What happened

Stitch Fix (SFIX 0.03%) shares were getting torn apart this week after the online styling service posted dismal guidance in its fiscal first-quarter earnings report. 

According to data from S&P Global Market Intelligence, the stock was down 13.7% for the week as of Thursday afternoon. 

A rack of Stitch Fix clothes with accessories.

Image source: Stitch Fix.

So what

Stitch Fix's first-quarter numbers for the period ended Oct. 30 were mostly strong as revenue increased 19% to $581.2 million, ahead of $571 million, and it turned in a solid adjusted earnings before interest, taxes, debt, and amortization (EBITDA) of $38.2 million. However, the company saw just 15,000 sequential customer additions in the quarter to 4.18 million, partly due to the abrupt end of a referral program that was delivering worse-than-expected results.

However, the reason for this week's slide was the company's disastrous guidance as it called for revenue growth of just flat to 3% in the current quarter, and it expects a sequential decline in customers in the quarter for the first time ever. There were a number of reasons for the disappointing guidance, including supply chain disruptions, Apple's new ad tracking restrictions, the end of the referral program, and challenges onboarding new customers to Freestyle, the pick-what-you-want option it just opened to new customers in August.

Full-year guidance also implied that the company didn't expect a rapid rebound anytime soon as it called for high-single-digit revenue growth for the year, implying just high-single-digit revenue growth in the second half of the fiscal year, well below the company's historical revenue growth rate around 20%.

Now what

The stock fell 24% on Wednesday after the report came out, but recouped some of those losses on Thursday, a sign some investors believe that the stock was oversold.

While shares of Stitch Fix are arguably cheap at a price-to-sales ratio of just 1, the business is in a much different position than it was before the earnings report came out, and it will likely be a struggle for the company to return to its previous growth rate.