Stitch Fix Inc. reported first-quarter tax results that hit expectations, but a change in strategy that includes lower growth in new users has shipped shares falling to 26% in Tuesday's trading and ending with 21%.  Earnings of 10 cents per share and sales of 366.2 million dollars turn FactSet's expectation at 3 cents per share and 358 million dollars in sales.
The personal styling service also reported 22% growth in customers during the year, and now 2.9 million active customers.
For the second quarter, Stitch Fix
expects "slower" active client growth, advertising costs to be lower, and a flat active client count. An active client is defined as someone who checked out a Fix in the previous 12-month period, says the company.
Read: Ulta Beauty welcomes Kardashians, but margins give analysts a break
"Our focus is not to add clients to add customers," said Mike Smith, the company's chief operating officer on the earnings call , according to a FactSet transcript. "We seek to attract customers that we can earn from the very beginning, and which we believe will be healthy, long-term customers."
To this end, the strategy is to link active customer growth, with growth in net revenue per client, calculated "by dividing net income over the last 12 months of active customers at the end of the period."
The company will also push efforts to notice its position in order to entice customers.
"We look forward to expecting each of these to play a role when driving our top line," Smith said. "In a given quarter, one can exceed the other, depending on the initiatives we distribute during that period."
William Blair analysts downgraded Stitch Fix on the shifting active customer growth strategy.
See: Walmart, Target Target Tariffs: Wells Fargo
"Due to the lack of visibility in this important metric, coin mesh supports additional guidance and greater risk in our view of the year's sales and earnings estimates, we downgrade Stitch Fix shares to market performance, says analysts led by Ralph Schackart.
Shares have previously been better than before.
"This is a slight shift in reports from previous quarters where growth is expected to be driven of membership growth, "wrote SunTrust Robinson Humphrey analysts, who believe this drives a bearish reaction.
" An important tenet for this task is that Stitch Fix's offer only appeals to a small segment of the market and that management's revenue growth of 20% to 25% over the next few years (repeated last night), can not be achieved, says SunTrust.
If the company can achieve the 20% to 25% growth target, analysts th It is believed that Stitch Fix will remain attractive.
Do not Miss: How to Buy Gift Cards for Friends and Families Who Do not Want to Play
SunTrust Prizes Stitch Fix Shares Buy at a Price of $ 40.
Self For bullish analysts, the active client growth number is a point of reference. Stifel analysts believe that Stitch Fix continues to use computer science for the growth of wallet, increase satisfaction and drive efficiency.
"Despite these ongoing improvements and our expectations for further efficiency gains in the coming quarters, we remain limited for visibility. Stifel has a $ 28 price target for Stitch Fix shares, down from $ 30.
Stitch The Fix share has lost 20.5% in 2018 while it strengthens the Online Retail ETF
has increased by 5.3% and the S & P 500 Index
has fallen 1.4% for the period.