident Our efforts to do so may not be successful Actions taken by us or the third parties with whom we work to detect investigate mitigate contain and remediate a security incident could result in outages data losses and disruptions of our business Threat actors may also gain access to other networks and systems after a compromise of our networks and systems
Compromise of our data security or the data security of third parties with whom we do business failure to prevent or mitigate the loss of personal or business information and delays in detecting or providing prompt notice of any such compromise or loss would likely disrupt our operations damage our reputation and subject us to litigation government action or other additional costs and liabilities that could adversely affect our business financial condition and operating results
We use open source software in the applications we have developed to operate our business and will use open source software in the future Some open source licenses contain express requirements or impose conditions which may be triggered under certain circumstances with respect to the exploitation of proprietary source code or other intellectual property by users of open source software While we employ practices designed to monitor our compliance with the licenses of third party open source software and to avoid using the open source software in a manner that would put our valuable proprietary source code at risk there is a risk that we could have used or may in the future use open source software in a manner which could require us to release our proprietary source code to users of our software or to the public require us to license our proprietary software for purposes of making modifications or derivative works or prohibit us from charging fees for the use of our proprietary software This could result in loss of revenue and allow our competitors to create similar offerings with lower development costs and ultimately could result in a loss of our competitive advantages Furthermore there is an increasing number of open source software license types almost none of which have been tested in a court of law resulting in guidance regarding the proper legal interpretation of such licenses and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our products If we were to receive a claim of non compliance with the terms of any of our open source licenses we may be required to publicly release certain portions of our proprietary source code or expend substantial time and resources to re engineer some or all of our software which may divert resources away from our product development efforts and as a result adversely affect our business In addition we could be required to seek licenses from third parties to continue offering our products for certain uses or cease offering the products associated with such software which may be costly
Further our use of open source software may present greater risks than use of other third party commercial software as open source licensors generally do not provide support warranties indemnification or other contractual protections regarding infringement claims or the quality of the code To the extent that our e commerce capabilities and other business operations depend on the successful and secure operation of open source software any undetected or unremediated vulnerabilities errors or defects in open source software that we use could prevent the deployment or impair the functionality of our systems and injure our reputation In addition the public availability of such software may make it easier for others to compromise our systems Any of these risks could be difficult to eliminate or manage and if not addressed could have an adverse effect on our business and operating results
Currently we are involved in various legal proceedings including the securities litigation and other matters described elsewhere herein We have in the past and may in the future become involved in other private actions collective actions investigations and various other legal proceedings by clients employees suppliers competitors government agencies stockholders or others The results of any such litigation investigations and other legal proceedings are inherently unpredictable and expensive Any claims against us whether meritorious or not could be time consuming result in costly litigation damage our reputation require significant amounts of management time and divert significant resources If any of these legal proceedings were to be determined adversely to us or we were to enter into a settlement arrangement we could be exposed to monetary damages or limits on our ability to operate our business which could have an adverse effect on our business financial condition and operating results
Any failure by us or our vendors to comply with product safety labor or other laws or our standard vendor terms and conditions or to provide safe factory conditions for our or their workers may damage our reputation and brand and harm our business
The merchandise we sell to our clients is subject to regulation by the Federal Consumer Product Safety Commission the Federal Trade Commission and similar state and international regulatory authorities As a result such merchandise could in the future be subject to recalls and other remedial actions Product safety labeling and licensing concerns may result in us voluntarily removing selected merchandise from our inventory Such recalls or voluntary removal of merchandise can result in among other things lost sales diverted resources potential harm to our reputation and increased client service costs and legal expenses which could have a material adverse effect on our operating results
Some of the merchandise we sell including our children s merchandise may expose us to product liability claims and litigation or regulatory action relating to personal injury or environmental or property damage Although we maintain liability insurance we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms or at all In addition some of our agreements with our vendors may not indemnify us from product liability for a particular vendor s merchandise or our vendors may not have sufficient resources or insurance to satisfy their indemnity and defense obligations
We purchase our merchandise from numerous domestic and international vendors Our standard vendor terms and conditions require vendors to comply with applicable laws We have hired independent firms that conduct audits of the working conditions at the factories producing our Owned Private Label Brands products If an audit reveals potential problems we require that the vendor institute corrective action plans to bring the factory into compliance with our standards or we may discontinue our relationship with the vendor The loss of an Owned Private Label Brands vendor due to failure to comply with our standards could cause inventory delays impact our clients experiences and otherwise harm our operating results In addition failure of our vendors to comply with applicable laws and regulations and contractual requirements could lead to litigation against us resulting in increased legal expenses and costs Furthermore the failure of any such vendors to provide safe and humane factory conditions and oversight at their facilities could damage our reputation with clients or result in legal claims against us
Furthermore U S import regulations prohibit the entry of certain goods produced by entities on government created lists or from sanctioned areas including China s Xinjiang Uyghur Autonomous Region the XUAR Although we do not intentionally source any products or materials from the XUAR either directly or indirectly through our suppliers and strive to ensure that our vendors comply with applicable laws we do not have the ability to completely map our product supply chain and we could be subject to penalties fines or sanctions if any of the vendors from which we purchase goods is found to have dealings directly or indirectly with sanctioned entities Even if we were not subject to penalties fines or sanctions if products we source are linked in any way to sanctioned regions or entities our reputation could be damaged
Our use of personal information other personal data and sensitive information subjects us to numerous and evolving privacy and security laws and other obligations such as cybersecurity and data protection in contracts and our compliance with or failure to comply with such obligations could harm our business
We collect and maintain significant amounts of personal information and other data relating to our clients and employees Numerous laws rules and regulations in the United States including the California Consumer Privacy Act the CCPA and California Privacy Rights Acts of 2020 CPRA govern privacy and the collection use and protection of personal information These laws rules and regulations evolve frequently and may be inconsistent from one jurisdiction to another or may be interpreted to conflict with our practices Any significant failure or perceived failure by us or any third parties with which we do business to comply with these laws rules and
regulations or with other obligations to which we may be or become subject would likely result in actions against us by governmental entities private claims and litigation fines penalties or other liabilities Any such action would be expensive to defend damage our reputation and adversely affect our business and operating results
The CCPA as amended by the CPRA collectively CCPA applies to personal information of consumers business representatives and employees who are California residents and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights A number of other states have also passed comprehensive privacy laws and similar laws are being considered in several other states as well as at the federal and local levels These developments further complicate compliance efforts and increase legal risk and compliance costs for us and the third parties upon whom we rely Additionally the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection use dissemination and security of data and the FTC has indicated that use of biometric technologies including facial recognition technologies may be subject to additional scrutiny Further the SEC has adopted new rules that require us to provide greater disclosures around proactive security protections that we employ and regarding security incidents The failure to comply with such requirements would lead to adverse consequences in some circumstances
The costs of compliance with and other burdens imposed by privacy and data security laws and regulations can reduce the efficiency of our marketing lead to negative publicity make it more difficult or more costly to meet expectations of or commitments to clients or lead to significant fines penalties or liabilities for noncompliance any of which could harm our business These laws could also impact our ability to offer our products in certain locations
Additionally under various privacy laws and other obligations we may be required to obtain certain consents to process personal data For example some of our data processing practices have been and may in the future be subject to challenges or lawsuits under data privacy and communications laws including wiretapping laws if we share consumer information with third parties through various methods such as chatbots session replay providers or third party marketing pixels These practices may be subject to increased challenges by class action plaintiffs Our inability or failure to obtain consent for these practices could result in adverse consequences including class action litigation and mass arbitration demands
We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet and eCommerce These regulations and laws may involve taxes privacy and data security consumer protection AI the ability to collect or share necessary information that allows us to conduct business on the internet marketing communications and advertising content protection electronic contracts or gift cards Furthermore the regulatory landscape impacting internet and eCommerce businesses is constantly evolving For example California s Automatic Renewal Law requires companies to adhere to enhanced disclosure requirements when entering into automatically renewing contracts with consumers As a result a wave of consumer class action lawsuits was brought against companies that offer online products and services on a subscription or recurring basis Any failure or perceived failure by us to comply with any of these laws or regulations could result in damage to our reputation lost business and proceedings or actions against us by governmental entities or others which could impact our operating results Furthermore any additional regulations that govern our business including additional automatic renewal laws may be costly to comply with or cause us to have to alter the way we run our business
If the use of cookie tracking technologies is further restricted regulated or blocked or if changes in technology cause cookies to become less reliable or acceptable as a means of tracking consumer behavior the amount or accuracy of internet user information we collect would decrease which could harm our business and operating results
Cookies are small data files that are sent by websites and stored locally on an internet user s computer or mobile device We and third parties who work on our behalf collect data via cookies that are used to track the behavior of visitors to our sites to provide a more personal and interactive experience and to increase the effectiveness of our marketing However internet users can easily disable delete and block cookies directly through browser settings or through other software browser extensions or hardware platforms that physically block cookies from being created and stored
Privacy regulations restrict how we deploy our cookies and this has in the past and could in the future potentially a increase the number of internet users that choose to proactively disable cookies on their systems or b cause our business partners service providers or vendors to no longer maintain their cookie processes We may have to develop alternative systems to determine our clients behavior customize their online experience or efficiently market to them if clients block cookies or regulations introduce additional barriers to collecting cookie data
We rely on trademark copyright trade secrets patents confidentiality agreements and other practices to protect our brands proprietary information technologies and processes Our principal trademark assets include the registered trademarks Stitch Fix and Fix multiple private label clothing and accessory brand names and our logos and taglines Our trademarks are valuable assets that support our brand and consumers perception of our services and merchandise We also hold the rights to the stitchfix com internet domain name and various other related domain names which are subject to internet regulatory bodies and trademark and other related laws of each applicable jurisdiction If we are unable to protect our trademarks or domain names in the United States or in other jurisdictions in which we may ultimately operate our brand recognition and reputation would suffer we would incur significant expense establishing new brands and our operating results would be adversely impacted
The patents we own in the United States and those that may be issued in the future may not provide us with any competitive advantages or may be challenged by third parties and our patent applications may never be granted Even if issued there can be no assurance that these patents will adequately protect our intellectual property or survive a legal challenge as the legal standards relating to the validity enforceability and scope of protection of patent and other intellectual property rights are uncertain Our limited patent protection may restrict our ability to protect our technologies and processes from competition We primarily rely on trade secret laws to protect our technologies and processes including the algorithms we use throughout our business Others may independently develop the same or similar technologies and processes or may improperly acquire and use information about our technologies and processes which may allow them to provide a service similar to ours which could harm our competitive position
We are also at risk of claims by others that we have infringed their copyrights trademarks or patents or improperly used or disclosed their trade secrets The costs of supporting any litigation or disputes related to these claims can be considerable and we cannot assure that we will achieve a favorable outcome of any such claim If any such claims are valid we may be compelled to cease our use of such intellectual property and pay damages which could adversely affect our business Even if such claims are not valid defending them could be expensive and distracting adversely affecting our operating results
