Stitch Fix, Inc. (SFIX)

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”) each 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.

BUSINESS OVERVIEW

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 nine months ended May 2, 2026, we reported revenue, net of $340.3 million and $1,023.7 million, respectively, representing a year-over-year increase of 4.7% and 7.1%, respectively, compared to the same period in the prior year. As of May 2, 2026, and May 3, 2025, we had approximately 2,309,000 and 2,353,000 active clients, respectively, representing a year-over-year decrease of 1.9%.

During the nine months ended May 2, 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 the three months and nine months ended May 2, 2026, was $1.5 million and $10.5 million, respectively, compared to a net loss from continuing operations of $7.4 million and $20.3 million for the same periods in the prior year.

For more information on the components of net loss from continuing operations for three months and nine months ended, refer to the section titled “Results of Operations” below.

KEY FINANCIAL AND OPERATING METRICS

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:

(1)    For the three months and nine months ended May 3, 2025, restructuring charges were $0.0 million and $1.2 million, respectively, primarily in severance and employee-related benefits and other restructuring costs; and other one-time costs were $0.1 million and $1.9 million, respectively, in one-time bonuses for certain continuing employees.

(2)    Non-ordinary course legal fees for the nine months ended May 2, 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

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ITEM 7. 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 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.

BUSINESS OVERVIEW

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.

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 15, “Discontinued Operations” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for further details.

FINANCIAL OVERVIEW

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.

Net loss from continuing operations for fiscal 2025 was $28.8 million, compared to a net loss from continuing operations of $118.9 million for fiscal 2024.

For more information on the components of net loss from continuing operations for fiscal 2025, refer to the section titled “Results of Operations” below.

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RESTRUCTURING

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.

Refer to Note 14, “Restructuring” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for further details.

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.

KEY FINANCIAL AND OPERATING METRICS

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 our core business;

•Adjusted EBITDA does not reflect our provision for income taxes, which may increase or decrease cash available to us;

•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;

•Adjusted EBITDA excludes non-ordinary course legal fees for specific proceedings that we have 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 our future contractual commitments.

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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:

(1)    For fiscal 2024, “Depreciation and amortization” excluded $12.1 million that was reflected in “Restructuring and other one-time costs”.

(2)    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.

(3)    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.

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:

OPERATING METRICS

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

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