Stitch Fix, Inc.
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| ITEM 1. | BUSINESS. |
OVERVIEW
Stitch Fix is the leading online personal styling service that helps people discover the styles they will love that fit perfectly so they always look - and feel - their best.
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.
HOW IT WORKS
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.
Once clients have onboarded, they can engage with us by receiving a Fix or by purchasing directly through Freestyle.
Fix
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
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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.
After onboarding to the service, clients choose their preferred order frequency and can select the exact date by which they want to receive their Fix. We currently offer two types of Fix scheduling:
•Auto-ship. Clients can elect to receive Fixes on a regular cadence aligned to their style needs.
•On-demand. Clients can choose to schedule a one-time Fix at any time.
Clients can increase or decrease the Fix frequency at any time, and can also easily reschedule any given shipment to better accommodate their needs.
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.
Freestyle
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.
OUR DATA SCIENCE AND AI ADVANTAGE
AI and data science are integrated across almost every facet of our business. Our data set is particularly powerful as:
•the vast majority of our client data is provided directly and explicitly by the client, rather than inferred, scraped, or obtained from other sources;
•our clients are motivated to provide us with relevant personal data, both at initial sign-up and over time as they use our service, because they trust it will improve their shopping experience; and
•our merchandise data tracks dimensions that enable us to predict purchase behavior and deliver a more personalized experience.
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:
•basic data, such as brand, size, color, pattern, silhouette, and material;
•item measurements, such as length, width, diameter of sleeve opening, and distance from collar to first button;
•nuanced descriptors, such as how appropriate the piece is for a client that prefers preppy clothing or whether it is appropriate for a formal event; and
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•client feedback, such as how the item fits or how popular the piece is with a particular client segment.
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.
Pairing Data Science and Human Judgment
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 DIFFERENTIATED VALUE PROPOSITION
Our Value Proposition to Clients
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.
Clients also value the quality and variety of merchandise we offer including the familiar brands they know, exclusive styles, and new brands they might not be aware of.
Our Value Proposition to Brand Partners
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.
OUR MERCHANDISE, BRAND PARTNERS, AND OWNED PRIVATE LABEL BRANDS
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.
Brand Partners
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.
Brands Exclusive to Stitch Fix
We offer products exclusive to Stitch Fix through our Owned Private Label Brands.
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.
SOURCING
We purchase our merchandise directly from our brand partners or Owned Private Label Brands merchandise vendors, who are responsible for the entire manufacturing process.
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.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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 II, Item 1A, and our unaudited condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes included in Part II, Item 8 of our Annual Report on Form 10-K (the “2025 Annual Report”) for the fiscal year ended August 2, 2025, filed with the Securities and Exchange Commission on September 25, 2025.
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 1, 2026 (“fiscal 2026”) and August 2, 2025 (“fiscal 2025”) consist of 52 weeks. Throughout this Quarterly Report, all references to quarters and years are to our fiscal quarters and fiscal years unless otherwise noted.
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. 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”). 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.
Since our inception, Stitch Fix has been powered by 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.
We offer a wide selection of apparel, shoes, and accessories for Women’s, Men’s, Kids, Petite, Maternity, and Plus categories. To ensure every client can find items they love, we curate merchandise across multiple price points and styles from established brand partners as well as our Owned Private Label Brands, which are created to serve unmet client needs. Our algorithms filter through this broad assortment to recommend a relevant subset of items to our Stylists or clients, who leverage these insights to select or purchase merchandise.
DISCONTINUED OPERATIONS
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 12, “Discontinued Operations” within the Notes to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for further details.
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FINANCIAL OVERVIEW
For the three months and six months ended January 31, 2026, we reported revenue, net of $341.3 million and $683.4 million, respectively, representing a year-over-year increase of 9.4% and 8.3%, respectively, compared to the same period in the prior year. As of January 31, 2026, and February 1, 2025, we had approximately 2,288,000 and 2,371,000 active clients, respectively, representing a year-over-year decrease of 3.5%.
During the six months ended January 31, 2026, we experienced an increase in net revenue year-over-year primarily due to an increase in net revenue per active client, driven by higher average order values and number of items kept per Fix, partially offset by a decline in active clients due to our challenges in acquiring and retaining active clients. Throughout the remainder of fiscal 2026, we expect broader macroeconomic uncertainty and market conditions to negatively impact consumer discretionary spending. However, we project that positive trends in average order values and the number of items kept per Fix will offset any negative impact of lower active client counts on net revenue in the remainder of 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. Refer to the section titled “Key Financial and Operating Metrics” for information on how we define and calculate active clients.
