Stitch Fix, Inc. (SFIX) Business

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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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.

Inventory Management and Fulfillment

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.

COMPETITION

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.

Refer to Part I, Item 1A “Risk Factors — Our industry is highly competitive and if we do not compete effectively, our operating results could be adversely affected” for more information.

SEASONALITY

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.

INTELLECTUAL PROPERTY

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 file patents in the United States and abroad and intend to pursue additional patent protection to the extent we believe it 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.

Our proprietary algorithm technologies, other than those incorporated into a patent application, are protected by trade secret laws.

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.

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GOVERNMENT REGULATION

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.

HUMAN CAPITAL

As of August 2, 2025, we had approximately 4,165 full-time and part-time employees, including 1,710 Stylists and 1,700 fulfillment center employees.

None of our employees are represented by a labor union. We have not experienced any work stoppages due to employee disputes, and we consider our relations with our employees to be good.

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.

INFORMATION ABOUT SEGMENTS

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.

CORPORATE AND AVAILABLE INFORMATION

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.

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