Stitch Fix, Inc.SFIX
Stitch Fix, Inc. Income Taxes Disclosure
| 11. | INCOME TAXES | ||||
The components of loss from continuing operations before income taxes were as follows:
| For the Fiscal Year Ended | ||||||||||||||||||||
| (in thousands) | August 2, 2025 | August 3, 2024 | July 29, 2023 | |||||||||||||||||
| Loss from continuing operations before income taxes: | ||||||||||||||||||||
| United States | $ | (28,023) | $ | (120,546) | $ | (149,465) | ||||||||||||||
| Total loss from continuing operations before income taxes | $ | (28,023) | $ | (120,546) | $ | (149,465) | ||||||||||||||
The components of the income tax provision (benefit) were as follows:
| For the Fiscal Year Ended | ||||||||||||||||||||
| (in thousands) | August 2, 2025 | August 3, 2024 | July 29, 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | 305 | $ | (1,663) | $ | 951 | ||||||||||||||
| State | 516 | 2 | (80) | |||||||||||||||||
| Total current | $ | 821 | $ | (1,661) | $ | 871 | ||||||||||||||
| Deferred: | ||||||||||||||||||||
| Total deferred | $ | — | $ | — | $ | — | ||||||||||||||
| Total income tax provision (benefit) | $ | 821 | $ | (1,661) | $ | 871 | ||||||||||||||
The reconciliation of our effective tax rate to the statutory federal rate was as follows:
| For the Fiscal Year Ended | ||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | August 2, 2025 | August 3, 2024 | July 29, 2023 | |||||||||||||||||||||||||||||||||||
| Taxes at federal statutory rate | $ | (5,885) | 21.0 | % | $ | (25,315) | 21.0 | % | $ | (31,388) | 21.0 | % | ||||||||||||||||||||||||||
| State taxes, net of federal effect | 456 | (1.6) | % | (11) | 0.0 | % | (214) | 0.1 | % | |||||||||||||||||||||||||||||
| Stock-based compensation | 1,310 | (4.7) | % | 8,376 | (6.9) | % | 14,917 | (10.0) | % | |||||||||||||||||||||||||||||
| Change in valuation allowance | 4,579 | (16.3) | % | 22,179 | (18.4) | % | 25,022 | (16.7) | % | |||||||||||||||||||||||||||||
| R&D credits | (975) | 3.5 | % | (6,032) | 5.0 | % | (8,426) | 5.6 | % | |||||||||||||||||||||||||||||
| Uncertain tax positions | — | — | % | (1,545) | 1.3 | % | 31 | 0.0 | % | |||||||||||||||||||||||||||||
| Return to provision | (52) | 0.2 | % | (207) | 0.2 | % | 2 | 0.0 | % | |||||||||||||||||||||||||||||
Excess officer’s compensation (2) | 1,032 | (3.7) | % | 376 | (0.3) | % | 445 | (0.3) | % | |||||||||||||||||||||||||||||
Meals and entertainment (2) | 321 | (1.1) | % | 380 | (0.3) | % | 415 | (0.3) | % | |||||||||||||||||||||||||||||
| Other | 35 | (0.1) | % | 138 | (0.1) | % | 67 | 0.0 | % | |||||||||||||||||||||||||||||
Effective tax rate (1) | $ | 821 | (2.9) | % | $ | (1,661) | 1.4 | % | $ | 871 | (0.6) | % | ||||||||||||||||||||||||||
(1) Due to rounding, percentages in this table may not sum to totals.
(2) Fiscal 2024 and fiscal 2023 amounts have been reclassified to conform to the current fiscal year presentation. Amounts were previously classified as “Other.”
Our provision for income taxes increased in fiscal 2025 as compared to fiscal 2024, primarily due to a decrease in pre-tax losses, partially offset by a decrease in the reversal of stock-based compensation expenses.
Our provision for income taxes decreased in fiscal 2024 as compared to fiscal 2023, primarily due to reserve releases from lapses in statutes of limitation and effective settlement of prior year tax positions.