Net loss from continuing operations for three months and six months ended January 31, 2026, was $2.7 million and $9.0 million, respectively, compared to a net loss from continuing operations of $6.6 million and $12.9 million for the same period in the prior year.
For more information on the components of net loss from continuing operations for three months and six months ended, refer to the section titled “Results of Operations” below.
NON-GAAP FINANCIAL MEASURES
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 interest income and other (income) expense, net as these items are not components of the core business;
•Adjusted EBITDA does not reflect provision for income taxes, which may increase or decrease cash available;
•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 the Company attracts and retains employees and a significant recurring expense in its business;
•Adjusted EBITDA excludes costs incurred related to discrete restructuring plans and other one-time costs attributable to continuing operations that are fundamentally different in strategic nature and frequency from ongoing initiatives. The Company believes exclusion of these items facilitates a more consistent comparison of operating performance over time, however these costs do include cash outflows;
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•Adjusted EBITDA excludes non-ordinary course legal fees for specific proceedings that the Company has determined arise outside of the ordinary course of business and are nonrecurring, infrequent, or unusual; and
•Free Cash Flow does not represent the total residual cash flow available for discretionary purposes and does not reflect future contractual commitments.
Adjusted EBITDA
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:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||
| (in thousands) | January 31, 2026 | February 1, 2025 | January 31, 2026 | February 1, 2025 | ||||||||||||||||||||
| Net loss from continuing operations | $ | (2,654) | $ | (6,623) | $ | (9,016) | $ | (12,886) | ||||||||||||||||
| Add (deduct): | ||||||||||||||||||||||||
| Interest income | (2,182) | (2,663) | (4,538) | (5,595) | ||||||||||||||||||||
| Other expense, net | 30 | 79 | 115 | 151 | ||||||||||||||||||||
| Provision for income taxes | 66 | 182 | 124 | 339 | ||||||||||||||||||||
| Depreciation and amortization | 6,260 | 7,115 | 12,546 | 14,500 | ||||||||||||||||||||
| Stock-based compensation expense | 14,405 | 17,281 | 25,900 | 29,931 | ||||||||||||||||||||
Restructuring and other one-time costs (1) | — | 548 | — | 2,974 | ||||||||||||||||||||
Non-ordinary course legal fees (2) | — | — | 4,223 | — | ||||||||||||||||||||
| Adjusted EBITDA | $ | 15,925 | $ | 15,919 | $ | 29,354 | $ | 29,414 | ||||||||||||||||
(1) For the three months and six months ended February 1, 2025, restructuring charges were $0.2 million and $1.2 million, respectively, primarily in severance and employee-related benefits and other restructuring costs; and other one-time costs were $0.4 million and $1.8 million, respectively, in one-time bonuses for certain continuing employees.
(2) Non-ordinary course legal fees for the six months ended January 31, 2026, include costs related to a specific class action lawsuit.
Free Cash Flow
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:
| For the Six Months Ended | |||||||||||||
| (in thousands) | January 31, 2026 | February 1, 2025 | |||||||||||
| Free Cash Flow reconciliation: | |||||||||||||
| Net cash provided by (used in) operating activities from continuing operations | $ | 18,235 | $ | (1,944) | |||||||||
| Deduct: | |||||||||||||
| Purchases of property and equipment | (9,310) | (7,547) | |||||||||||
| Free Cash Flow | $ | 8,925 | $ | (9,491) | |||||||||
Net cash used in investing activities from continuing operations | $ | (1,477) | $ | (38,974) | |||||||||
| Net cash used in financing activities from continuing operations | $ | (11,928) | $ | (8,193) | |||||||||
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OPERATING METRICS
| January 31, 2026 | November 1, 2025 | August 2, 2025 | May 3, 2025 | February 1, 2025 | |||||||||||||||||||||||||||
Active clients (in thousands) | 2,288 | 2,307 | 2,309 | 2,353 | 2,371 | ||||||||||||||||||||||||||
Net revenue per active client | $ | 577 | $ | 559 | $ | 549 | $ | 542 | $ | 537 | |||||||||||||||||||||
Active Clients
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 2,288,000 and 2,371,000 active clients as of January 31, 2026, and February 1, 2025, respectively, representing a year-over-year decrease of 3.5%. 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.