A predominant portion of the goods we sell is originally manufactured in countries other than the United States with the majority coming from China Tariffs and other protectionist trade measures could adversely affect our business including disruption and cost increases in our established patterns for sourcing our merchandise and increased uncertainties in planning our sourcing strategies and forecasting our margins Recent trade policies and uncertainty related thereto including with respect to tariffs and other restrictions particularly with respect to China in addition to other countries from which we source our merchandise and raw materials have created a dynamic and unpredictable trade landscape which has and may continue to adversely impact our business and operations For example since May 2025 the U S government has imposed significant incremental tariffs on a broad range of goods imported from China including the apparel we source Certain of these tariffs are subject to legal and other challenges the outcome of which could further change the tariff rate including with respect to China Tariffs and international trade arrangements will continue to change potentially without warning and to an extent or duration that is difficult to predict Changing tariff rates and shifting trade policies have created significant uncertainty for vendors consumers and us If tariffs from countries from which we source products are sustained at heightened levels it will further increase our merchandise costs may result in increased prices for our clients and may negatively impact our margins and consumer demand for our products and services any of which could harm our competitive position or otherwise negatively impact our operating results Moreover tariff and other trade related cost pressures and supply chain disruptions may lead to reputational harm if we are unable to deliver our products or services on expected timelines We may not be able to forecast such impacts accurately Although we continue to work with our vendors to mitigate our exposure to current or potential tariffs there can be no assurance that we will be able to offset any increased costs Other changes in U S tariffs quotas trade relationships or tax provisions could also reduce the supply of goods available to us or increase our cost of goods Although such changes would have implications across the entire industry we may fail to effectively adapt to and manage the adjustments in strategy that would be necessary in response to those changes In addition to the general uncertainty and overall risk from potential changes in U S laws and policies as we make business decisions in the face of such uncertainty we may incorrectly anticipate the outcomes miss out on business opportunities or fail to effectively
adapt our business strategies and manage the adjustments that are necessary in response to those changes These risks could adversely affect our revenues reduce our profitability and negatively impact our business
We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our clients would have to pay for our offering and adversely affect our operating results
While we collect remit and report sales tax in all states that impose a sales tax it is possible that one or more jurisdictions may assert that we are required to collect more taxes and if such an assertion or assertions were successful it could result in substantial tax liabilities including for past sales taxes and penalties and interest which could materially adversely affect our business financial condition and operating results
New income or other tax laws or regulations could be enacted at any time which could adversely affect our business operations and financial performance Further existing tax laws and regulations could be interpreted modified or applied adversely to us For example the Tax Cuts and Jobs Act the Inflation Reduction Act and One Big Beautiful Bill Act enacted many significant changes to the U S tax laws Future guidance from the IRS and other tax authorities with respect to these laws may affect us and certain aspects of these laws could be repealed or modified in the future Further regulatory or legislative developments may also arise We are currently unable to predict whether such changes will occur and if so the ultimate impact on our business To the extent that such changes have a negative impact on us our suppliers or our clients including as a result of related uncertainty these changes may materially and adversely impact our business financial condition results of operations and cash flows
We are subject to income and non income based taxes in the United States under federal state and local jurisdictions The governing tax laws and applicable tax rates vary by jurisdiction and are subject to interpretation Various tax authorities may disagree with tax positions we take and if any such tax authorities were to successfully challenge one or more of our tax positions the results could have a material effect on our operating results Further the ultimate amount of tax payable in a given financial statement period may be materially impacted by sudden or unforeseen changes in tax laws changes in the mix and level of earnings by taxing jurisdictions or changes to existing accounting rules or regulations The determination of our overall provision for income and other taxes is inherently uncertain as it requires significant judgment around complex transactions and calculations As a result fluctuations in our ultimate tax obligations may differ materially from amounts recorded in our financial statements and could adversely affect our business financial condition and operating results in the periods for which such determination is made
As of August 2 2025 we had federal and state net operating loss carryforwards of 161 1 million and 311 7 million respectively The federal net operating loss carryforwards may be carried forward indefinitely but the deductibility of such carryforwards in a taxable year is limited to 80 of such taxable year s taxable income without regard to such carryforwards Of the state net operating loss carryforwards approximately 237 6 million will expire if not utilized in various years through 2045 The remaining state net operating loss carryforwards have no expiration There may be periods during which the use of such carryforwards is suspended or otherwise limited which could accelerate or permanently increase state taxes owed The ability to use our net operating loss carryforwards depends on the availability of future taxable income In addition as of August 2 2025 we had federal and California research and development tax credit carryforwards of 57 3 million and 24 2 million respectively The federal research and development credits will begin to expire in 2038 if not utilized California research and development credits do not have an expiration date
A portion of our tax attributes may be subject to Sections 382 and 383 of the Internal Revenue Code of 1986 as amended and similar state provisions which set limitations on a corporation s ability to use its net operating loss carryforwards and other tax attributes to offset its taxable income or taxes These limitations arise if the corporation undergoes an ownership change which is generally defined as one or more stockholders or groups of stockholders that own at least 5 of the corporation s stock increasing their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three year period It is possible that we may experience ownership changes as a result of shifts in our stock ownership some of which may be outside of our control Any potential limitations on our ability to offset future income with our net operating loss carryforwards or other tax attributes could result in increased future tax liability to us
The market price of our Class A common stock may continue to be volatile or may decline steeply or suddenly regardless of our operating performance and we may not be able to meet investor or analyst expectations You may lose all or part of your investment
any forward looking financial or operating information we may provide including in connection with new offerings or business initiatives where such information is based on early or limited data any changes in this information or our failure to meet expectations based on this information
actions of securities analysts who initiate or maintain coverage of us changes in financial estimates by any securities analysts who follow our Company or our failure to meet these estimates or the expectations of investors
repurchases of our Class A common stock pursuant to our share repurchase program which could also cause our stock price to be higher that it would be in the absence of such a program and could potentially reduce the market liquidity for our stock
whether investors or securities analysts view our stock structure unfavorably particularly our dual class structure and the significant voting control of our directors executive officers and their affiliates
other events or factors including those resulting from war or incidents of terrorism public health crises such as the COVID 19 pandemic adverse weather events and climate conditions or responses to these events
In addition extreme price and volume fluctuations in the stock markets have affected and continue to affect many eCommerce and other technology companies stock prices including ours Often our stock price and that of many eCommerce and technology companies have fluctuated in ways unrelated or disproportionate to the companies operating performance In the past stockholders have filed securities class action litigation following periods of market volatility For example beginning in October 2018 we and certain of our directors and officers were sued in putative class action and derivative lawsuits alleging violations of the federal securities laws for allegedly making materially false and misleading statements On August 26 2022 a class action lawsuit alleging violations of federal securities laws was filed by certain of our stockholders naming as defendants us and certain of our officers and directors for allegedly making materially false and misleading statements regarding our Freestyle offering the Securities Class Action On March 17 2023 June 6 2023 May 24 2024 and July 22 2025 derivative actions were filed by certain of our stockholders against certain of our current and former directors and officers based on similar factual allegations underlying the Securities Class Action We may be the target of additional litigation of this type in the future as well Such securities litigation could subject us to substantial costs divert resources and the attention of management from our business and seriously harm our business
Moreover because of these price fluctuations comparing our operating results on a period to period basis may not be meaningful You should not rely on our past results as an indication of our future performance This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market or if the forecasts we provide to the market are below the expectations of analysts or investors the price of our Class A common stock could decline substantially Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings forecasts that we may provide
We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long term stockholder value Share repurchases could also increase the volatility of the trading price of our stock and could diminish our cash reserves
In January 2022 our Board of Directors authorized a share repurchase program to repurchase up to 150 0 million of our outstanding Class A common stock with no expiration date During fiscal 2024 and fiscal 2025 we did not repurchase any shares of our common stock and we had 120 0 million remaining in share repurchase capacity as of August 2 2025 Although our Board of Directors has authorized this repurchase program the program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares The actual timing and amount of repurchases remain subject to a variety of factors including stock price trading volume market conditions and other general business considerations In addition the terms of our first lien credit agreement with Citibank N A as agent and lender the 2023 Credit Facility impose limitations on our ability to repurchase shares The share repurchase program may be modified suspended or terminated at any time and we cannot guarantee that the program will be fully consummated or that it will enhance long term stockholder value The program could affect the trading price of our stock and increase volatility and any announcement of a termination of this program may result in a decrease in the trading price of our stock In addition this program could diminish our cash and cash equivalents and marketable securities
If our existing stockholders sell or indicate an intention to sell substantial amounts of our Class A common stock in the public market then the trading price of our Class A common stock could decline In addition shares underlying any outstanding options and restricted stock units will become eligible for sale if exercised or settled as applicable and to the extent permitted by the provisions of various vesting agreements and Rule 144 of the Securities Act All the shares of Class A and Class B common stock subject to stock options and restricted stock units outstanding and reserved for issuance under our 2011 Equity Incentive Plan our 2017 Incentive Plan and our 2019 Inducement Plan collectively our Incentive Plans have been registered on Form S 8 under the Securities Act and such shares are eligible for sale in the public markets subject to Rule 144 limitations applicable to affiliates If these additional shares are sold or if it is perceived that they will be sold in the public market the trading price of our Class A common stock could decline
The dual class structure of our common stock concentrates voting control with certain significant shareholders including our current and former directors executive officers and their affiliates and may depress the trading price of our Class A common stock
Our Class B common stock has ten votes per share and our Class A common stock has one vote per share As a result the holders of our Class B common stock including certain of our current and former directors executive officers and their affiliates are able to exercise considerable influence over matters requiring stockholder approval including the election of directors and approval of significant corporate transactions such as a merger or other sale of our company or our assets even if their stock holdings represent less than 50 of the outstanding shares of our capital stock As of September 19 2025 15 877 389 of our 134 110 980 shares outstanding were held by our directors executive officers and their affiliates and 11 197 809 of such shares held by our directors executive officers and their affiliates were shares of Class B common stock This concentration of ownership will limit the ability of other stockholders to influence corporate matters and may cause us to make strategic decisions that could involve risks to you or that may not be aligned with your interests This control may adversely affect the market price of our Class A common stock and some stock indices may not allow public companies utilizing dual or multi class capital structures to be included in their indices
We do not currently intend to pay dividends on our Class A common stock and consequently your ability to achieve a return on your investment will depend on appreciation of the value of our Class A common stock
We have never declared or paid cash dividends on our capital stock We currently intend to retain any future earnings to finance the operation and expansion of our business and we do not expect to pay any cash dividends
on our Class A common stock in the foreseeable future As a result any investment return on our Class A common stock will depend upon increases in the value for our Class A common stock which is not certain
Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger tender offer or proxy contest difficult thereby depressing the trading price of our Class A common stock
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could depress the trading price of our Class A common stock by acting to discourage delay or prevent a change of control of our Company or changes in our management that the stockholders of our Company may deem advantageous These provisions
Any provision of our amended and restated certificate of incorporation or amended and restated bylaws that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our Class A common stock
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States are the exclusive forums for substantially all disputes between us and our stockholders which could limit our stockholders ability to obtain a favorable judicial forum for disputes with us or our directors officers or employees
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law
This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act Furthermore Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions Accordingly both state and federal courts have jurisdiction to entertain such claims To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts among other considerations our amended and restated certificate of incorporation further provides that the federal district courts of the United States are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act While the Delaware courts have determined that such choice of forum provisions are facially valid a stockholder may nevertheless seek to bring a claim in a venue other than those
designated in the exclusive forum provisions In such instance we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions
These exclusive forum provisions may limit a stockholder s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors officers or other employees which may discourage lawsuits against us and our directors officers and other employees If a court were to find either exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action we may incur additional costs associated with resolving the dispute in other jurisdictions which could seriously harm our business
