Stitch Fix, Inc.SFIX
Stitch Fix, Inc. Stock Compensation Disclosure
| 10. | STOCK-BASED COMPENSATION | ||||
STOCK PLANS
2011 Equity Incentive Plan
In 2011, we adopted the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provided for the grant of stock-based awards to employees, directors, and non-employees under terms and provisions established by the Board of Directors.
The 2011 Plan allowed for the grant of incentive stock options or nonqualified stock options, as well as restricted stock unit (“RSU”) awards, restricted stock awards (“RSAs”), and stock appreciation rights. Only incentive and nonqualified stock options were granted under the 2011 Plan. Employee stock option awards generally vested 25% on the first anniversary of the grant date with the remaining shares subject to the option vesting ratably over the next three years subject to the employee’s continued service with the Company. Options generally expire after 10 years. Effective upon our initial public offering in 2017, the 2011 Plan was replaced by the 2017 Incentive Plan.
2017 Incentive Plan
In November 2017, our Board of Directors and stockholders adopted our 2017 Incentive Plan (the “2017 Plan”). The remaining shares available for issuance under our 2011 Plan became reserved for issuance under the 2017 Plan. Our 2017 Plan provides for the grant of Class A incentive stock options to employees and for the grant of nonqualified stock options, stock appreciation rights, RSAs, RSU awards, performance restricted stock unit (“PSU”) awards, performance cash awards, and other forms of stock awards to employees, directors, and consultants. Employee stock option awards generally begin to vest six months after the grant date with the remaining shares subject to the option vesting ratably over the next 30 months. Options generally expire after 10 years. RSU awards made to employees generally vest ratably on a quarterly basis subject to the employee’s continued service with the Company. PSU awards made to employees generally vest on a quarterly basis following the end of the performance period, subject to the employee’s continued service with the Company. As of August 2, 2025, the number of shares authorized for issuance under the 2017 Plan was 50,276,797 shares of Class A common stock, and the number of shares available for grant was 2,630,245.
The following table summarizes the shares available for grant under the 2017 Plan:
| Shares Available for Grant | ||||||||
Balance at August 3, 2024 | 5,239,593 | |||||||
| Authorized | 6,237,914 | |||||||
| Granted | (13,452,678) | |||||||
| Forfeited | 4,605,416 | |||||||
Balance at August 2, 2025 | 2,630,245 | |||||||
2019 Inducement Plan
In October 2019, our Board of Directors adopted our 2019 Inducement Plan (the “2019 Plan”). Our 2019 Plan provides for the grant of Class A nonqualified stock options and RSU awards to individuals who satisfy the standards for inducement grants under the relevant Nasdaq Stock Market rules. As of August 2, 2025, the number of shares authorized for issuance under the 2019 Plan was 10,750,000 shares of Class A common stock and the number of shares available for grant was 1,967,541.
STOCK OPTIONS
Stock option activity under the 2011 Plan, 2017 Plan, and 2019 Plan was as follows:
| Options Outstanding | ||||||||||||||||||||||||||
| Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||||||||||||
Balance at August 3, 2024 | 10,094,852 | $ | 5.67 | 8.36 | $ | 4,272 | ||||||||||||||||||||
| Exercised | (294,566) | 3.71 | ||||||||||||||||||||||||
| Cancelled | (483,791) | 11.50 | ||||||||||||||||||||||||
Balance at August 2, 2025 | 9,316,495 | $ | 5.43 | 7.41 | $ | 6,774 | ||||||||||||||||||||
| Options vested and exercisable at year-end | 6,510,370 | $ | 6.17 | 7.09 | $ | 4,264 | ||||||||||||||||||||
| Options vested and expected to vest at year-end | 9,311,243 | $ | 5.42 | 7.41 | $ | 6,771 | ||||||||||||||||||||
There were no options granted during fiscal 2025. The weighted-average grant date fair value of options granted during fiscal 2024 and fiscal 2023 was $2.09 and $2.72 per share, respectively. The total grant date fair value of options that vested during fiscal 2025, fiscal 2024, and fiscal 2023 was $7.3 million $7.1 million and $11.8 million, respectively. The aggregate intrinsic value of options exercised during fiscal 2025, fiscal 2024, and fiscal 2023 was $0.4 million, $0.1 million, $0.4 million, respectively. The aggregate intrinsic value of options exercised is the difference between the fair value of the underlying common stock on the date of exercise and the exercise price for in-the-money stock options.
RESTRICTED STOCK UNIT AWARDS
Employee RSUs are granted under the 2017 Plan and 2019 Plan, settle into Class A common stock, and generally vest ratably on a quarterly basis subject to the employee’s continued service with the Company.
