Company cuts guidance for the year, causing shares to plummet.

• Stitched Fix forecasted a weak outlook for its fiscal third quarter and reduced its full-year expectations.
• The company reported difficulties in welcoming new customers and transforming clients during the most recent quarter.
• Stitch Fix reported a per-share loss in line with analysts' estimates and revenue slightly above expectations for the three-month period ended Jan. 29.

The online styling service's subscriber growth struggles led to a weak outlook for its fiscal third quarter and a slashed full-year forecast, resulting in a tumble in extended trading on Tuesday.

The company reported challenges with onboarding new customers and converting clients in its latest quarter. Stitch Fix's per-share loss was in line with analysts' estimates, while revenue for the three-month period ended Jan. 29 was slightly above expectations.

Despite introducing a new option for shoppers to buy single items from its website, Stitch Fix's active client count is not where Chief Executive Elizabeth Spaulding wants it to be.

As of Tuesday's market close, Stitch Fix had fallen more than 41% this year and experienced an additional decline of over 17% in extended trading.

According to a survey of analysts by Refinitiv, how did the retailer perform in its fiscal second quarter compared to Wall Street's expectations?

• Loss per share: 28 cents vs. 28 cents expected
• Revenue: $516.7 million vs. $514.8 million expected

In the previous year, Stitch Fix reported a net loss of $21 million, or 20 cents per share. This quarter, the company reported a net loss of $30.9 million, or 28 cents per share, which was exactly in line with analysts' estimates.

The company's revenue increased to $516.7 million from $504.1 million the previous year, surpassing expectations of $514.8 million.

During the period, the company had a little over 4 million active clients, which was an increase of 4% from the previous year. The revenue per client was $549.

A client is considered active by Stitch Fix if they have checked out a curated style box or ordered an item through the retailer's direct-buy option within the past 52 weeks, measured on the last day of that period.

Stitch Fix anticipates its net revenue for the third quarter to be between $485 million and $500 million, which is a 10% to 7% decrease from the previous year. Analysts had predicted sales of $560.5 million.

Stitch Fix anticipates revenue to remain flat to slightly down year over year, despite assuming a flat number of active clients through the end of the 12-month period, which falls short of the analysts' expectation of an 8.1% revenue increase for the year.

The company has withdrawn its full-year adjusted earnings before interest, taxes and amortization outlook due to its active evaluation of marketing spend for onboarding and conversion improvements.

Freestyle doubts and friction

Spaulding, the CEO, revealed during an earnings conference call that the retailer unintentionally caused friction during the Freestyle rollout. In response, it is implementing changes to simplify the browsing and checkout process for customers.

Although the initial process was challenging, Spaulding stated that the company remains satisfied with its choice to introduce a direct-buy option, which makes Stitch Fix a more comprehensive platform for customers seeking new clothing items.

She informed analysts that she was confident in the company's long-term strategy and that they were seeing clear indications that their actions were leading to a prosperous future for the business.

Recently, analysts have raised numerous questions about Stitch Fix's Freestyle push, which has made the company a closer competitor with department store chains and apparel brands, many of which exist in large numbers.

Stitch Fix operates entirely online, which allows the company to connect with consumers without a physical presence. However, this has become a challenge as transportation costs have increased and the company must handle returns of unwanted items.

Find the full press release from Stitch Fix here.