Net Revenue per Active Client
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 $577 and $537 as of January 31, 2026, and February 1, 2025, respectively, or a year-over-year increase of 7.4%, respectively.
MACROECONOMIC ENVIRONMENT
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. While these conditions have not materially impacted our net revenues or client behavior to date in fiscal 2026, we anticipate that continued macroeconomic uncertainty may place pressure on consumer discretionary spending in the remainder of fiscal 2026, which may negatively impact our business.
INVENTORY MANAGEMENT
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.
CLIENT ACQUISITION AND ENGAGEMENT
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.
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Marketing expense is recorded in selling, general, and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. The largest component of our marketing expense is advertising, which for the three and six months ended January 31, 2026, was $28.9 million and $62.8 million, respectively, and for the three and six months ended February 1, 2025, was $24.4 million and $54.4 million, respectively. 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.
OPERATIONS AND INFRASTRUCTURE
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.
MERCHANDISE MIX
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.
REVENUE
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 Quarterly Report. We also recognize revenue resulting from estimated breakage income on gift cards.
COST OF GOODS SOLD
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. To date, tariffs have not materially impacted our cost of goods sold. However, we expect our cost of goods sold to increase in fiscal 2026 driven primarily by investments in our inventory assortment and rising transportation costs. 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.
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SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
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 year ended July 30, 2022 (“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.
INTEREST INCOME
Interest income is generated from our cash, cash equivalents, and investments in available-for-sale securities.
PROVISION FOR INCOME TAXES
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.
The following table summarizes our financial results from continuing operations:
| For the Three Months Ended | % | For the Six Months Ended | % | |||||||||||||||||||||||||||||||
| (in thousands) | January 31, 2026 | February 1, 2025 | Change | January 31, 2026 | February 1, 2025 | Change | ||||||||||||||||||||||||||||
| Revenue, net | $ | 341,297 | $ | 312,110 | 9.4 | % | $ | 683,424 | $ | 630,928 | 8.3 | % | ||||||||||||||||||||||
| Cost of goods sold | 192,352 | 173,249 | 11.0 | % | 385,155 | 347,262 | 10.9 | % | ||||||||||||||||||||||||||
| Gross profit | 148,945 | 138,861 | 7.3 | % | 298,269 | 283,666 | 5.1 | % | ||||||||||||||||||||||||||
| Selling, general, and administrative expenses | 153,685 | 147,886 | 3.9 | % | 311,584 | 301,657 | 3.3 | % | ||||||||||||||||||||||||||
| Operating loss | (4,740) | (9,025) | (47.5) | % | (13,315) | (17,991) | (26.0) | % | ||||||||||||||||||||||||||
| Interest income | 2,182 | 2,663 | (18.1) | % | 4,538 | 5,595 | (18.9) | % | ||||||||||||||||||||||||||
| Other expense, net | (30) | (79) | (62.0) | % | (115) | (151) | (23.8) | % | ||||||||||||||||||||||||||
| Loss before income taxes | (2,588) | (6,441) | (59.8) | % | (8,892) | (12,547) | (29.1) | % | ||||||||||||||||||||||||||
| Provision for income taxes | 66 | 182 | (63.7) | % | 124 | 339 | (63.4) | % | ||||||||||||||||||||||||||
| Net loss from continuing operations | $ | (2,654) | $ | (6,623) | (59.9) | % | $ | (9,016) | $ | (12,886) | (30.0) | % | ||||||||||||||||||||||
The components of our results from continuing operations as a percentage of revenue were as follows:
| For the Three Months Ended | For the Fiscal Year Ended | |||||||||||||||||||||||
| January 31, 2026 | February 1, 2025 | January 31, 2026 | February 1, 2025 | |||||||||||||||||||||
| Revenue, net | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||
| Cost of goods sold | 56.4 | % | 55.5 | % | 56.4 | % | 55.0 | % | ||||||||||||||||
| Gross margin | 43.6 | % | 44.5 | % | 43.6 | % | 45.0 | % | ||||||||||||||||
| Selling, general, and administrative expenses | 45.0 | % | 47.4 | % | 45.6 | % | 47.8 | % | ||||||||||||||||
| Operating loss | (1.4) | % | (2.9) | % | (1.9) | % | (2.9) | % | ||||||||||||||||
| Interest income | 0.6 | % | 0.9 | % | 0.7 | % | 0.9 | % | ||||||||||||||||
Other expense, net | — | % | — | % | — | % | — | % | ||||||||||||||||
| Loss before income taxes | (0.8) | % | (2.1) | % | (1.3) | % | (2.0) | % | ||||||||||||||||
| Provision for income taxes | — | % | 0.1 | % | — | % | 0.1 | % | ||||||||||||||||
| Net loss from continuing operations | (0.8) | % | (2.1) | % | (1.3) | % | (2.0) | % | ||||||||||||||||
STITCH FIX, INC. | Q2 2026 FORM 10-Q | 25
Note: Due to rounding, percentages in this table may not sum to totals.