We may issue additional equity securities in the future We also issue awards for Class A common stock to our existing and new employees and others under our Incentive Plans The number of shares subject to such awards is typically based on target dollar values and therefore the number of shares increases as our stock price decreases Future issuances of shares of our Class A common stock or the conversion of a substantial number of shares of our Class B common stock or the perception that these sales or conversions may occur could depress the market price of our Class A common stock and result in dilution to existing holders of our Class A common stock Also to the extent outstanding options to purchase shares of our Class A common stock or Class B common stock are exercised or options or other stock based awards are issued or become vested there will be further dilution The amount of dilution could be substantial depending upon the size of the issuances or exercises and our stock price Furthermore we may issue additional equity securities that could have rights senior to those of our Class A common stock As a result holders of our Class A common stock bear the risk that future issuances of debt or equity securities may reduce the value of our Class A common stock and further dilute their ownership interest
If we are unable to maintain effective internal control over financial reporting investors may lose confidence in the accuracy of our reported financial information and this may lead to a decline in our stock price
We are required to comply with Section 404 of the Sarbanes Oxley Act of 2002 the Sarbanes Oxley Act Specifically the Sarbanes Oxley Act requires management to assess the effectiveness of our internal controls over financial reporting and to report any material weaknesses in such internal control We have experienced material weaknesses and significant deficiencies in our internal controls previously Management has concluded that our internal control over financial reporting was effective as of August 2 2025 However our testing or the subsequent testing by our independent public accounting firm may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses If we or our accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses it could harm our operating results adversely affect our reputation or result in inaccurate financial reporting Furthermore should any such deficiencies arise we could be subject to lawsuits sanctions or investigations by regulatory authorities including SEC enforcement actions and we could be required to restate our financial results any of which would require additional financial and management resources
Even if we do not detect deficiencies our internal control over financial reporting will not prevent or detect all errors and fraud and individuals including employees and contractors could circumvent such controls Because of the inherent limitations in all control systems no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected
In addition we may encounter difficulties in the timely and accurate reporting of our financial results which would impact our ability to provide our investors with information in a timely manner Should we encounter such difficulties our investors could lose confidence in the reliability of our reported financial information and trading price of our Class A common stock could be negatively impacted
We require sufficient cash and liquidity to run our business finance our operations and pay for capital expenditures We may not be able to generate sufficient cash to fund our working capital and capital expenditures needs We also may require additional funds to support growth or respond to business challenges We are party to a credit
agreement with Citibank N A but a deterioration in our capital structure or the quality of our earnings could result in noncompliance with our debt covenants which would limit our ability to utilize our credit facility
We also may want or need to engage in equity or debt financings to secure additional funds The capital market environment including market disruptions limited liquidity or interest rate fluctuations may increase the cost of financing or restrict access to a potential source of liquidity Additionally if we raise additional funds through further issuances of equity or convertible debt securities our existing stockholders could suffer significant dilution and any new equity securities we issue could have rights preferences and privileges superior to those of holders of our Class A common stock
Our 2023 Credit Facility also contains covenants limiting our ability to among other things dispose of assets undergo a change in control merge or consolidate make acquisitions incur debt incur liens pay dividends repurchase stock and make investments in each case subject to certain exceptions and contains financial covenants requiring us to maintain a minimum liquidity level and a minimum total consolidated fixed charge coverage Ratio above specified levels measured in each case at the end of each fiscal quarter The restrictive covenants of this or any future debt financing secured may make it more difficult for us to obtain capital and to pursue business opportunities Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters which may make it more difficult for us to obtain additional capital and to pursue business opportunities In addition we may not be able to obtain additional financing on terms favorable to us if at all If we are unable to generate sufficient capital or obtain adequate financing or financing on terms satisfactory to us when we require it our ability to continue to support our business and to respond to business challenges could be significantly limited and our business and prospects could fail or be adversely affected
If securities or industry analysts either do not publish research about us or publish inaccurate or unfavorable research about us our business or our market or if they change their recommendations regarding our Class A common stock adversely the trading price or trading volume of our Class A common stock could decline
The trading market for our Class A common stock is influenced in part by the research and reports that securities or industry analysts may publish about us our business our market or our competitors If one or more of the analysts initiate research with an unfavorable rating or downgrade our Class A common stock provide a more favorable recommendation about our competitors or publish inaccurate or unfavorable research about our business our Class A common stock price would likely decline If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us we could lose visibility in the financial markets which in turn could cause the trading price or trading volume of our Class A common stock to decline
At Stitch Fix we recognize the importance of robust cybersecurity measures to protect our systems data and the interests of our stakeholders We have implemented a comprehensive cybersecurity risk management strategy and governance framework to identify assess manage mitigate and respond to cybersecurity risks and threats Our risk management strategy and governance framework is designed to identify assess and manage material risks from cybersecurity threats to our systems networks and data infrastructure including intellectual property customer data and data that is proprietary strategic or competitive in nature Information Systems and Data
We use third party service providers to assist us from time to time to identify assess and manage risks from cybersecurity threats which may include professional services firms such as legal counsel threat intelligence service providers cybersecurity consultants cybersecurity software providers penetration testing firms dark web monitoring services and forensic investigators
Stitch Fix views its cybersecurity strategy through a multi pronged lens encompassing prevention detection and response to ensure holistic coverage of our Information Systems and Data along with the environments in which they operate
Our cybersecurity program starts with prevention which includes risk assessment and identification We utilize that information to design a layer of controls as a baseline We conduct assessments to identify and evaluate potential cybersecurity risks This process involves analyzing our Information Systems and Data to identify vulnerabilities and potential threats Our cybersecurity program also includes third party risk management in which we oversee the identification and mitigation of risk associated with outsourcing to third party vendors and service providers particularly focused on vendors who process sensitive information
In addition to our risk assessment processes we prioritize cybersecurity awareness and training programs for our employees These initiatives are designed to educate our workforce about potential threats best practices for data protection and the importance of maintaining security measures We train our employees through annual security training phishing simulations and communications about cybersecurity topics and threats
Our cybersecurity program includes tools and processes designed to detect unusual network activity anomalous cybersecurity events and breaches We utilize a variety of preventative measures and detective tools
We have developed an incident response plan to ensure a swift and effective response in the event of a cybersecurity incident This plan includes predefined roles and responsibilities communication protocols and steps to contain and remediate any vulnerabilities that may lead to a breach
Our Chief Information Security Officer CISO oversees the Company s cybersecurity program Our CISO who reports to our Chief Product and Technology Officer CPTO has over 20 years of experience in information technology risk and cybersecurity leadership and has previously held both CISO and Chief Technology Officer roles Our CISO chairs the Company s Cybersecurity Governance Committee comprised of executive leaders across Legal Finance and Corporate Communications that has oversight responsibilities regarding the Company s information security functions including infrastructure governance privacy and compliance
Our CISO is responsible for hiring appropriate personnel helping to integrate cybersecurity risk considerations into the Company s overall risk management strategy and communicating key priorities to relevant personnel The Information Security Team conducts exercises to prepare for cybersecurity incidents approves cybersecurity processes and reviews security assessments and other security related reports
Our cybersecurity incident response processes include the escalation of information about certain cybersecurity incidents depending on the circumstances to our CISO members of management and the Audit Committee of the Board of Directors
The Audit Committee provides oversight for our cybersecurity program and our enterprise risk management process The Audit Committee also evaluates enterprise level risks and strategies including our cybersecurity risk The Audit Committee receives updates from management on the effectiveness of our cybersecurity program The Audit Committee also reviews plans on how management will enhance the program receives updates on special topics that help the Committee provide effective oversight of the program and is notified in the event of certain cybersecurity incidents
Although we have not experienced a material cybersecurity breach we cannot guarantee that we will not experience a material cyber threat or incident in the future For more information regarding the cybersecurity risks we face see Item 1A Risk Factors in this Annual Report
Our principal physical properties are located in the United States In San Francisco California we lease approximately 134 000 square feet of space of which approximately 38 000 square feet is utilized for our corporate headquarters Furthermore given our more distributed workforce and our reduction in headcount as part of our restructuring we currently sublease approximately 38 000 square feet of our San Francisco space and are actively marketing the remaining 58 000 square feet for sublease
We also currently lease and operate three fulfillment centers in the United States We currently utilize a total of approximately 2 514 000 square feet at which we receive merchandise from vendors ship products to clients and receive and process returns from clients These facilities are located in Arizona Indiana and Georgia In addition we currently sublease to subtenants approximately 1 012 000 square feet of space at our former Salt Lake City Utah fulfillment center
The information contained in Note 8 Commitments and Contingencies under the heading Contingencies within the Notes to the Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K is incorporated herein by reference
Our Class A common stock par value 0 00002 per share is listed on the Nasdaq Global Select Market under the symbol SFIX and began trading on November 17 2017 Prior to that date there was no public trading market for our Class A common stock There is no public trading market for our Class B common stock par value 0 00002 per share
As of the close of business on September 19 2025 there were 37 stockholders of record of our Class A common stock and 10 stockholders of record of our Class B common stock The actual number of holders of our Class A and Class B common stock is greater than the number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers or other nominees The number of holders of record presented here also does not include stockholders whose shares may be held in trust by other entities
We have never declared or paid cash dividends on our capital stock We currently intend to retain all available funds and future earnings if any to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future Any future determination regarding the declaration and payment of dividends if any will be at the discretion of our Board of Directors and will depend on then existing conditions including our financial condition operating results contractual restrictions capital requirements business prospects and other factors our board of directors may deem relevant
The following graph compares the cumulative total return to stockholders on our Class A common stock relative to the cumulative total returns of the Standard and Poor s Retail Select Industry Index S P Retail Select Industry and Nasdaq Composite Index Nasdaq Composite An investment of 100 with reinvestment of all dividends is assumed to have been made in our Class A common stock and in each index on July 31 2020 and its relative performance is tracked through August 2 2025 The comparisons are based on historical data and are not indicative of nor intended to forecast the future performance of our Class A common stock
The information under Cumulative Stock Performance Graph is not deemed to be soliciting material or filed with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act and is not to be incorporated by reference in any filing of Stitch Fix under the Securities Act or the Exchange Act whether made before or after the date of this Annual Report and irrespective of any general incorporation language in those filings
In January 2022 our Board of Directors authorized a share repurchase program to repurchase up to 150 0 million of our outstanding Class A common stock with no expiration date the 2022 Repurchase Program We may repurchase shares from time to time through open market repurchases privately negotiated transactions or other means including through Rule 10b5 1 trading plans The actual timing number and value of shares repurchased in the future will be determined by the Company in its discretion and will depend on a number of factors including price trading volume market conditions and other general business conditions During fiscal 2025 we did not repurchase any shares of our common stock and we had 120 0 million remaining in share repurchase capacity as of August 2 2025
You should read the following discussion and analysis of our financial condition and results of operations together with Special Note Regarding Forward Looking Statements Risk Factors included under Part I Item 1A and our consolidated financial statements and related notes thereto included in Part II Item 8 of this Annual Report on Form 10 K Annual Report
We use a 52 or 53 week fiscal year with our fiscal year ending on the Saturday that is closest to July 31 of that year The fiscal year ending August 2 2025 fiscal 2025 and July 29 2023 fiscal 2023 consisted of 52 weeks and the fiscal year ended August 3 2024 fiscal 2024 consisted of 53 weeks Throughout this Annual Report all references to quarters and years are to our fiscal quarters and fiscal years unless otherwise noted
In addition refer to our discussion and analysis of our financial condition and results of operations from fiscal 2024 to fiscal 2023 in Part II Item 7 in our Annual Report on Form 10 K for the fiscal year ended August 3 2024 filed with the Securities and Exchange Commission on September 25 2024
In 2011 Stitch Fix introduced an innovative approach to shopping for clothing and accessories We were inspired by the opportunity to create a client first styling experience offering an alternative to impersonal time consuming and inconvenient traditional shopping Clients primarily engage with us by 1 receiving a curated shipment of items informed by our algorithms and chosen by a Stitch Fix Stylist a Fix or 2 purchasing directly from our website or mobile app based on an individualized assortment of outfit and item recommendations Freestyle For the Fix experience clients choose to schedule regular shipments or order a Fix on demand Then after receiving a Fix they can purchase the items they want to keep and return the other items if any
