Stitch Fix(SFIX) - 2025 Q4 - Annual Report

PART I ITEM 1. BUSINESS. Stitch Fix offers personalized online styling through AI and expert stylists, providing curated shipments and direct purchases - Stitch Fix operates as an online personal styling service, integrating expert Stylists with AI and recommendation algorithms to offer personalized clothing and accessories[14][17] - Clients engage through two main models: 'Fixes' (curated shipments) and 'Freestyle' (direct purchases from personalized online assortments)[18][23][29] - The company's business is powered by AI and data science, utilizing a large, growing client-provided data set to enhance personalization and operational efficiency[19][30][34] Active Clients | Metric | As of August 2, 2025 | As of August 3, 2024 | | :----- | :------------------- | :------------------- | | Active Clients | 2,309,000 | 2,508,000 | - Stitch Fix expanded its assortment to include Men's, Kids, Petite, Maternity, and Plus apparel, along with shoes and accessories, from brand partners and private labels[20] - The company ceased its UK business operations in fiscal 2024, now operating solely in the United States[59][305] ITEM 1A. RISK FACTORS The company faces significant risks in client retention, consumer spending, competition, operations, cybersecurity, and legal and financial areas - The company faces significant risks in client retention and acquisition, with active clients decreasing year-over-year[73][74][75] - Operational risks include ineffective inventory management, constraints at three U.S. fulfillment centers, and shipping disruptions[87][92][94][96] - Revenue growth has declined in recent fiscal years (5.3% in FY2025, 16.0% in FY2024, 21.1% in FY2023), with uncertain future profitability despite restructuring[97][98] - The business is highly susceptible to macroeconomic conditions like inflation, recessionary concerns, and trade policies, impacting consumer spending and merchandise costs[77][78][118][120] - Cybersecurity threats, evolving privacy laws (e.g., CCPA/CPRA), and e-commerce regulations pose significant legal and operational risks, potentially causing expenses, liability, and reputational harm[129][140][145] - The Class A common stock market price is volatile, influenced by operating results, analyst expectations, and broader market trends, with potential decline from future share sales or dual-class structure[158][163][164] ITEM 1B. UNRESOLVED STAFF COMMENTS. The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[185] ITEM 1C. CYBERSECURITY. Stitch Fix employs a comprehensive cybersecurity strategy, overseen by the CISO and Audit Committee, covering risk management, training, and incident response - Stitch Fix employs a multi-pronged cybersecurity strategy focused on prevention, detection, and response to manage risks to its Information Systems and Data[188] - The cybersecurity program includes regular risk assessments, third-party risk management, and mandatory employee awareness and training[189][190] - Cybersecurity governance is led by the CISO, reporting to the CPTO and chairing the Cybersecurity Governance Committee, with Audit Committee oversight and regular updates[193][194][196] - Despite no material cybersecurity breach, the company acknowledges the ongoing risk of future threats or incidents[197] ITEM 2. PROPERTIES. Stitch Fix leases its San Francisco headquarters and operates three US fulfillment centers, while subleasing a former Salt Lake City facility - Stitch Fix leases approximately 134,000 square feet for its San Francisco headquarters, with 38,000 square feet utilized and 58,000 square feet marketed for sublease[199] - The company operates three fulfillment centers in Arizona, Indiana, and Georgia, totaling approximately 2,514,000 square feet[200] - Stitch Fix subleases approximately 1,012,000 square feet at its former Salt Lake City, Utah fulfillment center[200] ITEM 3. LEGAL PROCEEDINGS. Stitch Fix is involved in a Securities Class Action lawsuit regarding its Freestyle offering, with motions to dismiss filed and no material financial impact expected - Stitch Fix is a defendant in a Securities Class Action lawsuit and related derivative actions concerning its Freestyle offering between June 2020 and June 2022[159][364][366][367] - Motions to dismiss have been filed by the company, with some granted in part, and the lawsuits remain pending[364][365][367] - The company records loss contingencies when probable and estimable, but does not anticipate a material impact on operating results, financial position, or cash flows from current legal actions[363] ITEM 4. MINE SAFETY DISCLOSURES. This item is not applicable to Stitch Fix, Inc - Not applicable[203] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Stitch Fix Class A common stock trades on Nasdaq; the company does not pay dividends and has an authorized $150.0 million share repurchase program with $120.0 million remaining - Class A common stock (SFIX) is listed on Nasdaq Global Select Market; Class B common stock is not publicly traded[206] - As of September 19, 2025, there were 37 record holders for Class A common stock and 10 for Class B common stock[207] - The company has never declared or paid cash dividends and does not anticipate doing so, intending to retain earnings for business operations and expansion[208][165] - A $150.0 million share repurchase program was authorized in January 2022, with $120.0 million remaining available as of August 2, 2025, and no repurchases in fiscal 2024 or 2025[213][259][401][402] ITEM 6. [RESERVED] This item is reserved and not applicable - Not applicable[214] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Fiscal 2025 revenue decreased 5.3% due to client declines, but net loss from continuing operations significantly reduced by 75.7% to $28.8 million due to restructuring Fiscal Year 2025 Financial Highlights (Continuing Operations) | Metric | FY2025 (in thousands) | FY2024 (in thousands) | YoY Change | | :----------------------------------- | :-------------------- | :-------------------- | :--------- | | Revenue, net | $1,267,171 | $1,337,468 | (5.3)% | | Net loss from continuing operations | $(28,844) | $(118,885) | (75.7)% | | Active Clients | 2,309 | 2,508 | (7.9)% | | Net Revenue per Active Client | $549 | $533 | 3.0% | | Selling, general, and administrative expenses | $601,844 | $725,465 | (17.0)% | - The decline in revenue