Stitch Fix, Inc.

Previous wording

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.

Current wording

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 ended August 1, 2026 (“fiscal 2026”) and August 2, 2025 (“fiscal 2025”) 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.

Previous wording

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.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Special Note Regarding Forward-Looking Statements”, Item 1, Item 1A, and Item 8 of this Annual Report. In addition, refer to our discussion and analysis of our financial condition and results of operations from fiscal 2025 to fiscal 2024 in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended August 2, 2025.

Previous wording

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.

Current wording

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 AI and recommendation algorithms. 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

Previous wording

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.

Current wording

Net loss from continuing operations for fiscal 2026 was $12.6 million, compared to Net loss from continuing operations of $28.8 million for the prior year.

Previous wording

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

Current wording

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

Previous wording

•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;

Current wording

•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 employees and a significant recurring expense in our business;

Previous wording

•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;

Current wording

•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. We believe exclusion of these items facilitates a more consistent comparison of operating performance over time, however these costs do include cash outflows;

Previous wording

•Free Cash Flow does not represent the total residual cash flow available for discretionary purposes and does not reflect our future contractual commitments.

Current wording

•Free Cash Flow does not represent the total residual cash flow available for discretionary purposes and does not reflect future contractual commitments.

Previous wording

(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.

Current wording

(2) Non-ordinary course legal fees include costs related to a specific class action lawsuit.

Previous wording

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

Current wording

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 2,277,000 and 2,309,000 active clients as of August 1, 2026, and August 2, 2025,

Previous wording

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 2,309,000 and 2,508,000 active clients as of August 2, 2025, and August 3, 2024, respectively, representing a year-over-year decrease of 7.9%. 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.

Current wording

respectively, representing a year-over-year decrease of 1.4%. The decrease in active clients is due to inactive clients outpacing client additions during the year, which we largely attribute to client conversion and retention challenges.

Previous wording

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 $549 and $533 as of August 2, 2025, and August 3, 2024, respectively, or a year-over-year increase of 3.0%.

Current wording

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 $592 and $549 as of August 1, 2026, and August 2, 2025, respectively, or a year-over-year increase of 7.8%.

Previous wording

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. However, we anticipate that broader macroeconomic uncertainty and market conditions will put increased pressure on consumer discretionary spending in fiscal 2026, which may negatively impact our business.

Current wording

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. Beginning in the fourth quarter of fiscal 2026, we began to see impacts from these conditions. We anticipate that macroeconomic uncertainty will continue to place pressure on consumer discretionary spending, which we expect to negatively impact our business in fiscal 2027.

Previous wording

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.

Current wording

To grow our business, we remain focused on retaining current clients, attracting new clients, improving client conversion, and enhancing our overall client experience for new and existing clients. 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, and public relations expenses. Our marketing expenses have varied from period to period and we expect this trend to continue.

Previous wording

Marketing expense is recorded in selling, general, and administrative expenses in the consolidated statements of operations and comprehensive loss. The largest component of our marketing expense is advertising, which was $117.3 million and $111.4 million for fiscal 2025 and fiscal 2024. 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.

Current wording

Marketing expense is recorded in Selling, general, and administrative expenses (“SG&A”) in the consolidated statements of operations and comprehensive loss. The largest component of our marketing expense is advertising, which was $129.6 million and $117.3 million for the fiscal year ended August 1, 2026 and August 2, 2025, 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.

Previous wording

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.

Current wording

We intend to leverage our data science and deep understanding of our clients’ needs to make targeted investments in technology and product. AI continues to gain momentum in the economy and we are responding by continuing to integrate AI into our internal business processes and operating strategy, focusing on seeking and retaining AI talent, and utilizing AI to enhance client-facing experiences.

Previous wording

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.

Current wording

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 conversion and retention, we may at times optimize our inventory strategy to prioritize long-term client retention over short-term gross margin impact.

Previous wording

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

Current wording

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 sell merchandise across a broad range of price points and may further broaden our price point offerings in the future.

Previous wording

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.

Current wording

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 in an effort 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.

Previous wording

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 Annual Report. We also recognize revenue resulting from estimated breakage income on gift cards.

Current wording

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 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 Annual Report. We also recognize revenue resulting from estimated breakage income on gift cards.

Previous wording

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. We expect our cost of goods sold to increase in fiscal 2026 if tariffs are sustained at heightened levels. 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.

Current wording

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 that impact our gross margins, payment processing fees, and packaging materials costs, offset by the recoverable cost of merchandise estimated to be returned. Our classification of cost of goods sold may vary from other companies in our industry and may not be comparable.

Previous wording

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 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.

Current wording

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, facility costs for our fulfillment centers and office, professional service fees, information technology costs, and depreciation and amortization expense. Our classification of certain components within SG&A may vary from other companies in our industry and may not be comparable.

