Item 2.05 Costs Associated with Exit or Disposal Activities.
As disclosed prior to the date of this report, Stitch Fix, Inc. (the "Company")
previously committed to a restructuring in 2022 to reduce operating costs that
included elimination of approximately 15% of employees in salaried positions,
representing approximately 4% of the Company's employees in total. In
furtherance of and as an expansion of this restructuring plan, on January 5,
2023, the Company is implementing a plan of termination that includes the
elimination of approximately 6% of the Company's current employee workforce,
including approximately 20% of employees in salaried positions (the "January
2023 Reduction in Force" and, together with the previously announced
restructuring, the "Restructuring Plan").
As of October 29, 2022, the Company had incurred $18.7 million in restructuring
charges in connection with the Restructuring Plan, excluding charges relating to
the January 2023 Reduction in Force. As a result of the January 2023 Reduction
in Force, the Company estimates that it will incur between $15 million and
$20 million in cash restructuring charges for separation-related payments,
benefits, and related taxes. The Company expects that most expenses related to
the January 2023 Reduction in Force will be incurred by the end of the quarter
ending January 28, 2023, and expects most cash payments related to the January
2023 Reduction in Force to be completed by the end of the quarter ending
April 29, 2023.
The Company may incur other charges or cash expenditures not currently
contemplated that may occur as a result of or in connection with the
Restructuring Plan, including the January 2023 Reduction in Force. The Company
intends to exclude such charges from its calculation of adjusted EBITDA.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
On January 4, 2023, in connection with the Company's Reduction in Force, the
Company and Elizabeth Spaulding, the Company's Chief Executive Officer, agreed
that she would step down from her employment with the Company and from the Board
of Directors, effective January 5, 2023. In connection with Ms. Spaulding's
termination of employment, she entered into a separation agreement with the
Company that provides she will receive 12 months of salary and 15 months of
health care coverage reimbursement and will provide consulting services to the
Company through March 31, 2023. Ms. Spaulding's resignation from the Board of
Directors is not the result of any disagreement with the Company on any matter
relating to the Company's operations, policies or practices.
Also on January 4, 2023, the Board of Directors appointed Katrina Lake, the
Company's Founder and Executive Chairperson of the Board of Directors, as Chief
Executive Officer, effective January 5, 2023, to serve in an interim capacity
for six months or until her successor is appointed, or until such other date as
may be mutually agreed by Ms. Lake and the Board of Directors. Ms. Lake, age 40,
served as the Company's Chief Executive Officer from its inception until July
2021, and is currently a non-executive employee of the Company. She has been a
member of the Board of Directors since the Company's inception in 2011. Ms. Lake
holds a B.A. in Economics from Stanford University and an M.B.A. from Harvard
University.
On this same date, the Compensation Committee of the Board of Directors approved
an amended and restated employment offer letter with Ms. Lake that provides that
Ms. Lake will receive no change in her annual base salary, which is currently
$80,000, and two options to purchase a total of 200,000 shares of the Company's
Class A common stock with an exercise price equal to the closing price of the
Company's Class A common stock on the date of grant, which will be January 6,
2023. The first option, for 150,000 shares, will vest upon the earlier to occur
of July 5, 2023 and the first day of employment of a successor Chief Executive
Officer (the "Cliff Vesting Option"). The second option, for 50,000 shares, will
vest upon the first day of employment of a successor Chief Executive Officer,
provided her successor is offered the role prior to July 5, 2023. The Cliff
Vesting Option will be subject to full acceleration of vesting in the event of
either a termination of Ms. Lake's employment as Chief Executive Officer by the
Company without cause, whether or not in connection with a change in control, or
resignation by Ms. Lake for good reason, prior to July 6, 2023. Ms. Lake is also
entitled to 12 months of heath care coverage reimbursement in the event of
either a termination of Ms. Lake's employment as Chief Executive Officer without
cause or a resignation by Ms. Lake for good reason, prior to July 6, 2023.
Chelsea Lake, Ms. Lake's sister, is an employee of the Company with compensation
as described in the Company's proxy statement for its 2022 Annual Meeting of
Stockholders, filed with the SEC on November 1, 2022.
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Forward Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the
meaning of the federal securities laws including, without limitation, statements
regarding the intended effect of the Restructuring Plan, the Company's
expectations regarding the estimated costs, timing of such costs, and timing of
completion of the Restructuring Plan and January 2023 Reduction in Force, and
the length of Ms. Lake's service as interim Chief Executive Officer. All
statements other than statements of historical fact could be deemed forward
looking, including but not limited to the Company's expectations regarding the
amount and timing of restructuring charges and the potential benefits of the
Restructuring Plan. These statements involve substantial risks and uncertainties
that may cause the Company's actual results, performance, or achievements to be
materially different from any future results, performance, or achievements
expressed or implied by the forward-looking statements, including risks and
uncertainties related to the current macroeconomic environment; the Company's
ability to generate sufficient net revenue to offset its costs; the growth of
the Company's market and consumer behavior; the Company's ability to acquire,
engage, and retain clients; the Company's ability to provide offerings and
services that achieve market acceptance; the Company's data science and
technology, stylists, operations, marketing initiatives, and other key strategic
areas; risks related to the Company's inventory; risks related to the Company's
supply chain, sourcing of materials and shipping of merchandise; risks related
to international operations; the Company's ability to forecast its future
operating results and restructuring expenses; and other risks described in the
filings the Company makes with the Securities and Exchange Commission (the
"SEC"). Further information on these and other factors that could cause the
Company's financial results, performance, and achievements to differ materially
from any results, performance, or achievements anticipated, expressed, or
implied by these forward-looking statements is included in filings the Company
makes with the SEC from time to time, including in the section titled "Risk
Factors" in its Quarterly Report on Form 10-Q for the fiscal quarter ended
October 29, 2022. These documents are available on the SEC Filings section of
the Investor Relations section of the Company's website at:
https://investors.stitchfix.com. Any forward-looking statements contained in
this Current Report on Form 8-K are based on assumptions that the Company
believes to be reasonable as of the date of this report. The Company undertakes
no obligation to update any forward-looking statements made in this Current
Report on Form 8-K to reflect events or circumstances after the date hereof or
to reflect new information or the occurrence of unanticipated events, except as
required by law.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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