During the first quarter of fiscal 2024 we ceased operations of our UK business and the accounting requirements for reporting the UK business as a discontinued operation were met Accordingly any discussion of historical information in Management s Discussion and Analysis below reflects the results of the UK business as a discontinued operation and amounts and disclosures below relate to the Company s continuing operations for all periods presented unless otherwise noted Refer to Note 15 Discontinued Operations within the Notes to the Consolidated Financial Statements included in Part II Item 8 of this Annual Report for further details
For fiscal 2025 we reported 1 3 billion in revenue net representing a year over year decrease of 5 3 compared to fiscal 2024 As of August 2 2025 and August 3 2024 we had approximately 2 309 000 and 2 508 000 active clients respectively representing a year over year decline of 7 9
During fiscal 2025 we experienced a decline in net revenue year over year primarily due to our challenges in acquiring and retaining active clients In fiscal 2026 we expect broader macroeconomic uncertainty and market conditions to negatively impact consumer discretionary spending and we will enter the fiscal year with fewer active clients than the start of fiscal 2025 However we project that positive trends in average order values and the number of items kept per Fix will offset the negative impact of those active client losses on net revenue in fiscal 2026 We remain focused on retaining current clients attracting new clients improving the conversion of new visitors to our site and app and enhancing our overall client experience for new and existing clients
During fiscal 2025 in furtherance of and as an expansion of the restructuring plan announced in June 2022 the 2022 Restructuring Plan we recorded 1 2 million of additional restructuring charges As of August 2 2025 we do not expect any additional cash restructuring charges related to the 2022 Restructuring Plan
We are continuing to evaluate other fixed and variable operating costs including further rationalizing our real estate footprint and continuing to optimize and be disciplined in our marketing strategy to better position ourselves for profitability However our future results of operations will depend on our ability to successfully navigate current business challenges and the overall macroeconomic environment
We report our financial results in accordance with generally accepted accounting principles in the United States GAAP However management believes that certain non GAAP financial measures provide users of our financial information with additional useful information in evaluating our performance We believe that adjusted EBITDA from continuing operations Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies and that this supplemental measure facilitates comparisons between continuing operations of companies We believe free cash flow from continuing operations Free Cash Flow is an important metric because it represents a measure of how much cash from continuing operations we have available for discretionary and non discretionary items after the deduction of capital expenditures These non GAAP financial measures may be different than similarly titled measures used by other companies
Our non GAAP financial measures should not be considered in isolation from or as substitutes for financial information prepared in accordance with GAAP There are several limitations related to the use of our non GAAP financial measures as compared to the closest comparable GAAP measures Some of these limitations include
Adjusted EBITDA excludes the recurring non cash expenses of depreciation and amortization of property and equipment and although these are non cash expenses the assets being depreciated and amortized may have to be replaced in the future
Adjusted EBITDA excludes the non cash expense of stock based compensation which has been and will continue to be for the foreseeable future an important part of how we attract and retain our employees and a significant recurring expense in our business
Adjusted EBITDA excludes costs incurred related to discrete restructuring plans and other one time costs attributable to our continuing operations that are fundamentally different in strategic nature and frequency from ongoing initiatives We believe exclusion of these items facilitates a more consistent comparison of operating performance over time however these costs do include cash outflows
We define Adjusted EBITDA as net loss from continuing operations excluding interest income other income expense net provision for income taxes depreciation and amortization stock based compensation expense restructuring and other one time costs and non ordinary course legal fees related to our continuing operations The following table presents a reconciliation of net loss from continuing operations the most comparable GAAP financial measure to Adjusted EBITDA for each of the periods presented
Restructuring and other one time costs includes restructuring charges as described in Note 14 Restructuring in the Notes to the Consolidated Financial Statements in Part II Item 8 Fiscal 2025 includes 2 0 million in one time bonuses for certain continuing employees Fiscal 2024 consists of 6 7 million in one time professional services fees
Non ordinary course legal fees for fiscal 2025 include costs related to a specific class action lawsuit We estimate we will incur approximately 4 2 million in non ordinary course legal fees in fiscal 2026 related to said class action lawsuit Refer to Note 8 Commitments and Contingencies in the Notes to the Consolidated Financial Statements in Part II Item 8
We define Free Cash Flow as cash flows provided by operating activities from continuing operations reduced by purchases of property and equipment that are included in cash flows from investing activities from continuing operations The following table presents a reconciliation of net cash flows used in operating activities from continuing operations the most comparable GAAP financial measure to Free Cash Flow for each of the periods presented
We believe that the number of active clients is a key indicator of the overall health of our business We define an active client as a client who checked out a Fix or was shipped an item via Freestyle in the preceding 52 weeks measured as of the last day of that period Clients check out a Fix when they indicate what items they are keeping
through our mobile application or on our website We consider each Women s Men s or Kids account as a client even if they share the same household A single person could have multiple accounts and count as multiple active clients We had approximately 2 309 000 and 2 508 000 active clients as of August 2 2025 and August 3 2024 respectively representing a year over year decrease of 7 9 The decrease in active clients is due to dormant clients outpacing client additions during the year which we largely attribute to client conversion and retention challenges
We believe that net revenue per active client is an indicator of client engagement and satisfaction We calculate net revenue per active client based on net revenue over the preceding four fiscal quarters divided by the number of active clients measured as of the last day of the period Net revenue per active client was 549 and 533 as of August 2 2025 and August 3 2024 respectively or a year over year increase of 3 0
Our business and operating results are subject to national and global economic conditions and their impact on consumer discretionary spending As the macroeconomic environment is experiencing inflation recessionary concerns and general uncertainty regarding trade policies including tariffs and other restrictions and the overall future political and economic environment we cannot predict whether or when such circumstances may improve or worsen However we anticipate that broader macroeconomic uncertainty and market conditions will put increased pressure on consumer discretionary spending in fiscal 2026 which may negatively impact our business
We leverage our data science to buy and manage our inventory including merchandise assortment and fulfillment center optimization Because our merchandise assortment directly correlates to client success we may at times optimize our inventory to prioritize long term client success over short term gross margin impact To ensure sufficient availability of merchandise we generally enter into purchase orders well in advance and frequently before apparel trends are confirmed by client purchases As a result we are vulnerable to demand and pricing shifts including due to tariffs and availability of merchandise at the time of purchase We incur inventory write offs and changes in inventory reserves that impact our gross margins Moreover our inventory investments will fluctuate with the needs of our business
To grow our business we must continue to acquire clients and successfully engage and retain them Our marketing strategy aims to preserve liquidity and achieve profitability while simultaneously attracting long term clients to fuel a return to growth We utilize both digital and offline channels to attract new visitors to our website or mobile app and subsequently convert them into clients Our marketing costs are largely composed of advertising client referrals and public relations expenses At any given time our advertising efforts may include social media marketing keyword search campaigns affiliate programs partnerships campaigns with celebrities and influencers display advertising television radio video content direct mail email mobile push communications SMS and search engine optimization Our marketing expenses have varied from period to period and we expect this trend to continue
Marketing expense is recorded in selling general and administrative expenses in the consolidated statements of operations and comprehensive loss The largest component of our marketing expense is advertising which was 117 3 million and 111 4 million for fiscal 2025 and fiscal 2024 We will continue to be methodical about our approach when we are making advertising decisions and may adjust our spending up or down based on performance
We intend to leverage our data science and deep understanding of our clients needs to make targeted investments in technology and product including continued integration of AI into internal business processes and client facing experiences
We offer apparel shoes and accessories across categories brands product types and price points We currently serve our clients in the following categories Women s Petite Maternity Men s Plus and Kids We carry a mix of third party branded merchandise including premium brands and our own Owned Private Label Brands We also
offer a wide variety of product types including denim dresses blouses skirts shoes jewelry and handbags We sell merchandise across a broad range of price points and may further broaden our price point offerings in the future
Historically changes in our merchandise mix have not caused significant fluctuations in our gross margin however categories brands product types and price points do have a range of margin profiles For example our Owned Private Label Brands have generally contributed higher margins than our third party brands which have generally contributed lower margins We continue to evolve our merchandise mix to improve the client experience and attract new active clients Shifts in merchandise mix will result in fluctuations in our gross margin from period to period
We generate revenue from the sale of merchandise through our Fix and Freestyle offerings With our Fix offering we charge a nonrefundable upfront fee referred to as a styling fee that is credited towards any merchandise purchased We offer Style Pass to provide select U S clients with an alternative to paying a styling fee per Fix Style Pass clients pay a nonrefundable annual fee for unlimited styling that is credited towards merchandise purchases We deduct discounts sales tax and estimated refunds to arrive at net revenue which we refer to as revenue throughout this Annual Report We also recognize revenue resulting from estimated breakage income on gift cards
Cost of goods sold consists of the costs of merchandise expenses for inbound freight and shipping to and from clients inventory write offs and changes in our inventory reserve payment processing fees and packaging materials costs offset by the recoverable cost of merchandise estimated to be returned We expect our cost of goods sold to increase in fiscal 2026 if tariffs are sustained at heightened levels We also expect fluctuations in our cost of goods sold as a percentage of revenue primarily due to how we manage our inventory and merchandise mix Our classification of cost of goods sold may vary from other companies in our industry and may not be comparable
Selling general and administrative expenses SG A consist primarily of compensation and benefits costs including stock based compensation expense for our employees including our Stylists fulfillment center operations data analytics merchandising engineering marketing client experience and corporate personnel SG A also includes marketing and advertising costs third party logistics costs facility costs for our fulfillment centers and office professional service fees information technology costs and depreciation and amortization expense As a result of our restructuring and cost reduction actions from fiscal 2022 through fiscal 2025 we expect SG A as a percentage of revenue in fiscal 2026 to continue to decrease as compared to fiscal 2025 Our classification of certain components within SG A may vary from other companies in our industry and may not be comparable
Our provision for income taxes from continuing operations consists of an estimate of federal and state income taxes based on enacted federal and state tax rates as adjusted for allowable credits deductions uncertain tax positions and changes in the valuation of our net federal and state deferred tax assets
Revenue in fiscal 2025 decreased by 70 3 million or 5 3 compared to fiscal 2024 which included a 21 6 million impact of an extra week Excluding the impact of an extra week revenue in fiscal 2025 decreased by 48 7 million or 3 7 compared to fiscal 2024 The decline in revenue was primarily attributable to a 7 9 decrease in active clients from August 3 2024 to August 2 2025 which led to a decrease in sales of merchandise Partially offsetting the revenue decline was an improvement in net revenue per active client which was driven by higher average order values with the number of items kept by our clients per Fix increasing and higher average unit retail prices
Gross margin for fiscal 2025 increased by 10 basis points compared to the prior year period The increase was primarily driven by higher average order values and transportation leverage due to improvements in carrier mix and rate negotiations with key carriers that offset some of the impact of rising shipping costs partially offset by lower product margins
SG A in fiscal 2025 decreased by 123 6 million compared to fiscal 2024 The decrease was primarily driven by lower compensation and benefits expense including lower stock based compensation expense lower facilities costs and lower depreciation and amortization expense largely driven by our restructuring actions partially offset by higher advertising spend
SG A as a percentage of revenue decreased to 47 5 for fiscal 2025 compared to 54 2 for fiscal 2024 The decrease was primarily driven by lower compensation and benefits expense including lower stock based
compensation expense lower facilities costs and lower depreciation and amortization expense largely driven by our restructuring actions as a percentage of revenue partially offset by higher advertising spend as a percentage of revenue
Our provision for income taxes increased in fiscal 2025 as compared to fiscal 2024 primarily due to a decrease in pretax losses partially offset by a decrease in the reversal of stock based compensation expenses
Our principal sources of liquidity are our cash cash equivalents investments cash flows from continuing operations and borrowing capacity under our credit facility As of August 2 2025 we had 114 0 million of cash and cash equivalents attributable to continuing operations and 128 8 million of investments As of August 2 2025 we had repatriated our remaining cash held outside of the U S in the UK
On December 4 2023 we entered into a first lien credit agreement with Citibank N A as agent and lender which provides for a 50 0 million revolving credit facility maturing on December 4 2026 the 2023 Credit Facility The 2023 Credit Facility includes a sub facility that provides for the issuance of letters of credit in an amount of up to 30 0 million Availability of the 2023 Credit Facility is based upon a borrowing base formula and periodic borrowing base certifications valuing certain of our accounts receivable credit card receivables and inventory as reduced by certain reserves if any Our borrowing availability based on balances as of August 2 2025 was 50 0 million and our excess availability was 31 3 million as a result of outstanding letters of credit and no outstanding borrowing