was primarily due to a 7.9% decrease in active clients, partially offset by higher average order values and more items kept per Fix[249] - Gross margin for fiscal 2025 increased by 10 basis points, driven by higher average order values and transportation leverage, despite lower product margins[250] - SG&A expenses decreased significantly by $123.6 million (17.0%), primarily due to lower compensation, benefits, facilities, and depreciation costs from restructuring[251][252] - The company recorded $1.2 million in additional restructuring charges in fiscal 2025, with no further cash charges expected from the 2022 Restructuring Plan[224][407] Non-GAAP Financial Measures (Continuing Operations) | Metric | FY2025 (in thousands) | FY2024 (in thousands) | | :------------- | :-------------------- | :-------------------- | | Adjusted EBITDA | $49,139 | $29,281 | | Free Cash Flow | $9,282 | $14,242 | - Cash and cash equivalents stood at $114.0 million, with $128.8 million in investments as of August 2, 2025, and a $50.0 million revolving credit facility with $31.3 million excess availability[255][256] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company faces market risks from interest rate fluctuations on investments and inflation impacting costs and consumer spending - The company's cash equivalents and investments are exposed to interest rate risk, but the short-term nature of the portfolio limits material impact from immediate rate changes[279] - Stitch Fix is subject to inflation risk, impacting merchandise, shipping, and labor costs, and adversely affecting consumer discretionary spending and net revenue[280] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents audited consolidated financial statements for fiscal years 2023-2025, prepared under GAAP, with detailed notes on accounting policies and financial items - The consolidated financial statements for fiscal years ended August 2, 2025, August 3, 2024, and July 29, 2023, are presented in accordance with GAAP[284][285][306] - The report includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations and Comprehensive Loss, Stockholders' Equity, and Cash Flow[283] - Key financial notes cover significant accounting policies, fair value measurements, leases, property and equipment, accrued liabilities, credit facility, commitments and contingencies, stock-based compensation, income taxes, net loss per share, segment reporting, restructuring, and discontinued operations[283] - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements and internal control over financial reporting as of August 2, 2025[285] - A critical audit matter identified was the estimated inventory reserve for excess and slow-moving inventory, due to estimation uncertainty influenced by subjective factors like customer merchandise preference and economic conditions[293][294] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. The company reported no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure were reported[412] ITEM 9A. CONTROLS AND PROCEDURES. Stitch Fix's management concluded that disclosure controls and internal control over financial reporting were effective as of August 2, 2025, with no material changes - Disclosure controls and procedures were deemed effective as of August 2, 2025[414] - Management concluded that internal control over financial reporting was effective as of August 2, 2025, based on COSO criteria[416] - No material changes in internal control over financial reporting occurred during the three months ended August 2, 2025[419] - The company acknowledges that internal control systems have inherent limitations and cannot prevent or detect all errors or fraud[420] ITEM 9B. OTHER INFORMATION No Rule 10b5-1 trading arrangements were adopted or terminated by directors and officers during the fiscal quarter ended August 2, 2025 - No Rule 10b5-1 trading arrangements were adopted or terminated by directors and officers during the fiscal quarter ended August 2, 2025[421] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. This item is not applicable to Stitch Fix, Inc - Not applicable[422] PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement, including the Code of Conduct - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement[425] - Stitch Fix maintains a written Code of Conduct for all employees, officers, and directors, accessible on its investor relations website[426] ITEM 11. EXECUTIVE COMPENSATION. Executive compensation information is incorporated by reference from the 2025 Proxy Statement - Executive compensation details are incorporated by reference from the 2025 Proxy Statement[427] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Security ownership information for beneficial owners and management, along with equity compensation plan details, is incorporated by reference from the 2025 Proxy Statement - Security ownership information for beneficial owners and management, along with equity compensation plan details, is incorporated by reference from the 2025 Proxy Statement[428] ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2025 Proxy Statement - Details on certain relationships, related transactions, and director independence are incorporated by reference from the 2025 Proxy Statement[429] ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Principal accounting fees and services information is incorporated by reference from the 2025 Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the 2025 Proxy Statement[430] PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. This section lists all exhibits filed with the Annual Report, including corporate documents and agreements, with financial statements under Item 8 - The section provides an index of exhibits filed with the Annual Report, including corporate documents, equity plans, and agreements[433] - Financial statements are included under Item 8, and financial statement schedules are omitted[434] ITEM 16. FORM 10-K SUMMARY. This item is not applicable to Stitch Fix, Inc - Not applicable[438] SIGNATURES The Annual Report on Form 10-K was signed by the Chief Financial Officer and other authorized persons on September 25, 2025 - The Annual Report on Form 10-K was signed by the Chief Financial Officer, David Aufderhaar, on September 25, 2025[442] - Additional signatures include the Chief Executive Officer, Matt Baer, and various Directors, all dated September 25, 2025[445]