RSU award activity under the 2017 Plan and 2019 Plan was as follows:
| Unvested RSU Awards | |||||||||||
| Class A Common Stock | Weighted- Average Grant Date Fair Value | ||||||||||
Unvested at August 3, 2024 | 8,239,439 | $ | 6.04 | ||||||||
| Granted | 10,813,687 | 3.36 | |||||||||
| Vested | (7,423,416) | 4.61 | |||||||||
| Forfeited | (5,038,425) | 4.83 | |||||||||
Unvested at August 2, 2025 | 6,591,285 | $ | 4.18 | ||||||||
PERFORMANCE RESTRICTED STOCK UNIT AWARDS
In each of the first and second quarter of fiscal 2025, the Compensation Committee approved certain PSU awards, which become eligible to vest in multiple tranches over a - or three-year period. Each PSU award represents a contingent right to receive one share of Class A common stock. The awards have both service-based and performance-based vesting conditions. The actual number of shares earned on vesting ranges from 0% to 150% of the target number granted, depending on the attainment of specified performance-based metrics during the performance period, which is fiscal 2025.
In July 2025, the Company granted a PSU award to a senior executive which includes market-based and service-based vesting conditions. The award is eligible to vest in four equal tranches. Each tranche is subject to the achievement of a stock price hurdle, in which the Company’s closing stock price must be at or above a specified stock price target for 30 consecutive trading days, during a four-year performance period, as well as continued employment through each applicable vesting date. When a stock price hurdle is achieved, 25% of the number of granted awards are eligible to vest.
PSU award activity under the 2017 Plan was as follows:
| Unvested PSU Awards | |||||||||||
| Class A Common Stock | Weighted- Average Grant Date Fair Value | ||||||||||
Unvested at August 3, 2024 | — | $ | — | ||||||||
| Granted | 2,638,991 | 3.48 | |||||||||
Unvested at August 2, 2025 | 2,638,991 | $ | 3.48 | ||||||||
STOCK-BASED COMPENSATION EXPENSE
Stock-based compensation expense for options, RSU awards, and PSU awards granted to employees for fiscal 2025 was $56.7 million. For fiscal 2024 and 2023, stock-based compensation expense for options and RSU awards granted to employees was $76.8 million and $102.1 million. Stock-based compensation expense is included in selling, general, and administrative expenses in the consolidated statements of operations and comprehensive loss.
The Company recognized no income tax benefit from stock-based compensation during fiscal 2025, fiscal 2024 and fiscal 2023 as the Company currently maintains a full valuation allowance against its net deferred tax assets.
As of August 2, 2025, the total unrecognized compensation expense related to unvested options, RSU awards, and PSU awards, net of estimated forfeitures, was $33.2 million, which we expect to recognize over an estimated weighted average period of 1.22 years.
Stock-based compensation expense related to RSU awards is recorded, net of forfeitures, over the requisite service period using the straight-line method such that an expense is only recognized for those awards that we expect to vest. Stock-based compensation expense related to PSU awards is recorded under the accelerated method. For PSU awards without a market-based vesting condition, stock-based compensation is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions. Stock-based compensation expense related to stock options is recorded by estimating the fair value of stock-based awards using the Black-Scholes option pricing model and amortizing the fair value of the stock-based awards granted over the applicable vesting period of the awards on a straight-line basis.
For PSU awards with a market-based vesting condition, the Company uses a Monte Carlo simulation, which uses subjective assumptions and simulates multiple stock price paths of the Common Stock to determine the fair value of market-based PSUs on the grant date. Stock-based compensation expense is recognized using an accelerated attribution method over the lesser of the derived performance periods or explicit achievement of the stock price hurdles. Compensation expense is recorded regardless of whether the market condition will be ultimately satisfied.
The fair value of stock options granted in fiscal 2024 and fiscal 2023 to employees was estimated at the grant date using the Black-Scholes option-pricing model with the following assumptions:
| For the Fiscal Year Ended | ||||||||||||||
| August 3, 2024 | July 29, 2023 | |||||||||||||
| Expected term (in years) | 3.7 - 5.5 | 3.2 - 5.5 | ||||||||||||
| Volatility | 77.3% - 79.9% | 80.3% - 87.3% | ||||||||||||
| Risk free interest rate | 4.1% - 4.8% | 3.6% - 4.4% | ||||||||||||
| Dividend yield | —% | —% | ||||||||||||
The following assumptions are used to establish the fair value of the Company’s PSUs with market-based vesting conditions:
For the Fiscal Year Ended | |||||
| August 2, 2025 | |||||
Fair value per tranche | $3.01 - $3.64 | ||||
Derived service period (in years) | 0.59 - 1.57 | ||||
Expected volatility | 83.2% | ||||
Risk-free rate | 3.8% | ||||
| Cost of equity | 20.6% | ||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.