| 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.
