Stitch Fix Inc. (NASDAQ: SFIX) shares plummeted 10.54% to $4.29 on Wednesday, despite the company reporting better-than-expected third-quarter earnings. The sharp decline was primarily attributed to a significant share disposal by a major institutional investor, overshadowing the positive earnings report.

On Tuesday after market close, Stitch Fix reported a loss of six cents per share for Q3, beating the consensus estimate of an 11 cent loss. The company also surpassed revenue expectations, reporting sales of $325.02 million against the estimated $314.44 million. Despite these positive results, investors seemed more concerned about the company's declining active client base, which fell 10.6% year-over-year to 2.35 million.

The stock's downward trajectory was further exacerbated by news that Working Capital Advisors (UK) Ltd., a significant institutional investor, had filed a report indicating the disposal of Stitch Fix common shares. This large-scale sell-off by a major shareholder raised concerns among other investors about the company's future prospects. In response to these developments, Telsey Advisory Group maintained its Market Perform rating on Stitch Fix with a price target of $6, while Bernstein analyst Aneesha Sherman reiterated a Hold rating with a $4.50 price target. Looking ahead, Stitch Fix has raised its fiscal-year sales forecast to $1.25-$1.26 billion, up from the previous guidance of $1.23-$1.24 billion, signaling some optimism despite the current market reaction.