We believe our existing cash cash equivalents investment balances and the borrowing available under our 2023 Credit Facility if needed will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months and beyond
In January 2022 our Board of Directors authorized a share repurchase program to repurchase up to 150 0 million of our outstanding Class A common stock with no expiration date the 2022 Repurchase Program We may repurchase shares from time to time through open market repurchases privately negotiated transactions or other means including through Rule 10b5 1 trading plans The actual timing number and value of shares repurchased in the future will be determined by the Company in its discretion and will depend on a number of factors including price trading volume market conditions and other general business conditions Repurchases will be funded from the Company s existing cash and cash equivalents or future cash flow The repurchase program may be modified suspended or terminated at any time During fiscal 2025 and fiscal 2024 the Company made no repurchases of Class A common stock As of August 2 2025 the Company had repurchased an aggregate 2 302 141 shares of Class A common stock for 30 0 million and 120 0 million remained available under the 2022 Repurchase Program authorization
During fiscal 2025 cash provided by operating activities from continuing operations was 25 6 million which consisted of a net loss from continuing operations of 28 8 million adjusted by non cash charges of 87 2 million and change in net operating assets and liabilities of 32 8 million The non cash charges were primarily driven by 56 7 million of stock based compensation expense and 26 1 million of depreciation amortization and accretion The change in net operating assets and liabilities was primarily due to a 24 8 million increase in gross inventory balances due to higher inventory receipts
During the fiscal 2024 cash provided by operating activities from continuing operations was 28 2 million which consisted of a net loss from continuing operations of 118 9 million adjusted by non cash charges of 124 6 million and a 22 5 million change in net operating assets and liabilities The non cash charges were primarily driven by 76 8 million of stock based compensation expense and 44 5 million of depreciation amortization and accretion 19 3 million of asset impairment partially offset by 15 1 million of changes in inventory reserves The change in net operating assets and liabilities was primarily due to a 47 7 million change in gross inventory balances due to a decline in inventory receipts to bring inventory balances in line with current demand
During fiscal 2025 cash used in investing activities from continuing operations was 59 1 million This was due to purchases of securities available for sale of 197 9 million and purchases of property and equipment of 16 3 million partially offset by sales and maturities of available for sale securities of 155 1 million
During the fiscal 2024 cash used in investing activities from continuing operations was 78 7 million This was primarily due to purchases of securities available for sale of 97 3 million and purchases of property and equipment of 14 0 million partially offset by the maturities of available for sale securities of 32 2 million
During fiscal 2025 cash used in financing activities from continuing operations was 15 0 million primarily due to payments for tax withholding related to vesting of restricted stock units of 16 0 million
During the fiscal 2024 cash used in financing activities from continuing operations was 15 5 million primarily due to payments for tax withholding related to vesting of restricted stock units of 16 1 million partially offset by proceeds from the exercise of stock options of 1 0 million
Our most significant contractual obligations relate to purchase commitments of inventory and operating lease obligations related to our fulfillment centers and corporate office As of August 2 2025 we had remaining commitments of 138 4 million for inventory purchases predominantly due within one year and 63 7 million for other service agreements due over the next one to three years
For information on our contractual obligations for operating leases and other obligations refer to Note 4 Leases and Note 8 Commitments and Contingencies respectively within the Notes to the Consolidated Financial Statements included in Part II Item 8 Financial Statements and Supplementary Data of this Annual Report
Our consolidated financial statements have been prepared in accordance with GAAP The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets liabilities revenues and expenses and the related disclosures We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances Actual results may differ from these estimates under different assumptions or conditions
Inventory net consists of finished goods which are recorded at the lower of cost or net realizable value using the first in first out FIFO method We establish a reserve for excess and slow moving inventory we expect to write off or sell below cost as liquidations based on historical trends which considers factors such as the age of the inventory and sell through rate for a particular item In addition we estimate and accrue shrinkage as a percentage of inventory out to the client and also accrue for damaged items and items we intend to liquidate Estimates are made to reduce the inventory value for lost stolen damaged or liquidated items to net realizable value If actual experience differs significantly from our estimates due to changes in client merchandise preferences client demand or economic conditions additional inventory write downs may be required which could adversely affect our operating results A 10 change in our inventory reserves estimate as of August 2 2025 would result in a change in reserves of approximately 2 8 million
We record stock based compensation expense net of estimated forfeitures so that expense is recorded for only the stock options that we expect to vest We estimate forfeitures based on our historical forfeiture of stock options We will revise our estimated forfeiture rate if actual forfeitures differ materially from our initial estimates
We will continue to use judgment in evaluating assumptions related to our stock based compensation expense As we continue to accumulate data related to our common stock we may have refinements to our estimates and assumptions which could impact our future stock based compensation expense
Revenue is recognized net of sales taxes discounts and estimated refunds We record a refund reserve based on our historical refund patterns The impact of our refund reserve on our operating results may fluctuate based on changes in client refund activity over time
We also sell gift cards to clients and establish a liability based on the face value of such gift cards If a gift card is not used we will recognize estimated gift card breakage revenue proportionately to customer usage of gift cards over the expected gift card usage period subject to requirements to remit balances to governmental agencies
For recent accounting pronouncements refer to Note 2 Significant Accounting Policies within the Notes to the Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10 K
Our cash equivalents and investments in available for sale securities are exposed to market risk due to fluctuations in interest rates which may affect our interest income and the fair market value of our investments However due to the short term nature of the majority of our investment portfolio as of August 2 2025 we do not believe an immediate 10 increase or decrease in interest rates would have a material effect on the fair market value of our portfolio As such we do not expect a sudden change in market interest rates would have a material impact on our consolidated financial results
Our costs are subject to inflationary pressures which we expect to continue and if those pressures become significant we may not be able to fully offset such higher costs through price increases Our inability or failure to do so could harm our business financial condition and results of operations The primary inflationary factors affecting our business are merchandise costs shipping and freight costs and labor costs Additionally although difficult to quantify we believe inflation is having an adverse effect on our clients discretionary spending habits which has impacted and may continue to impact net revenue
We have audited the accompanying consolidated balance sheets of Stitch Fix Inc and subsidiaries the Company as of August 2 2025 and August 3 2024 the related consolidated statements of operations and comprehensive loss stockholders equity and cash flow for each of the fiscal years ended August 2 2025 August 3 2024 and July 29 2023 and the related notes collectively referred to as the financial statements We also have audited the Company s internal control over financial reporting as of August 2 2025 based on criteria established in
In our opinion the financial statements referred to above present fairly in all material respects the financial position of the Company as of August 2 2025 and August 3 2024 and the results of its operations and its cash flows for each of the fiscal years ended August 2 2025 August 3 2024 and July 29 2023 in conformity with accounting principles generally accepted in the United States of America Also in our opinion the Company maintained in all material respects effective internal control over financial reporting as of August 2 2025 based on criteria established in
The Company s management is responsible for these financial statements for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on these financial statements and an opinion on the Company s internal control over financial reporting based on our audits We are a public accounting firm registered with the Public Company Accounting Oversight Board United States PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures to respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audits also included performing such other procedures as we considered necessary in the circumstances We believe that our audits provide a reasonable basis for our opinions
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
The Company establishes inventory reserves to record its inventory at the lower of cost or net realizable value A portion of the inventory reserves represents an amount for excess and slow moving inventory on hand that is expected to be written off or otherwise disposed of below cost at a future date The Company s estimate of the appropriate amount of the excess and slow moving inventory reserve utilizes certain inputs and involves judgment Such inputs include data associated with historical trends historical inventory write off activity and the on hand inventory aging The calculation and analysis of historical trend data historical write off activity and the application of this analysis to on hand inventory involves complex calculations
We identified the estimated inventory reserve for excess and slow moving inventory as a critical audit matter given the estimation uncertainty is impacted by a number of subjective factors including current and future customer merchandise preference consumer spending trends and economic conditions This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the methodology and the reasonableness of these subjective factors in combination with assumptions and inputs including historical inventory trends historical inventory write off activity and the on hand inventory aging used to determine excess and slow moving inventory
We compared actual write off activity in the current year to the excess and slow moving inventory reserve estimated by the Company in the prior year to evaluate management s ability to accurately estimate the excess and slow moving inventory reserve
We evaluated the appropriateness of and performed audit procedures over specified inputs supporting management s excess and slow moving inventory reserve estimate including the age of on hand inventory historical inventory trends and historical write off activity
We evaluated the appropriateness and consistency of management s methods and assumptions used in developing their estimate of the excess and slow moving inventory reserve which included consideration of write off trends by merchandise category on hand inventory aging distribution and the impact of current and future customer merchandise preference consumer spending trends and economic conditions
Class A common stock 0 00002 par value 2 000 000 000 shares authorized at August 2 2025 and August 3 2024 118 921 860 and 104 742 401 shares issued at August 2 2025 and August 3 2024 and 116 619 719 and 102 440 260 shares outstanding at August 2 2025 and August 3 2024 respectively
Class B common stock 0 00002 par value 100 000 000 shares authorized at August 2 2025 and August 3 2024 15 856 558 and 22 318 035 shares issued and outstanding at August 2 2025 and August 3 2024 respectively
Stitch Fix Inc we our us or the Company is an online personal styling service that helps people discover the styles they will love that fit perfectly so they always look and feel their best Clients primarily engage with us by 1 receiving a curated shipment of items informed by our algorithms and chosen by a Stitch Fix Stylist a Fix or 2 purchasing directly from our website or mobile app based on an individualized assortment of outfit and item recommendations Freestyle Clients choose to schedule regular shipments or order a Fix on demand Then after receiving a Fix they can purchase the items they want to keep and return the other items if any We are incorporated in Delaware and have operations in the United States Previously we also had operations in the United Kingdom UK During the first quarter of fiscal 2024 we ceased operations of our UK business and met the requirements to report the UK business as a discontinued operation for all periods presented
The consolidated financial statements and accompanying notes have been prepared in accordance with generally accepted accounting principles in the United States GAAP The consolidated financial statements include the accounts of Stitch Fix Inc and our wholly owned subsidiaries
The Company s fiscal year is a 52 week or 53 week period ending on the Saturday closest to July 31 The fiscal years ending August 2 2025 fiscal 2025 July 29 2023 fiscal 2023 and July 30 2022 fiscal 2022 each consisted of 52 weeks The fiscal year ended August 3 2024 fiscal 2024 consisted of 53 weeks with the extra week occurring in the fourth fiscal quarter ending August 3 2024
During the first quarter of fiscal 2024 we ceased operations of our UK business and met the requirements to report the UK business as a discontinued operation Accordingly the consolidated financial statements for all periods presented reflect the results of the UK business as a discontinued operation Unless otherwise noted amounts and disclosures throughout these Notes to Consolidated Financial Statements relate to the Company s continuing operations Refer to Note 15 Discontinued Operations for further details
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and the accompanying footnotes
Significant estimates and assumptions are used for inventory net stock based compensation expense and revenue recognition Actual results could differ from those estimates and such differences may be material to the consolidated financial statements
Cash consists of bank deposits and amounts in transit from banks for client credit card and debit card transactions that will process in less than seven days Cash equivalents consist of investments in short term money market funds
Our investments have been classified and accounted for as available for sale securities We determine the appropriate classification of our investments at the time of purchase and reevaluate the classification at each balance sheet date Available for sale securities with maturities of 12 months or less are classified as short term and available for sale securities with original maturities greater than 12 months are classified as long term Our available for sale securities are carried at fair value with unrealized gains and losses net of taxes reported within accumulated other comprehensive income loss AOCI in stockholders equity The cost of securities sold is based upon the specific identification method
For debt securities with an amortized cost basis in excess of estimated fair value we determine what amount of that deficit if any is caused by expected credit losses The portion of the deficit attributable to expected credit losses is recognized in other income expense net in our consolidated statements of income and was immaterial during fiscal 2025 fiscal 2024 and fiscal 2023 The allowance for expected credit losses on our available for sale debt securities was immaterial at both August 2 2025 and August 3 2024
We have elected to present accrued interest receivable separately from short term investments in our consolidated balance sheets Accrued interest receivable was 1 1 million and 0 6 million as of August 2 2025 and August 3 2024 respectively and was recorded in prepaid expenses and other current assets in the consolidated balance sheets We have also elected to exclude accrued interest receivable from the estimation of expected credit losses on our available for sale securities and reverse accrued interest receivable through interest income when amounts are determined to be uncollectible We did not write off any accrued interest receivable during fiscal 2025 or fiscal 2024
