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Stitch Fix (SFIX 19.31, -6.66, -25.64%) was trading down 18% at a six-month low pre-market after the company reported strong first quarter financial results but missed user growth estimates and guided down profit for the second quarter last night.

The customized apparel shopping platform reported first quarter EBITDA and revenue above its own forecast. EBITDA grew 21% to $14.3 mln while revenue rose 24% to $366 mln. However, active client count increased 22% to 2.9 mln, which missed analyst estimates.

Net revenue per active client rose 2%. Gross margin expanded 140 basis points to 45.1% but EBITDA margins fell 10 basis points to 3.9% due to investments in talent and marketing. The company increased advertising expense 38% to $39 mln.

Stitch Fix reaffirmed fiscal 2019 EBITDA guidance of $20-40 mln and raised revenue for the year to $1.49-1.53 bln from $1.47-1.53 bln.

While revenue guidance for the second quarter was in-line, the company guided down quarterly EBITDA for the fifth straight quarter.

Stitch Fix doesn't experience typical retail seasonality in the December quarter because people use the service for themselves rather than giving it as a gift. As a result, the company is pulling back on advertising this quarter and the company guided for active client count to be relatively flat sequentially. The company also called for a sequential reduction in gross margin.

Stitch Fix continues to execute well but the stock is somewhat of a battleground between bulls and bears as valuation comes in to question. The company should be able to scale profits over time if it can continue to grow sales north of 20% but the eCommerce and retail apparel markets are very competitive.

With a ~$2.2 bln valuation, the stock trades at ~1.5x sales and ~60x EBITDA estimates for the current fiscal year.