Stitch FixThe shares plunged by more than 27% Wednesday, as an analyst claimed that the company is running into “growth walls.”

Online shopping and styling was able to top fiscal first-quarter expectationsInvestors should be wary of slowing user growth or a lower revenue outlook after Tuesday’s bell.

It reported 4.18 million active clients, up 11% from year-ago levels. But within that figure were only 15,000 net new adds — the lowest count Stitch Fix has ever booked in a three-month period, excluding the one quarter that was depressed by the onset of the coronavirus pandemic.

CNBC’s Chief Executive Elizabeth Spaulding stated that the retailer was undergoing a multi-quarter transformation.

She explained to analysts that Stitch Fix was still in the process of onboarding new customers for its Freestyle option. This is now open to all. Prior to this, only existing Stitch Fix subscribers were allowed to use the direct-buy portal. Anyone can now visit the website of the retailer to purchase one or two dresses, as well as shoes.

Investors had expected to see better results during the last quarter, thanks to the Freestyle rollout that was finished in the fourth-quarter.

Mark Mahaney from Evercore ISI lowered the price target of Stitch Fix shares down to $24 instead of $68. After Tuesday’s report, he also downgraded Stitch Fix stock to “inline” instead of “outperform”.

Mahaney stated in a note sent to clients that “our call is Stitch Fix has reached a growth limit, with its core Fix offering likely maturing out in the U.S. Market.” The new Freestyle offer may be a source of additional growth. But it’s taken more time than we expected. [it will]Still, it may not be material.”

Stitch Fix shares closed Tuesday at $24.97. This is a decrease of 57% over the previous year.

Company’s outlook for fiscal-year revenue growth was reduced to a low-single-digit percentage, down from the prior forecast of an increase of 15%. Analysts were expecting sales to rise by 15% year-over-year.

Telsey Advisory Group reduced its price target by $40, from $55.

Dana Telsey is the CEO of Stitch Fix and Chief Research Officer. She stated that estimates for the future have slowed as the company worked through some challenges.

Spaulding stated to analysts that it had reduced marketing costs in its most recent quarter as it determined the most effective ways of reaching potential customers. Investors were also warned by this warning that Stitch Fix’s plans for customers aren’t working.

Ike Boruchow from Wells Fargo, an analyst at the bank, pointed out to clients that Stitch Fix news comes as retailers experience “the most robust apparel industry growth rate in recent history.”

“Unfortunately in our opinion, this places the model in doubt,” he stated.

Wells Fargo has dropped its price target from $35 to $14

Learn more about Stitch Fix’s first quarter earnings results here.