REVENUE AND GROSS MARGIN
Revenue increased by $29.2 million and $52.5 million, or 9.4% and 8.3%, respectively, during the three months and six months ended January 31, 2026. The increase in revenue was primarily attributable to an improvement in net revenue per active client of 7.4% year over year, which was primarily driven by higher average order values with the number of items kept by our clients per Fix increasing, and higher average unit retail prices. Partially offsetting the net revenue per active client increase was 3.5% decrease in active clients from February 1, 2025, to January 31, 2026.
Gross margin for the three and six months ended January 31, 2026, decreased by 90 and 140 basis points, respectively, compared to the same periods in the prior year. The decrease for the three month period was primarily driven by higher transportation costs and higher costs related to inventory health management, partially offset by improved product margins. The decrease for the six month period was primarily driven by higher transportation costs and lower product margins.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
SG&A in the three months ended January 31, 2026, increased by $5.8 million compared to the same period. The increase was primarily driven by higher advertising spend and higher compensation and benefits expense, partially offset by lower stock-based compensation expense. SG&A in the six months ended January 31, 2026, increased $9.9 million compared to the same period in the prior year. The increase was primarily driven by higher advertising spend and professional fees, including $4.2 million in non-ordinary course legal fees.
SG&A as a percentage of revenue for three months ended January 31, 2026, decreased to 45.0% compared to 47.4% for the same period in the prior year. The decrease was primarily driven by lower compensation and benefits expense, including lower stock-based compensation expense, partially offset by higher advertising spend as a percentage of revenue. SG&A as a percentage of revenue for six months ended January 31, 2026, decreased to 45.6% compared to 47.8% for the same period in the prior year. The decrease was primarily driven by lower compensation and benefits expense, including lower stock-based compensation expense, partially offset by higher advertising spend and professional fees as a percentage of revenue.
PROVISION FOR INCOME TAXES
The following table summarizes our effective tax rate from loss from continuing operations for the periods presented:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||
| (in thousands, except percentages) | January 31, 2026 | February 1, 2025 | January 31, 2026 | February 1, 2025 | ||||||||||||||||||||
| Loss from continuing operations before income taxes | $ | (2,588) | $ | (6,441) | $ | (8,892) | $ | (12,547) | ||||||||||||||||
| Provision for income taxes | 66 | 182 | 124 | 339 | ||||||||||||||||||||
| Effective tax rate | (2.6) | % | (2.8) | % | (1.4) | % | (2.7) | % | ||||||||||||||||
Our continuing operations are subject to income taxes in the United States. Our effective tax rate for the three and six months ended January 31, 2026, differs from the federal statutory income tax rate primarily due to the full valuation allowance recorded on our net federal and state deferred tax assets. The tax provision for the three and six months ended January 31, 2026, is primarily comprised of state taxes.
Our effective tax rate for the three and six months ended February 1, 2025, differs from the federal statutory income tax rate primarily due to the full valuation allowance recorded on our net federal and state deferred tax assets. The tax provision for the three and six months ended February 1, 2025, is primarily comprised of state taxes.
STITCH FIX, INC. | Q2 2026 FORM 10-Q | 26
SOURCES OF LIQUIDITY
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 January 31, 2026, we had $118.8 million of cash and cash equivalents attributable to continuing operations, and $121.7 million of investments.
Credit Facility
As of January 31, 2026, we have a revolving credit facility with borrowing availability of $50.0 million, and excess availability of $33.1 million as a result of outstanding letters of credit, and no outstanding borrowing.
For information on the terms of the Credit Facility, refer to Note 5, “Credit Facility” within the Notes to unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
USES OF CASH
Our primary uses of cash include operating costs such as merchandise purchases, lease obligations, compensation and benefits, marketing, and other expenditures necessary to support our business.
We believe our existing cash, cash equivalents, investment balances, and the borrowing available under our 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.
