Stitch Fix Inc. (SFIX) shares plummeted 15.78% in pre-market trading on Thursday, following the release of the company's fourth-quarter earnings report. Despite beating analyst expectations, investors expressed significant concerns about the company's growth trajectory and declining client base.

For the quarter ended July 31, Stitch Fix reported a narrower-than-expected loss of $0.07 per share, compared to the anticipated loss of $0.10 per share. Revenue came in at $311.2 million, surpassing the Street estimate of $305.83 million. However, this still represented a 2.6% year-over-year decline in revenue, although the company noted that adjusting for an extra week in the previous year's quarter, revenue would have increased by 4.4%.

The sharp stock decline appears to be driven by several factors, including a 7.9% year-over-year decrease in the company's active client base to 2.309 million. Additionally, while Stitch Fix forecasts revenue growth of 1% to 5% for fiscal 2026, this modest outlook seems insufficient to alleviate 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.