During the first quarter of fiscal 2024 we ceased operations of our UK business and met the requirements to report the UK business as a discontinued operation The functional currency of our UK business was the British pound sterling We translated assets and liabilities to U S dollars using period end exchange rates and average monthly exchange rates for revenues costs and expenses Prior to being classified as a discontinued operation we recorded translation gains and losses in AOCI as a component of stockholders equity During the fiscal 2024 historical foreign currency translation losses which were previously recognized in AOCI were fully reclassified from equity to loss from discontinued operations net of income taxes in the consolidated statements of operations and comprehensive loss Refer to Note 9 Accumulated Other Comprehensive Income Loss and Note 15 Discontinued Operations for further details
We apply fair value accounting for assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability an exit price in an orderly transaction between market participants at the measurement date The guidance establishes three levels of the fair value hierarchy as follows
Level 2 Inputs are observable unadjusted quoted prices in active markets for similar assets or liabilities unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities and
Inventory net consists of finished goods which are recorded at the lower of cost or net realizable value using the first in first out FIFO method Gross inventory costs include both merchandise costs and in bound freight costs Inventory net includes reserves for excess and slow moving inventory we expect to write off based on historical trends inventory we intend to liquidate damaged inventory and shrinkage
Our total inventory reserves which reduce inventory in our consolidated balance sheets were 27 9 million and 23 6 million as of August 2 2025 and August 3 2024 respectively We have not made any material changes to our assumptions included in the calculations of the lower of cost or net realizable value reserves during fiscal 2025 or fiscal 2024
Property and equipment net is recorded at cost less accumulated depreciation and amortization Depreciation and amortization is recorded on a straight line basis over the estimated useful lives of the respective assets Repair and maintenance costs are expensed as incurred
We capitalize eligible costs to develop our proprietary systems website and mobile app Capitalization of such costs begins when the preliminary project stage is completed and it is probable that the project will be completed and the software will be used to perform the function intended A subsequent addition modification or upgrade to internal use software is capitalized to the extent that it enhances the software s functionality or extends its useful life Costs related to design or maintenance are expensed as incurred
Our leasing portfolio consists of operating leases which include lease arrangements for our corporate offices and fulfillment centers Operating leases with a term greater than one year are recorded on the consolidated balance sheets as operating lease right of use assets and operating lease liabilities at the commencement date These balances are initially recorded at the present value of future minimum lease payments which is calculated using our incremental borrowing rate and the expected lease term Certain adjustments to our operating lease right of use assets may be required for items such as initial direct costs paid or incentives received
We have subleased certain portions of our fulfillment centers and corporate offices due to the reduction in square footage needs for our current operations Sublease income is recorded as a reduction to rent expense which is reflected in selling general and administrative expense SG A in the consolidated statement of operations and comprehensive loss We continue to seek sublease arrangements for certain corporate office space and fulfillment centers
We review our long lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated from the use of the asset and its eventual disposition If such assets are considered to be impaired the impairment to be recognized is measured as the amount by which the carrying amount exceeds the estimated fair value of the impaired assets Assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell
If a right of use asset is impaired the carrying value is adjusted to the estimated fair value of the right of use asset and is disconnected from the lease liability and amortized on a straight line basis over the remaining lease term The lease liability continues to be accreted using the same constant periodic discount rate as before the impairment Thus after impairment the operating lease is no longer accounted for using the straight line treatment of total lease expense
We did not record an impairment charge in fiscal 2025 or fiscal 2023 In the fourth quarter of fiscal 2024 we identified triggering events requiring impairment testing of our right of use lease asset associated with our San Francisco headquarters We recorded an asset impairment charge of 19 3 million related to a portion of our corporate office space which was allocated between operating lease right of use assets and property and equipment net to record the corresponding assets at their estimated fair market value The significant assumptions used in the discounted cash flow models for each of the asset groups included projected sublease income based on estimated market rental rates expected vacancy periods prior to the commencement of future subleases and expected lease incentives offered to future tenants These fair value measurements qualify as level 3 measurements in the fair value hierarchy Refer to Note 4 Leases and Note 14 Restructuring for further information
We generate revenue primarily from the sale of merchandise to clients in a Fix and when clients purchase merchandise directly from Freestyle Clients create an online account on our website or mobile app complete a style profile and order a Fix or merchandise to be delivered on a specified date
Each Fix represents an offer made by us to the client to purchase merchandise The client is charged a nonrefundable upfront styling fee before the Fix is shipped As an alternative to the styling fee select clients have the option to purchase a Style Pass Style Pass clients pay a nonrefundable annual fee for unlimited Fixes that is credited towards merchandise purchases If the offer to purchase merchandise is accepted we charge the client the order amount for the accepted merchandise net of the upfront styling fee or Style Pass annual fee For each Fix acceptance occurs when the client checks out the merchandise on our website or mobile app We offer a discount to clients who purchase all of the items in the Fix
We recognize revenue through the following steps 1 identification of the contract or contracts with the customer 2 identification of the performance obligations in the contract 3 determination of the transaction price 4 allocation of the transaction price to the performance obligations in the contract and 5 recognition of revenue when or as we satisfy a performance obligation
Our styling fee and Style Pass arrangements represent the option to purchase merchandise These fees and arrangements are not distinct within the context of the contract with our Fix customers and therefore do not give rise to separate performance obligations Both the upfront styling fee and Style Pass annual fee are included in deferred revenue until the performance obligation is satisfied when the client exercises his or her option to purchase merchandise i e upon checkout of a Fix or when the option s to purchase merchandise expire s
Revenue is recognized when control of the promised goods is transferred to the client For a Fix control is transferred when the client accepts or rejects the offer to purchase merchandise Upon acceptance by purchasing one or more items within the Fix at checkout the total amount of the order including the upfront styling fee is recognized as revenue If none of the items within the Fix are accepted at checkout the upfront styling fee is recognized as revenue at that time The Style Pass annual fee is recognized at the earlier of i the time at which a client accepts and applies the Style Pass fee to an offer to purchase merchandise or ii upon expiry of the annual period Under Style Pass arrangements if a client does not accept any items within the Fix the annual fee will continue to be deferred until it is applied to a future purchase or upon expiry of the annual period If a client would like to exchange an item we recognize revenue at the time the exchanged item is shipped which coincides with the transfer of control to the customer For a Freestyle purchase control is transferred and revenue is recognized upon shipment to the client
We deduct discounts sales tax and estimated refunds to arrive at net revenue Sales tax collected from clients is not considered revenue and is included in accrued liabilities until remitted to the taxing authorities All shipping costs are accounted for in cost of goods sold and all handling costs are accounted for as fulfillment costs within SG A and are therefore not evaluated as a separate performance obligation Discounts are recorded as a reduction to revenue when the order is accepted We record a refund reserve based on our historical refund patterns Our refund reserve which is included in accrued liabilities in the consolidated balance sheets was 7 4 million and 6 4 million as of August 2 2025 and August 3 2024 respectively
We have five types of contractual liabilities i cash collections of upfront styling fees which are included in deferred revenue and are recognized as revenue upon the earlier of application to a merchandise purchase or expiry of the offer ii cash collections of Style Pass annual fees which are included in deferred revenue and are recognized upon the earlier of application to a merchandise purchase or expiry of the Style Pass annual period iii unredeemed gift cards which are included in gift card liability and recognized as revenue upon usage or inclusion in gift card breakage estimates iv referral credits which are included in other current liabilities and are recognized as revenue when used and v cash collections of Freestyle purchases which are included in deferred revenue and are recognized as revenue upon shipment
We sell gift cards to clients and establish a liability based upon the face value of such gift cards We reduce the liability and recognize revenue upon usage of the gift card If a gift card is not used we will recognize estimated gift card breakage revenue proportionately to customer usage of gift cards over the expected gift card usage period subject to requirements to remit balances to governmental agencies All commissions paid to third parties upon issuance of gift cards are recognized in SG A as incurred as on average gift cards are used within a one year period Similarly referral credits that are considered incremental costs of obtaining a contract with a customer are recognized in SG A when issued as on average referral credits are used within a one year period
We expect deferred revenue for upfront styling fees Freestyle orders and Style Pass annual fees to be recognized within one year On average our gift card liability and other current liabilities are also recognized within one year
Cost of goods sold consists of the costs of merchandise expenses for shipping to and from clients and inbound freight inventory write offs and changes in our inventory reserve payment processing fees and packaging materials costs offset by the recoverable cost of merchandise estimated to be returned
SG A expenses consist primarily of compensation and benefits costs including stock based compensation expense for our employees including our Stylist fulfillment center operations data analytics merchandising engineering client experience marketing and corporate personnel SG A expenses also include marketing and advertising third party logistics costs facility costs for our fulfillment centers and offices professional services fees information technology and depreciation and amortization
Marketing expense is recorded in SG A in the consolidated statements of operations and comprehensive loss and the largest component of our marketing expense is advertising expense At any given time our advertising efforts may include social media marketing keyword search campaigns affiliate programs partnerships campaigns with celebrities and influencers display advertising television radio video content direct mail email mobile push communications SMS and search engine optimization Costs associated with the production of advertising such as writing copy printing and other production costs are expensed as incurred Costs associated with communicating advertising on online influencer campaigns and on all television and radio campaigns are expensed the first time the advertisement is run All other online advertising costs are expensed as incurred We recorded advertising expense of 117 3 million 111 4 million and 111 6 million for fiscal 2025 fiscal 2024 and fiscal 2023 respectively
We have a client referral program under which we issue credits for future purchases to clients when their referral results in a new client who has ordered a Fix or made a purchase on Freestyle We record a liability at the time of issuing the credit and reduce the liability upon application of the credit to a client s purchase We also have an affiliate program under which we make cash payments to lifestyle or fashion influencers or others who refer clients in high volumes Amounts related to both of these programs are included within selling general and administrative expenses in the consolidated statements of operations and comprehensive loss
We account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carryforwards Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which they are expected to be realized or settled
Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the amount that is more likely than not to be realized We consider many factors when assessing the likelihood of future realization including our recent cumulative loss earnings expectations in earlier future years and other relevant factors
We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50 likelihood of being realized upon ultimate settlement We recognize interest and penalties related to unrecognized tax benefits if any as income tax expense
We measure stock based compensation expense using the estimated fair values of stock based awards at the grant date For options and restricted stock unit RSU awards with service conditions only stock based compensation expense is recognized net of forfeitures over the requisite service period using the straight line method such that an expense is only recognized for those awards that we expect to vest Forfeitures are estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from those estimates
We estimate the fair value of incentive stock options or nonqualified stock option awards using the Black Scholes option pricing model and amortizing the fair value over the applicable vesting period on a straight line basis The Black Scholes option pricing model includes the following assumptions
Comprehensive loss represents all changes in stockholders equity during a period from sources other than transactions with stockholders Comprehensive loss includes the net loss for the period the gain loss due to foreign currency translation and the change in unrealized gain loss on available for sale securities
We are subject to concentrations of credit risk principally from cash and cash equivalents and investment securities The majority of our cash is held by one financial institution within the United States Our cash balance held by this institution exceeds federally insured limits The associated risk of concentration for cash is mitigated by banking with credit worthy institutions The associated risk of concentration for cash equivalents and investments is mitigated by maintaining a diversified portfolio of highly rated instruments
In November 2023 the Financial Accounting Standards Board FASB issued Accounting Standards Update ASU No 2023 07 Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures ASU 2023 07 This update is designed to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses This standard also enhances interim disclosure requirements and provides new segment disclosure requirements for entities with a single reportable segment This standard is effective for us beginning in fiscal 2025 for the annual period and the interim periods thereafter We adopted this ASU on a retrospective basis and added disclosures within Note 13 Segment Reporting
ASU 2023 09 This update enhances the transparency and decision usefulness of income tax disclosures by improving the income tax disclosures primarily related to the rate reconciliation and income taxes paid information The update also includes certain other amendments to improve the effectiveness of income tax disclosures This standard is effective for us beginning in fiscal 2026 for the annual period with early adoption permitted We do not anticipate this standard to have a material impact on our consolidated financial statements or related disclosures