Previous wording

Revenue in fiscal 2025 decreased by $70.3 million, or 5.3%, compared to fiscal 2024, which included a $21.6 million impact of an extra week. Excluding the impact of an extra week, revenue in fiscal 2025 decreased by $48.7 million or 3.7%, compared to fiscal 2024. The decline in revenue was primarily attributable to a 7.9% decrease in active clients from August 3, 2024, to August 2, 2025, which led to a decrease in sales of merchandise. Partially offsetting the revenue decline was an improvement in net revenue per active client, which was driven by higher average order values with the number of items kept by our clients per Fix increasing, and higher average unit retail prices.

Current wording

Revenue, net in fiscal 2026 increased by $80.9 million, or 6.4%, compared to the prior year. The increase was primarily due to an improvement in net revenue per active client of 7.8% year over year and higher average order values, driven by the number of items kept by our clients per Fix increasing and higher average unit retail prices. This increase was partially offset by a 1.4% decrease in active clients from August 2, 2025 to August 1, 2026.

Previous wording

Gross margin for fiscal 2025 increased by 10 basis points compared to the prior year period. The increase was primarily driven by higher average order values and transportation leverage due to improvements in carrier mix and rate negotiations with key carriers that offset some of the impact of rising shipping costs, partially offset by lower product margins.

Current wording

Gross margin for fiscal 2026 decreased by 70 basis points compared to the prior year. The decrease was primarily driven by higher transportation costs and lower product margins, partially offset by improved costs related to inventory health management.

Previous wording

SG&A as a percentage of revenue decreased to 47.5% for fiscal 2025, compared to 54.2% for fiscal 2024. The decrease was primarily driven by lower compensation and benefits expense including lower stock-based

Current wording

SG&A as a percentage of revenue decreased to 45.3% for fiscal 2026, compared to 47.5% for the prior year, primarily driven by lower compensation and benefits expense as a percentage of revenue.

Previous wording

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 August 2, 2025, we had $114.0 million of cash and cash equivalents attributable to continuing operations, and $128.8 million of investments. As of August 2, 2025, we had repatriated our remaining cash held outside of the U.S. in the UK.

Current wording

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 August 1, 2026, we had $95.3 million of cash and cash equivalents attributable to continuing operations, and $125.6 million of investments.

Previous wording

For information on the terms of the 2023 Credit Facility, refer to Note 7, “Credit Facility” within the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report.

Current wording

Refer to Note 7 in Part II, Item 8 of this Annual Report for information on the terms of the Credit Facility.

Previous wording

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.

Current wording

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. From time-to-time, we also use cash to repurchase shares of our Class A common stock.

Previous wording

We believe our existing cash, cash equivalents, investment balances, and the borrowing available under our 2023 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.

Current wording

We believe our existing principal sources of liquidity will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months and beyond.

Previous wording

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 fiscal 2025 and fiscal 2024, the Company made no repurchases of Class A common stock. As of August 2, 2025, 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.

Current wording

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 our existing cash and cash equivalents or future cash flow. The repurchase program may be modified, suspended, or terminated at any time. Refer to Note 12 in Part II, Item 8 of this Annual Report for information on the 2022 Repurchase Program.

Previous wording

During the fiscal 2024, cash provided by operating activities from continuing operations was $28.2 million, which consisted of a net loss from continuing operations of $118.9 million, adjusted by non-cash charges of $124.6 million and a $22.5 million change in net operating assets and liabilities. The non-cash charges were primarily driven by $76.8 million of stock-based compensation expense and $44.5 million of depreciation, amortization, and accretion, $19.3 million of asset impairment, partially offset by $15.1 million of changes in inventory reserves. The change in net operating assets and liabilities was primarily due to a $47.7 million change in gross inventory balances due to a decline in inventory receipts to bring inventory balances in line with current demand.

Current wording

During fiscal 2026, cash provided by operating activities from continuing operations was $39.1 million, which consisted of a net loss from continuing operations of $12.6 million, adjusted by non-cash charges of $68.6 million and change in net operating assets and liabilities of $16.9 million. The non-cash charges were primarily driven by $46.4 million of stock-based compensation expense and $22.6 million of depreciation, amortization, and accretion. The change in net operating assets and liabilities was primarily driven by $13.2 million decrease in operating lease right-of-use assets and liabilities from usual business activities and $2.8 million increase in gross inventory balances due to higher inventory receipts and investment in greater assortment.

Previous wording

During fiscal 2025, cash provided by operating activities from continuing operations was $25.6 million, which consisted of a net loss from continuing operations of $28.8 million, adjusted by non-cash charges of $87.2 million and change in net operating assets and liabilities of $32.8 million. The non-cash charges were primarily driven by $56.7 million of stock-based compensation expense and $26.1 million of depreciation, amortization, and accretion. The change in net operating assets and liabilities was primarily due to a $24.8 million increase in gross inventory balances due to higher inventory receipts.