The components of net deferred tax assets were as follows:
| (in thousands) | August 2, 2025 | August 3, 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Inventory reserve and UNICAP | $ | 14,612 | $ | 11,816 | ||||||||||
| Accruals and reserves | 2,165 | 1,937 | ||||||||||||
| Research and development credits | 48,304 | 48,424 | ||||||||||||
| Capitalized research and development costs | 48,602 | 40,094 | ||||||||||||
| Stock-based compensation | 6,724 | 7,892 | ||||||||||||
| Deferred revenue | 1,148 | 1,661 | ||||||||||||
| Operating lease liability | 24,473 | 30,889 | ||||||||||||
| Net operating losses | 53,880 | 59,938 | ||||||||||||
| Other | 1,719 | 2,071 | ||||||||||||
| Gross deferred tax assets | $ | 201,627 | $ | 204,722 | ||||||||||
| Less: valuation allowance | (179,564) | (176,732) | ||||||||||||
| Deferred tax assets, net of valuation allowance | $ | 22,063 | $ | 27,990 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Depreciation and amortization | $ | (8,281) | $ | (10,747) | ||||||||||
| Operating lease right-of-use assets | (13,400) | (16,767) | ||||||||||||
| Other | (382) | (476) | ||||||||||||
| Gross deferred tax liabilities | $ | (22,063) | $ | (27,990) | ||||||||||
| Net deferred tax assets, net of valuation allowance | $ | — | $ | — | ||||||||||
As of August 2, 2025, and August 3, 2024, we had federal net operating loss carryforwards of $161.1 million and $186.7 million, respectively, which will be carried forward indefinitely. As of August 2, 2025, and August 3, 2024, we had federal research and development tax credit carryforwards of $57.3 million and $57.1 million, respectively. The research and development tax credits will expire beginning in 2038, if not utilized.
As of August 2, 2025, and August 3, 2024, we had state net operating loss carryforwards of $311.7 million and $328.5 million, respectively. Of these carryforwards, approximately $237.6 million will expire, if not utilized, in various years through 2045. The remaining carryforwards have no expiration. As of August 2, 2025, and August 3, 2024, we had California research and development tax credit carryforwards of $24.2 million and $24.1 million, respectively, which are not subject to expiration. Utilization of the net operating loss carryforwards, tax credits, and other tax attributes may be subject to various limitations due to the ownership change limitations provided by IRC Section 382 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before their utilization and reduce our ability to offset future income with our tax attributes.
On July 4, 2025, the One Big Beautiful Bill Act (the “2025 Tax Act”) was signed into law. The 2025 Tax Act includes a broad range of tax reform that may affect the Company’s financial results, including domestic research cost expensing and 100% first-year bonus depreciation. For tax years beginning after December 31, 2024, taxpayers may elect to either (i) immediately deduct eligible Section 174 research expenditures or (ii) capitalize and amortize such costs over a period of no less than 60 months. We are currently evaluating the impact of the 2025 Tax Act upon our future effective tax rate, tax liabilities, and cash taxes.
UNCERTAIN TAX POSITIONS
A reconciliation of our unrecognized tax benefits is as follows:
| (in thousands) | August 2, 2025 | August 3, 2024 | July 29, 2023 | |||||||||||||||||
| Balance at the beginning of the year | $ | 32,816 | $ | 29,916 | $ | 26,106 | ||||||||||||||
| Lapse of statute of limitations | — | (377) | (474) | |||||||||||||||||
| Increase related to prior period tax positions | 33 | 2,572 | 1,134 | |||||||||||||||||
| Decrease related to prior period tax positions | (18) | (1,927) | — | |||||||||||||||||
| Increase related to current year tax positions | 341 | 2,632 | 3,150 | |||||||||||||||||
Balance at the end of the year | $ | 33,172 | $ | 32,816 | $ | 29,916 | ||||||||||||||
The amount of unrecognized tax benefits relating to our tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations. The Company does not expect its gross unrecognized tax benefits to change significantly within the next 12 months. As of August 2, 2025, the total amount of unrecognized tax benefits, if recognized, would not affect the Company’s effective tax rate due to the existence of carryforwards and the valuation allowance in the United States and applicable U.S. state jurisdictions.
We recognize interest related to uncertain tax positions in our provision for income taxes. As of August 2, 2025, no interest or penalties have been recorded.
We file income tax returns in the U.S. federal and various state and local jurisdictions. As of August 2, 2025, our fiscal 2021 through fiscal 2024 tax returns are subject to potential examination in one or more jurisdictions.
We regularly assess whether it is more likely than not that we will realize our deferred tax assets in each taxing jurisdiction in which we operate. We consider many factors when assessing the likelihood of future realization, including our recent cumulative loss, earnings expectations in earlier future years, and other relevant factors. We continue to record a full valuation allowance on our U.S. federal and state net deferred tax assets due to cumulative historical losses. The valuation allowance primarily relates to federal and state deferred tax assets, including unrealized credit carryforwards and net operating losses. The valuation allowance increased by $2.8 million in fiscal 2025, and by $22.0 million in fiscal 2024.
A reconciliation of our valuation allowance was as follows:
| (in thousands) | August 2, 2025 | August 3, 2024 | ||||||||||||
| Valuation allowance at the beginning of the year | $ | 176,732 | $ | 154,757 | ||||||||||
| Valuation allowance charged to expense | 5,632 | 29,246 | ||||||||||||
| Valuation allowance credited to other accounts | (2,800) | (7,271) | ||||||||||||
| Valuation allowance at the end of the year | $ | 179,564 | $ | 176,732 | ||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 25, 2025 | Showing above |
| 2024 | Sep 25, 2024 | |
| 2018 | Oct 3, 2018 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.