ASU 2024 03 This update is to improve the disclosures of components of certain income statement expense items In January 2025 the FASB additionally issued ASU No 2025 01 which clarified the effective date of ASU 2024 03 for entities that do not have a calendar year end This guidance is effective for us beginning in fiscal 2028 for the annual period and the interim periods thereafter with early adoption permitted We are currently evaluating the impact that this standard will have on our consolidated financial statements or related disclosures
Our financial instruments consist of cash cash equivalents investments accounts receivable accounts payable and accrued liabilities At August 2 2025 and August 3 2024 the carrying values of cash accounts receivable accounts payable and accrued liabilities approximated fair value due to their short term nature We measure our cash equivalents and investments at fair value within Level 1 or Level 2 of the fair value hierarchy because we value these investments using unadjusted quoted market prices or alternative pricing sources and models utilizing market observable inputs respectively
Further the Company measures the fair value of certain lease right of use assets and other long lived assets subject to long lived asset impairment using Level 3 unobservable inputs Refer to 2 Summary of Accounting Policies for further details on impairment of long lived assets
Our cash equivalents and investments which were accounted for as available for sale securities and were measured at fair value on a recurring basis as of August 2 2025 and August 3 2024 were as follows
For August 2 2025 U S Treasury securities and corporate bonds includes both short term investments with remaining maturities of less than one year and long term investments with remaining maturities over one year and less than five years
The following table sets forth the amortized cost gross unrealized gains and losses and fair values of our investments which are accounted for as available for sale securities as of August 2 2025 and August 3 2024
Our leasing portfolio includes lease arrangements for our corporate offices and fulfillment centers Such leases generally have original lease terms between five years and eleven years and often include one or more options to renew We have not considered any of our renewal options reasonably certain to be exercised at lease commencement and do not have residual value guarantees associated with our leases
As of August 2 2025 the Company subleases certain office and warehouse space to third parties These subleases have total original lease terms ranging from approximately two years to eight years that will expire at various dates by fiscal year 2032 one of which includes an option to extend the sublease for an additional two years
The weighted average remaining term for our leases as of August 2 2025 and August 3 2024 was 4 4 years and 5 1 years respectively The weighted average discount rate for our leases as of August 2 2025 and August 3 2024 was 5 2
In fiscal 2024 we recorded an impairment charge related to a portion of our corporate office space of 16 6 million Refer to Note 14 Restructuring for further details on the impairment charge In addition in fiscal 2024 we entered into an early termination of our lease at our Dallas warehouse resulting in removal of the right of use asset which was included in the 1 5 million loss on lease termination recorded within selling general and administrative expenses on the consolidated statements of operations and comprehensive loss
Operating lease cost is recorded on a straight line basis over the lease term For impaired operating leases the right of use asset is depreciated on a straight line basis over the remaining lease term Certain leases contain variable payments which are expensed as incurred and not included in our operating lease right of use assets and operating lease liabilities These amounts primarily include payments for maintenance utilities taxes and insurance on our office and fulfillment center leases
During fiscal 2025 and fiscal 2024 we had subleases for certain portions of fulfillment centers and our corporate offices due to the reduction in square footage needs for current operations We continue to seek sublease arrangements for corporate office space
On December 4 2023 we entered into a first lien credit agreement with Citibank N A as agent and lender which provides for a 50 0 million revolving credit facility maturing on December 4 2026 the 2023 Credit Facility The 2023 Credit Facility includes a sub facility that provides for the issuance of letters of credit in an amount of up to 30 0 million Availability of the 2023 Credit Facility is based upon a borrowing base formula and periodic borrowing base certifications valuing certain of our accounts receivable credit card receivables and inventory as reduced by certain reserves if any Our borrowing availability based on balances as of August 2 2025 was 50 0 million and our excess availability was 31 3 million as a result of outstanding letters of credit and no outstanding borrowing
The 2023 Credit Facility is subject to customary fees for loan facilities of this type including a commitment fee equal to 0 30 based on the average daily undrawn portion of the 2023 Credit Facility payable quarterly
The interest rate applicable to the 2023 Credit Facility will be at our option either a the Adjusted Term SOFR rate for the applicable interest period subject to a 0 00 floor plus a margin of 2 00 or b the Base Rate plus a margin of 2 00 The Base Rate is the highest of a the federal funds rate plus 0 50 b the Wall Street Journal prime rate or c the Adjusted Term SOFR rate for a one month interest period plus 1 00
Debt under the 2023 Credit Facility is guaranteed by substantially all of our material domestic subsidiaries and is secured by substantially all of our and such subsidiaries assets The 2023 Credit Facility contains affirmative and negative covenants indemnification provisions and events of default The 2023 Credit Facility also contains financial covenants that require us to maintain a minimum liquidity level and if applicable a minimum total consolidated fixed charge coverage ratio during the periods set forth in the 2023 Credit Facility As of August 2 2025 we were in compliance with all financial covenants
We record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated We also disclose material contingencies when we believe a loss is not probable but reasonably possible Accounting for contingencies requires us to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss Although we cannot predict with assurance the outcome of any litigation or tax matters we do not believe there are currently any such actions that if resolved unfavorably would have a material impact on our operating results financial position and cash flows
On August 26 2022 a class action lawsuit alleging violations of federal securities laws was filed by certain of our stockholders in the U S District Court for the Northern District of California naming as defendants us and certain of our officers and directors the Securities Class Action An amended complaint was filed on August 15 2023 The lawsuit alleges violations of the Securities Exchange Act of 1934 as amended by us and our officers for allegedly making materially false and misleading statements regarding our Freestyle offering between June 2020 and June 2022 The plaintiffs seek unspecified monetary damages and other relief The Company filed a motion to dismiss on November 1 2023 A hearing on the motion to dismiss was held on April 18 2024 and the motion to dismiss was granted on July 16 2024 with leave to amend The plaintiffs filed a second amended complaint on September 13
2024 The Company filed a motion to dismiss the second amended complaint on November 8 2024 A hearing on the motion to dismiss the second amended complaint was held on March 27 2025 and the motion to dismiss was granted in part and denied in part on July 9 2025 The lawsuit remains pending
On March 17 2023 a derivative action was filed by certain of our stockholders against certain of our current and former directors and officers in the Court of Chancery for the State of Delaware based on the same factual allegations underlying the Securities Class Action It seeks damages and restitution to be paid to the Company by the individual defendants governance changes and attorney s fees and costs The case is stayed pending resolution of the class certification in the Securities Class Action
On June 6 2023 a shareholder action was filed by certain of our stockholders against certain of our current and former directors and officers in the Superior Court of the State of California for the County of Los Angeles It alleged claims based on similar allegations underlying the Securities Class Action and sought inter alia all remedies provided by California Corporations Code Section 25402 restitution and disgorgement of alleged insider trading proceeds by insider trading defendants and attorney s fees and costs The shareholder action was voluntarily dismissed on January 25 2024 On May 24 2024 another derivative action was filed by the same stockholder against certain of our current and former directors and officers among others in the Court of Chancery for the State of Delaware It alleged claims based on similar allegations underlying the Securities Class Action and sought the disgorgement and redistribution of alleged insider trading profits by the insider trading defendants to stockholders damages and restitution to be paid to the Company by the individual defendants governance changes and attorney s fees and costs On July 8 2025 a notice of voluntary dismissal was filed for this action The Court of Chancery for the State of Delaware approved the voluntary dismissal on August 8 2025 On July 22 2025 another derivative action was filed by the same stockholder against certain of our current and former directors and officers among others in the U S District Court for the Northern District of California It alleges claims based on similar allegations underlying the Securities Class Action and seeks the disgorgement and redistribution of alleged insider trading profits by the insider trading defendants to stockholders damages and restitution to be paid to the Company by the individual defendants governance changes and attorney s fees and costs The action in the Northern District of California remains pending
In the ordinary course of business we may provide indemnifications of varying scope and terms to vendors directors officers and other parties with respect to certain matters We have not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in the consolidated financial statements
In the normal course of business the Company enters into non cancellable purchase commitments with various parties As of August 2 2025 we had remaining commitments of 138 4 million for inventory purchases predominantly due within one year and 63 7 million for other service agreements due over the next one to three years
During the first quarter of fiscal 2024 we ceased operations of our UK business and the accounting requirements for reporting the UK business as a discontinued operation were met Accordingly in the first quarter of fiscal 2024 we reclassified historical foreign currency translation losses which were previously recognized in AOCI from stockholders equity to loss from discontinued operations net of income taxes in the consolidated statements of operations and comprehensive loss Refer to Note 15 Discontinued Operations for further details
In 2011 we adopted the 2011 Equity Incentive Plan the 2011 Plan The 2011 Plan provided for the grant of stock based awards to employees directors and non employees under terms and provisions established by the Board of Directors
The 2011 Plan allowed for the grant of incentive stock options or nonqualified stock options as well as restricted stock unit RSU awards restricted stock awards RSAs and stock appreciation rights Only incentive and nonqualified stock options were granted under the 2011 Plan Employee stock option awards generally vested 25 on the first anniversary of the grant date with the remaining shares subject to the option vesting ratably over the next three years subject to the employee s continued service with the Company Options generally expire after 10 years Effective upon our initial public offering in 2017 the 2011 Plan was replaced by the 2017 Incentive Plan
In November 2017 our Board of Directors and stockholders adopted our 2017 Incentive Plan the 2017 Plan The remaining shares available for issuance under our 2011 Plan became reserved for issuance under the 2017 Plan Our 2017 Plan provides for the grant of Class A incentive stock options to employees and for the grant of nonqualified stock options stock appreciation rights RSAs RSU awards performance restricted stock unit PSU awards performance cash awards and other forms of stock awards to employees directors and consultants Employee stock option awards generally begin to vest six months after the grant date with the remaining shares subject to the option vesting ratably over the next 30 months Options generally expire after 10 years RSU awards made to employees generally vest ratably on a quarterly basis subject to the employee s continued service with the Company PSU awards made to employees generally vest on a quarterly basis following the end of the performance period subject to the employee s continued service with the Company As of August 2 2025 the number of shares authorized for issuance under the 2017 Plan was 50 276 797 shares of Class A common stock and the number of shares available for grant was 2 630 245
In October 2019 our Board of Directors adopted our 2019 Inducement Plan the 2019 Plan Our 2019 Plan provides for the grant of Class A nonqualified stock options and RSU awards to individuals who satisfy the standards for inducement grants under the relevant Nasdaq Stock Market rules As of August 2 2025 the number of shares authorized for issuance under the 2019 Plan was 10 750 000 shares of Class A common stock and the number of shares available for grant was 1 967 541
There were no options granted during fiscal 2025 The weighted average grant date fair value of options granted during fiscal 2024 and fiscal 2023 was 2 09 and 2 72 per share respectively The total grant date fair value of options that vested during fiscal 2025 fiscal 2024 and fiscal 2023 was 7 3 million 7 1 million and 11 8 million respectively The aggregate intrinsic value of options exercised during fiscal 2025 fiscal 2024 and fiscal 2023 was 0 4 million 0 1 million 0 4 million respectively The aggregate intrinsic value of options exercised is the difference between the fair value of the underlying common stock on the date of exercise and the exercise price for in the money stock options
Employee RSUs are granted under the 2017 Plan and 2019 Plan settle into Class A common stock and generally vest ratably on a quarterly basis subject to the employee s continued service with the Company
In each of the first and second quarter of fiscal 2025 the Compensation Committee approved certain PSU awards which become eligible to vest in multiple tranches over a one or three year period Each PSU award represents a contingent right to receive one share of Class A common stock The awards have both service based and performance based vesting conditions The actual number of shares earned on vesting ranges from 0 to 150 of the target number granted depending on the attainment of specified performance based metrics during the performance period which is fiscal 2025
In July 2025 the Company granted a PSU award to a senior executive which includes market based and service based vesting conditions The award is eligible to vest in four equal tranches Each tranche is subject to the achievement of a stock price hurdle in which the Company s closing stock price must be at or above a specified stock price target for 30 consecutive trading days during a four year performance period as well as continued employment through each applicable vesting date When a stock price hurdle is achieved 25 of the number of granted awards are eligible to vest
Stock based compensation expense for options RSU awards and PSU awards granted to employees for fiscal 2025 was 56 7 million For fiscal 2024 and 2023 stock based compensation expense for options and RSU awards granted to employees was 76 8 million and 102 1 million Stock based compensation expense is included in selling general and administrative expenses in the consolidated statements of operations and comprehensive loss
The Company recognized no income tax benefit from stock based compensation during fiscal 2025 fiscal 2024 and fiscal 2023 as the Company currently maintains a full valuation allowance against its net deferred tax assets
As of August 2 2025 the total unrecognized compensation expense related to unvested options RSU awards and PSU awards net of estimated forfeitures was 33 2 million which we expect to recognize over an estimated weighted average period of 1 22 years
Stock based compensation expense related to RSU awards is recorded net of forfeitures over the requisite service period using the straight line method such that an expense is only recognized for those awards that we expect to vest Stock based compensation expense related to PSU awards is recorded under the accelerated method For PSU awards without a market based vesting condition stock based compensation is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions Stock based compensation expense related to stock options is recorded by estimating the fair value of stock based awards using the Black Scholes option pricing model and amortizing the fair value of the stock based awards granted over the applicable vesting period of the awards on a straight line basis