Current wording

During fiscal 2025, cash provided by operating activities from continuing operations was $25.6 million, which consisted of a net loss from continuing operations of $28.8 million, adjusted by non-cash charges of $87.2 million and a $32.8 million change in net operating assets and liabilities. The non-cash charges were primarily driven by $56.7 million of stock-based compensation expense and $26.1 million of depreciation, amortization, and accretion. The change in net operating assets and liabilities was primarily due to a $24.8 million increase in gross inventory balances due to higher inventory receipts.

Previous wording

During the fiscal 2024, cash used in investing activities from continuing operations was $78.7 million. This was primarily due to purchases of securities available-for-sale of $97.3 million and purchases of property and equipment of $14.0 million, partially offset by the maturities of available-for-sale securities of $32.2 million.

Current wording

During fiscal 2026, cash used in investing activities from continuing operations was $15.4 million. This was primarily due to purchases of securities available-for-sale of $119.0 million and purchases of property and equipment of $19.2 million, partially offset by sales and maturities of available-for-sale securities of $122.8 million.

Previous wording

During fiscal 2025, cash used in investing activities from continuing operations was $59.1 million. This was due to purchases of securities available-for-sale of $197.9 million and purchases of property and equipment of $16.3 million, partially offset by sales and maturities of available-for-sale securities of $155.1 million.

Current wording

During fiscal 2025, cash used in investing activities from continuing operations was $59.1 million. This was primarily due to purchases of securities available-for-sale of $197.9 million and purchases of property and equipment of $16.3 million, partially offset by the sales and maturities of available-for-sale securities of $155.1 million.

Previous wording

During fiscal 2025, cash used in financing activities from continuing operations was $15.0 million primarily due to payments for tax withholding related to vesting of restricted stock units of $16.0 million.

Current wording

During fiscal 2025, cash used in financing activities from continuing operations was $15.0 million, primarily due to payments for tax withholdings related to vesting of share-based awards of $16.0 million.

Previous wording

Our most significant contractual obligations relate to purchase commitments of inventory and operating lease obligations related to our fulfillment centers and corporate office. As of August 2, 2025, we had remaining commitments of $138.4 million for inventory purchases, predominantly due within one year, and $63.7 million for other service agreements due over the next one to three years.

Current wording

Our most significant contractual obligations relate to purchase commitments of inventory and operating lease obligations related to our fulfillment centers and corporate office. As of August 1, 2026, we had remaining commitments of $182.3 million for inventory purchases, predominantly due within one year, and $54.4 million for other service agreements due over the next one to three years.

Previous wording

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these 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 other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these 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

Previous wording

Inventory, net consists of finished goods which are recorded at the lower of cost or net realizable value using the first-in-first-out (“FIFO”) method. We establish a reserve for excess and slow-moving inventory we expect to write off or sell below cost as liquidations based on historical trends, which considers factors such as the age of the inventory and sell through rate for a particular item. In addition, we estimate and accrue shrinkage as a percentage of inventory out to the client and also accrue for damaged items and items we intend to liquidate. Estimates are made to reduce the inventory value for lost, stolen, damaged, or liquidated items to net realizable value. If actual experience differs significantly from our estimates due to changes in client merchandise preferences, client demand, or economic conditions, additional inventory write-downs may be required which could adversely affect our operating results. A 10% change in our inventory reserves estimate as of August 2, 2025, would result in a change in reserves of approximately $2.8 million.

Current wording

Inventory, net consists of finished goods which are recorded at the lower of cost or net realizable value using the first-in-first-out (“FIFO”) method. We establish a reserve for excess and slow-moving inventory we expect to write off or sell below cost as liquidations based on historical trends, which considers factors such as the age of the inventory and sell through rate for a particular item. In addition, we estimate and accrue shrinkage as a percentage of inventory out to the client and also accrue for damaged items and items we intend to liquidate. Estimates are made to reduce the inventory value for lost, stolen, damaged, or liquidated items to net realizable value. If actual experience differs significantly from our estimates due to changes in client merchandise preferences, client demand, or economic conditions, additional inventory write-downs may be required which could adversely affect our operating results. A 10% change in our inventory reserves estimate as of August 1, 2026, would result in a change in reserves of approximately $2.6 million.

Previous wording

We grant stock options to our employees and members of our Board of Directors, and recognize stock-based compensation expense based on the fair value of such awards at grant date.

Current wording

Our stock-based compensation plans allow for the Company to grant performance restricted stock unit (“PSU”) awards and nonqualified stock options to employees, directors, and non-employees under terms and provisions established by our Board of Directors. PSU awards and stock options require certain estimates and judgments to determine the fair value of the award. We recognize stock-based compensation expense based on the fair value of such awards at the award grant date, net of estimated forfeitures. We estimate forfeitures based on our historical forfeiture of the respective award.

Previous wording

We estimate the fair value of stock options using the Black-Scholes option-pricing model.

Current wording

To determine the fair value of stock options, the Company uses the Black-Scholes option-pricing model.