SHARE REPURCHASES
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 the three and six months ended January 31, 2026, and February 1, 2025, the Company made no repurchases of Class A common stock. As of January 31, 2026, 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.
The following table summarizes our cash flows for the periods indicated below:
| For the Six Months Ended | |||||||||||||
| (in thousands) | January 31, 2026 | February 1, 2025 | |||||||||||
| Net cash provided by (used in) operating activities from continuing operations | $ | 18,235 | $ | (1,944) | |||||||||
| Net cash used in investing activities from continuing operations | (1,477) | (38,974) | |||||||||||
| Net cash used in financing activities from continuing operations | (11,928) | (8,193) | |||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 4,830 | $ | (49,111) | |||||||||
CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
During the six months ended January 31, 2026, cash provided by operating activities from continuing operations was $18.2 million, which consisted of a net loss from continuing operations of $9.0 million, adjusted by non-cash charges of $46.0 million and change in net operating assets and liabilities of $18.8 million. The non-cash charges were primarily driven by $25.9 million of stock-based compensation expense and $12.0 million of depreciation, amortization, and accretion. The change in net operating assets and liabilities was primarily due to a $10.1 million increase in gross inventory balances as we increased purchases for the fall and winter season and to invest in greater assortment.
STITCH FIX, INC. | Q2 2026 FORM 10-Q | 27
During the six months ended February 1, 2025, cash used in operating activities from continuing operations was $1.9 million, which consisted of a net loss from continuing operations of $12.9 million, adjusted by non-cash charges of $45.5 million and a $34.6 million change in net operating assets and liabilities. The non-cash charges were primarily driven by $29.9 million of stock-based compensation expense, $13.5 million of depreciation, amortization, and accretion, and a $2.0 million change in inventory reserves. The change in net operating assets and liabilities was primarily due to a $14.2 million net decrease in accounts payable and accrued liabilities driven by the timing of payments, and a $13.7 million in gross inventory balances due to higher inventory receipts.
CASH USED IN INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
During the six months ended January 31, 2026, cash used in investing activities from continuing operations was $1.5 million. This was due to purchases of securities available-for-sale of $33.5 million and purchases of property and equipment of $9.3 million, partially offset by sales and maturities of available-for-sale securities of $41.4 million.
During the six months ended February 1, 2025, cash used in investing activities from continuing operations was $39.0 million. This was primarily due to purchases of securities available-for-sale of $96.6 million, partially offset by the sales and maturities of available-for-sale securities of $65.1 million.
CASH USED IN FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
During the six months ended January 31, 2026, cash used in financing activities from continuing operations was $11.9 million primarily due to payments for tax withholding related to vesting of share-based awards of $12.3 million.
During the six months ended February 1, 2025, cash used in financing activities from continuing operations was $8.2 million due to payments for tax withholding related to vesting of share-based awards.
During the six months ended January 31, 2026, there were no material changes to our contractual obligations and other commitments from those disclosed in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Annual Report on Form 10-K.
Our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these unaudited condensed consolidated 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 on other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes to our critical accounting policies and estimates disclosed in our 2025 Annual Report on Form 10-K.
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-04-10 | O'Connor Casey | Chief Legal Officer | Sell | -60,000 | $3.08 | -$185,010 |
| 2026-04-07 | Aufderhaar David | Chief Financial Officer | Sell | -65,709 | $3.09 | -$202,732 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-09-24 10-K expected by 2026-09-30 (in 105 days)
- ~2026-12-04 10-Q expected by 2026-12-05 (in 176 days)
- ~2027-03-11 10-Q expected by 2027-03-12 (in 273 days)
- ~2027-06-10 10-Q expected by 2027-06-11 (in 364 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-06-10 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-01 8-K Other Events; Financial Statements and Exhibits
- 2026-03-17 8-K Officer/Director Change
- 2026-03-12 10-Q Quarterly Report
- 2026-03-11 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-16 8-K Material Agreement Entered; Shareholder Vote Results; Financial Statements and Exhibits
- 2025-12-05 10-Q Quarterly Report
- 2025-12-04 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-25 10-K Annual Report
- 2025-09-24 8-K Earnings Release; Financial Statements and Exhibits
- 2025-06-11 10-Q Quarterly Report
- 2025-06-10 8-K Earnings Release; Financial Statements and Exhibits
- 2025-03-12 10-Q Quarterly Report
- 2025-03-11 8-K Earnings Release; Financial Statements and Exhibits
- 2024-12-11 10-Q Quarterly Report