Shares of Stitch Fix Inc. (SFIX) plummeted 9.40% in pre-market trading on Thursday, following the company's fourth-quarter earnings report released after market close on Wednesday. Despite beating analyst expectations, investors appear concerned about the company's growth trajectory and declining client base.

For the quarter ended July 31, Stitch Fix reported a loss of $0.07 per share, narrower than the expected loss of $0.10 per share. Revenue came in at $311.2 million, surpassing the Street estimate of $305.83 million. While these figures beat expectations, the company's revenue still declined by 2.6% year-over-year. Stitch Fix noted that adjusting for an extra week in the previous year's quarter, revenue would have increased by 4.4%.

The sharp stock decline seems to be driven by several factors. Despite positive guidance for the upcoming quarter and fiscal year 2026, investors appear worried about Stitch Fix's declining active client base, which fell 7.9% year-over-year to 2.309 million. This metric is crucial for the company's growth prospects. Additionally, while the company forecasts revenue growth of 1% to 5% for fiscal 2026, this modest outlook may not be enough to assuage investor concerns about long-term profitability in the competitive online retail space. The market's reaction suggests that despite beating quarterly estimates, Stitch Fix faces ongoing challenges in its business model and growth strategy.