Lulu's Fashion Lounge Holdings, Inc. Q2 FY2025 earnings call

• Special occasion and bridesmaid categories were key growth drivers with robust year-over-year net sales growth. - First-time reorders of new products continued to show momentum. - Product margins improved for the third consecutive quarter, increasing by roughly 170 basis points compared to the prior year period. - Gross margin was 45.3%, flat year-over-year but expanded sequentially. - Return rates improved 114 basis points, fourth consecutive quarter of improvement. - Brand campaigns and activations drove engagement and awareness, with brand equity score reaching a new record. - Wholesale business added 3 new major partners and saw growth among boutique retailers. - OpEx declined 15% year-over-year, with fixed costs down 19%. - Implemented SKU rationalization and direct sourcing strategy, aiming for double direct sourcing sales mix by year-end.

In the second quarter, net revenue was approximately $81.5 million, a decrease of 11% year-over-year. Special occasion and bridesmaid categories were key growth drivers with formal and bridesmaid categories seeing robust year-over-year and net sales growth. Casual wear and footwear businesses continued to be soft. Gross margin for the quarter was 45.3%, with product-related margins improving but offset by logistics cost pressures. Return rates improved 114 basis points during the quarter, marking the fourth consecutive quarter of improvement. Net revenue decrease was driven by a 16% decrease in total orders placed, partially offset by a 1% increase in average order value and lower return rates.

• Expect to generate positive adjusted EBITDA in the third quarter. - Now expect capital expenditures for the full year to be approximately $2.5 million, the low end of the previously estimated range. - Continuing to evaluate options to mitigate tariff impacts through vendor collaboration, sourcing diversification, strategic pricing, and assortment optimization. - Direct sourcing strategy expected to more materially benefit the business in the second half of the year.

• Macro-economic environment impact including tariffs, consumer demand, and return rates on the business. - Uncertainty around negotiation of a new asset-based revolving credit facility. - Uncertainty regarding tariff policy outcomes and its impact on the supply chain. - Logistics cost pressures from rate increases and higher fuel surcharges pass-through from shipping carriers.

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