For PSU awards with a market based vesting condition the Company uses a Monte Carlo simulation which uses subjective assumptions and simulates multiple stock price paths of the Common Stock to determine the fair value of market based PSUs on the grant date Stock based compensation expense is recognized using an accelerated attribution method over the lesser of the derived performance periods or explicit achievement of the stock price hurdles Compensation expense is recorded regardless of whether the market condition will be ultimately satisfied
Our provision for income taxes increased in fiscal 2025 as compared to fiscal 2024 primarily due to a decrease in pre tax losses partially offset by a decrease in the reversal of stock based compensation expenses
Our provision for income taxes decreased in fiscal 2024 as compared to fiscal 2023 primarily due to reserve releases from lapses in statutes of limitation and effective settlement of prior year tax positions
As of August 2 2025 and August 3 2024 we had federal net operating loss carryforwards of 161 1 million and 186 7 million respectively which will be carried forward indefinitely As of August 2 2025 and August 3 2024 we had federal research and development tax credit carryforwards of 57 3 million and 57 1 million respectively The research and development tax credits will expire beginning in 2038 if not utilized
As of August 2 2025 and August 3 2024 we had state net operating loss carryforwards of 311 7 million and 328 5 million respectively Of these carryforwards approximately 237 6 million will expire if not utilized in various years through 2045 The remaining carryforwards have no expiration As of August 2 2025 and August 3 2024 we had California research and development tax credit carryforwards of 24 2 million and 24 1 million respectively which are not subject to expiration Utilization of the net operating loss carryforwards tax credits and other tax attributes may be subject to various limitations due to the ownership change limitations provided by IRC Section 382 and similar state provisions The annual limitation may result in the expiration of net operating losses and credits before their utilization and reduce our ability to offset future income with our tax attributes
On July 4 2025 the One Big Beautiful Bill Act the 2025 Tax Act was signed into law The 2025 Tax Act includes a broad range of tax reform that may affect the Company s financial results including domestic research cost expensing and 100 first year bonus depreciation For tax years beginning after December 31 2024 taxpayers may elect to either i immediately deduct eligible Section 174 research expenditures or ii capitalize and amortize such costs over a period of no less than 60 months We are currently evaluating the impact of the 2025 Tax Act upon our future effective tax rate tax liabilities and cash taxes
The amount of unrecognized tax benefits relating to our tax positions is subject to change based on future events including but not limited to the settlements of ongoing audits and or the expiration of applicable statutes of limitations The Company does not expect its gross unrecognized tax benefits to change significantly within the next 12 months As of August 2 2025 the total amount of unrecognized tax benefits if recognized would not affect the Company s effective tax rate due to the existence of carryforwards and the valuation allowance in the United States and applicable U S state jurisdictions
We file income tax returns in the U S federal and various state and local jurisdictions As of August 2 2025 our fiscal 2021 through fiscal 2024 tax returns are subject to potential examination in one or more jurisdictions
We regularly assess whether it is more likely than not that we will realize our deferred tax assets in each taxing jurisdiction in which we operate We consider many factors when assessing the likelihood of future realization including our recent cumulative loss earnings expectations in earlier future years and other relevant factors We continue to record a full valuation allowance on our U S federal and state net deferred tax assets due to cumulative historical losses The valuation allowance primarily relates to federal and state deferred tax assets including unrealized credit carryforwards and net operating losses The valuation allowance increased by 2 8 million in fiscal 2025 and by 22 0 million in fiscal 2024
Basic and diluted loss per share from continuing operations attributable to common stockholders is presented in conformity with the two class method required for participating securities Class A and Class B common stock The rights of the holders of Class A and Class B common stock are identical except with respect to voting conversion and transfer rights Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock
Basic net loss per share from continuing operations attributable to common stockholders is computed by dividing the net loss from continuing operations attributable to common stockholders by the weighted average number of common shares outstanding during the period
For the calculation of diluted loss per share from continuing operations net loss from continuing operations attributable to common stockholders for basic loss per share is adjusted by the effect of dilutive securities Diluted net loss per share from continuing operations attributable to common stockholders is computed by dividing the net loss from continuing operations attributable to common stockholders by the weighted average number of common shares outstanding including all potentially dilutive common shares In periods of loss there are no potentially dilutive common shares to add to the weighted average number of common shares outstanding The undistributed losses are allocated based on the contractual participation rights of the Class A and Class B common shares as if the losses for the year have been distributed As the liquidation and dividend rights are identical the undistributed loss is allocated on a proportionate basis
The table below presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted loss per share from continuing operations attributable to Class A and Class B common stockholders
As the Company has reported net loss from continuing operations for each of the periods presented all potentially dilutive securities were considered antidilutive The following common stock equivalents were excluded from the computation of diluted loss per share from continuing operations because their effect would have been antidilutive for the periods presented
In January 2022 the Company s Board of Directors authorized a share repurchase program to repurchase up to 150 0 million of our outstanding Class A common stock with no expiration date the 2022 Repurchase Program The actual timing number and value of shares repurchased in the future will be determined by the Company in its discretion and will depend on a number of factors including market conditions applicable legal requirements our capital needs and whether there is a better alternative use of capital
We did not repurchase any shares during the twelve months ended August 2 2025 or August 3 2024 As of August 2 2025 120 0 million remained available under the 2022 Repurchase Program authorization Repurchases under the 2022 Repurchase Program during any given fiscal period will reduce the number of weighted average common shares outstanding for the respective period
The Company identifies any operating segments based on whether the Company s Chief Executive Officer who is the Chief Operating Decision Maker CODM regularly reviews operating results of particular components of the Company s activities and allocates resources and assesses performance based on those results The Company has one operating segment and as a result one reportable segment related to the sale of merchandise directly to clients who received a curated shipment of items or purchased directly from its website or mobile app
Financial information and data are provided to the CODM on a consolidated basis The CODM uses consolidated net loss from continuing operations as reported on the Company s consolidated statements of operations to evaluate performance make key operating decisions and allocate resources Net loss from continuing operations is used to compare budget to actual results
In June 2022 we announced a restructuring plan the 2022 Restructuring Plan to reduce our future fixed and variable operating costs and allow us to centralize key capabilities strengthen decision making to drive efficiencies and ensure we are allocating resources to our most critical priorities In fiscal 2022 and 2023 in furtherance of and as an expansion of the 2022 Restructuring Plan we reduced our employee workforce impaired a portion of our corporate office space and announced intended closures of certain fulfillment centers In fiscal 2024 in furtherance of and as an expansion of the 2022 Restructuring Plan we closed certain fulfillment centers implemented an organizational realignment which eliminated certain styling leadership and corporate positions revised our compensation model for Stylists and impaired a portion of our corporate office space in the fourth quarter of fiscal
2024 due to change in the use of the space In fiscal 2025 in furtherance of and as an expansion of the 2022 Restructuring Plan we continued to implement an organizational realignment by eliminating certain corporate positions
In June 2023 we announced that we would enter a consultation period in accordance with UK law to explore exiting the market in the UK During the first quarter of fiscal 2024 we ceased operations of our UK business and the accounting requirements for reporting the UK business as a discontinued operation were met As a result the UK business is presented in the accompanying consolidated statements as a discontinued operation for all periods presented
Cash from our UK business is recorded as continuing operations on the consolidated balance sheets as any cash remaining after the settlement of outstanding liabilities related to the UK business is expected to be repatriated into the U S
For fiscal year 2024 Other income expense net includes the loss from the release of historical foreign currency translation adjustments related to the exit of the UK business Refer to Note 9 Accumulated Other Comprehensive Income Loss for further details
We recorded expenses related to the exit and wind down of the UK business of an aggregate 0 1 million 5 3 million and 4 7 million for fiscal 2025 fiscal 2024 and fiscal 2023 respectively In fiscal 2024 these charges were recorded in selling general and administrative expenses from discontinued operations and consisted primarily of severance and employee related benefits and early contract termination charges In fiscal 2023 these charges were recorded in both costs of goods sold and selling general and administrative expenses from discontinued operations and consisted primarily of losses from firm purchase commitments for future receipts of inventory inventory write downs to net realizable value and fixed asset impairment charges
Our management with the participation of our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a 15 e and 15d 15 e under the Securities Exchange Act of 1934 as amended the Exchange Act as of the end of the period covered by this Annual Report on Form 10 K the Evaluation Date
Based on the evaluation of our disclosure controls and procedures our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the Evaluation Date
Management including our Chief Executive Officer and Chief Financial Officer is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a 15 f and 15d 15 f under the Exchange Act Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with U S GAAP
Under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO Based on evaluation under these criteria management determined that our internal control over financial reporting was effective as of the Evaluation Date
Deloitte Touche LLP our independent registered public accounting firm has audited the effectiveness of our internal control over financial reporting and as part of the audit has issued a report on the effectiveness of our
During the three months ended August 2 2025 there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting
An effective internal control system no matter how well designed has inherent limitations including the possibility of human error or overriding of controls and therefore can provide only reasonable assurance with respect to reliable financial reporting Because of its inherent limitations our internal control over financial reporting may not prevent or detect all misstatements including the possibility of human error the circumvention or overriding of controls or fraud Effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements
During the fiscal quarter ended August 2 2025 none of our directors and officers as defined in Rule 16a 1 f under the Exchange Act adopted or terminated any Rule 10b5 1 trading arrangement or non Rule 10b5 1 trading arrangement as defined in Item 408 of Regulation S K
Information required by this item regarding directors and director nominees executive officers the Board of Directors and its committees certain corporate governance matters the Company s Insider Trading Policy and compliance with Section 16 a of the Exchange Act is incorporated by reference to the information set forth under the captions Proposal 1 Election of Directors Executive Officers Executive Compensation Executive Compensation Policies and Practices and Delinquent Section 16 a Reports in the definitive proxy statement for our 2025 Annual Meeting of Stockholders the 2025 Proxy Statement
We have adopted a written code of business conduct and ethics Code of Conduct that applies to all of our employees officers and directors including our principal executive officer principal financial officer and principal accounting officer The Code of Conduct is available on our investor relations website at investors stitchfix com under Documents under the section entitled Governance If we make any substantive amendments to our Code of Conduct or grant any of our directors or executive officers any waiver including any implicit waiver from a provision of our Code of Conduct we will disclose the nature of the amendment or waiver on our website or in a Current Report on Form 8 K
Information required by this item regarding executive compensation is incorporated by reference to the information set forth under the captions Proposal 1 Election of Directors Compensation Committee Interlocks and Insider Participation Executive Compensation and Director Compensation in our 2025 Proxy Statement
Information required by this item regarding security ownership of certain beneficial owners and management and securities authorized for issuance under our equity compensation plans is incorporated by reference to the information set forth under the captions Security Ownership of Certain Beneficial Owners and Management and Executive Compensation Equity Compensation Plan Information in our 2025 Proxy Statement
Information required by this item regarding certain relationships and related transactions and director independence is incorporated by reference to the information set forth under the captions Transactions with Related Persons and Indemnification and Proposal 1 Election of Directors Independence of the Board in our 2025 Proxy Statement
Information required by this item regarding principal accounting fees and services is incorporated by reference to the information set forth under the caption Proposal 3 Ratification of Selection of Independent Registered Public Accounting Firm in our 2025 Proxy Statement
2 The financial statement schedules are omitted because they are either not applicable or the information required is presented in the financial statements and notes thereto under Item 8 Financial Statements and Supplementary Data
The certification attached as Exhibit 32 1 accompanying this Annual Report is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Stitch Fix Inc under the Securities Act of 1933 as amended or the Securities Exchange Act of 1934 as amended whether made before or after the date of this Annual Report irrespective of any general incorporation language contained in such filing
Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this Annual Report on Form 10 K to be signed on its behalf by the undersigned thereunto duly authorized
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Matt Baer David Aufderhaar and Casey O Connor and each of them as his or her true and lawful attorneys in fact and agents with full power of substitution for him or her and in his or her name in any and all capacities to sign any and all amendments to this Annual Report on Form 10 K and to file the same with exhibits thereto and other documents in connection therewith with the U S Securities and Exchange Commission granting unto said attorneys in fact and agents and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith as fully to all intents and purposes as he or she might or could do in person hereby ratifying and confirming all that said attorneys in fact and agents and either of them his or her substitute or substitutes may lawfully do or cause to be done by virtue hereof
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated

Company Name	Stitch Fix, Inc. Vist SEC web-site
Category	RETAIL-CATALOG & MAIL-ORDER HOUSES
Trading Symbol	SFIX