Lulu's Fashion Lounge (LVLU) Q4 2024 Earnings Call March 28, 2025 01:10 AM ET Company Participants Naomi Beckman-Straus - General Counsel & Corporate SecretaryCrystal Landsem - CEO and DirectorMark Vos - President & Chief Information OfficerTiffany Smith - CFO Operator Good afternoon, and welcome to Lulu's Fourth Quarter and Fiscal Year twenty twenty four Earnings Conference Call. Today's call is being recorded and we have allocated one hour for the prepared remarks and Q and A. At this time, I'd like to tu ...

Financial Data and Key Metrics Changes - Q4 net revenue was approximately $66.1 million, down 12% year-over-year, driven by a 12% decrease in total orders placed and a 5% decrease in average order value [44] - For the full year, net revenue totaled $315.9 million, down 11% versus 2023, primarily due to a 12% decline in total orders placed and higher return rates, partially offset by a 3% increase in average order value [44] - Gross margin for Q4 was 37.9%, down 120 basis points year-over-year, impacted by higher markdowns and discounts [45] - Net loss for Q4 worsened to $31.9 million from $7.2 million year-over-year, reflecting a noncash $28.4 million goodwill impairment charge [46] - Adjusted net loss for Q4 was $3.5 million, representing a more than 50% reduction in net loss compared to Q4 of last year [47] Business Line Data and Key Metrics Changes - Special occasion and bridesmaids categories delivered positive mid-teens year-over-year net sales growth in Q4, reinforcing market leadership [19] - Q4 wholesale revenue grew 76% year-over-year, driven by high double-digit gains among major partners [22] - Casual wear segment continued to experience softness, leading to year-over-year net sales declines [16] Market Data and Key Metrics Changes - International presence showed strong year-over-year growth in Q4, marking fiscal year 2024 as a high double-digit international growth year [29] - Return rates improved for the second consecutive quarter, highlighting material improvements in fit and quality [21] Company Strategy and Development Direction - The company is focusing on core strengths as a premier destination for occasion dresses while optimizing cost structures [10] - Strategic initiatives include product assortment optimization, brand engagement investments, and technology enablement [10][12] - Plans to mitigate tariff impacts through diversified sourcing and pricing adjustments [15][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic uncertainties in 2025 but is focused on positioning the business for success [13] - Full year guidance for 2025 anticipates net revenue between $280 million and $310 million, reflecting potential macroeconomic pressures [54] - Adjusted EBITDA outlook for 2025 is expected to be between $0 and $6 million, indicating a potential improvement from 2024 [56] Other Important Information - The company successfully consolidated two distribution facilities, enhancing operational efficiency [42] - Inventory balance at quarter end was $34 million, down about $1.4 million year-over-year, reflecting disciplined inventory management [52] Q&A Session Summary Question: What are the expectations for revenue in 2025? - The company anticipates net revenue to be between $280 million and $310 million, reflecting potential macroeconomic pressures and stable demand [54] Question: How is the company addressing tariff impacts? - The company plans to mitigate tariff impacts through diversified sourcing and pricing adjustments, while maintaining product quality [35] Question: What are the key initiatives for improving profitability? - Key initiatives include cost reduction measures, product assortment optimization, and investments in brand awareness and technology [10][56]

Part I [Business](index=9&type=section&id=Item%201.%20Business) Lulus is a digitally-native fashion brand for Millennial and Gen Z women, employing a data-driven 'test, learn, and reorder' model to offer attainable luxury apparel and drive growth - Lulus is a digitally-native, online fashion brand for Millennial and Gen Z women, offering attainable luxury products[26](index=26&type=chunk) - The company employs a "**test, learn, and reorder**" strategy, using data to test new products in small batches and reordering successful items in higher volumes to optimize profitability and reduce fashion risk[28](index=28&type=chunk)[33](index=33&type=chunk) - Key growth strategies include increasing brand awareness through marketing, enhancing relationships with its **2.6 million active customers**, expanding product categories, and pursuing international markets[37](index=37&type=chunk)[39](index=39&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - The company collaborates with a network of around **300 suppliers** without long-term volume commitments, providing flexibility[43](index=43&type=chunk) - Technology is central to the business, with proprietary systems for website management, merchandising, order processing, and warehouse management, all driven by data analytics and predictive modeling[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - As of December 29, 2024, Lulus had **580 full-time and part-time employees**. The company emphasizes a culture defined by its core values: "All Voices, All In, Always Evolving"[67](index=67&type=chunk)[68](index=68&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including recurring net losses, a Nasdaq delisting notice, substantial doubt about its going concern ability, supply chain dependencies, and reliance on social media platforms - The company has a history of net losses, including a **$55 million loss in fiscal 2024**, and may not achieve or maintain profitability[129](index=129&type=chunk) - On February 27, 2025, the company received a delisting notice from Nasdaq for its common stock's closing bid price falling below **$1.00 per share** for 30 consecutive trading days[256](index=256&type=chunk) - The company's financial condition, including recurring net losses and reliance on amended credit facilities, raises **substantial doubt about its ability to continue as a going concern**[123](index=123&type=chunk)[425](index=425&type=chunk) - The business is highly dependent on its brand image and ability to engage customers and influencers. Negative publicity or failure to meet expectations could harm the business[77](index=77&type=chunk)[80](index=80&type=chunk) - A significant portion of merchandise is manufactured in **China**, exposing the company to risks from international trade disputes, tariffs, and political instability. The U.S. government imposed **new tariffs** on Chinese, Canadian, and Mexican imports in February 2025[108](index=108&type=chunk)[161](index=161&type=chunk)[204](index=204&type=chunk) - The company relies on **social media** for marketing and faces risks from platform changes or bans, such as the potential U.S. ban on **TikTok**, which is a key channel for engaging Gen Z customers[89](index=89&type=chunk)[91](index=91&type=chunk)[103](index=103&type=chunk) - A goodwill impairment charge of **$28.4 million** was recorded in the fourth quarter of 2024 due to a sustained decline in stock price and continuing net losses[270](index=270&type=chunk) [Unresolved Staff Comments](index=90&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the SEC - Not applicable[301](index=301&type=chunk) [Cybersecurity](index=90&type=section&id=Item%201C.%20Cybersecurity) Lulus manages cybersecurity through a layered, cross-departmental strategy overseen by the Audit Committee, with no material threats identified in fiscal 2024 - Cybersecurity risk is managed through a **cross-departmental approach** overseen by the **Board's Audit Committee**, with the President and CIO leading the program[302](index=302&type=chunk)[303](index=303&type=chunk)[305](index=305&type=chunk) - The company utilizes a **layered cybersecurity strategy** and regularly conducts external penetration tests, bug bounty hackathons, and maturity assessments to maintain a robust program[304](index=304&type=chunk) - In fiscal year 2024, **no cybersecurity threats** were identified that have materially affected or are reasonably likely to materially affect the company's business strategy, operations, or financial condition[308](index=308&type=chunk) [Properties](index=92&type=section&id=Item%202.%20Properties) Lulus leases all its facilities, including corporate headquarters, office space, and two distribution centers, having recently consolidated its Chico distribution operations - The company **does not own any real property** and **leases all its facilities**[309](index=309&type=chunk) Leased Facilities | Location | Type | Square Footage (approximate) | | :--- | :--- | :--- | | Chico, California | Retail space | 5,600 | | Los Angeles, California | Retail space | 6,400 | | Chico, California | Corporate headquarters | 7,600 | | Los Angeles, California | Office and studio space | 26,800 | | Chico, California | Distribution facility and office space | 100,000 | | Ontario, California | Distribution facility | 140,400 | | Easton, Pennsylvania | Distribution facility | 258,200 | [Legal Proceedings](index=92&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, none of which are expected to have a material adverse effect on its business or financial condition - The company is **not currently a party** to any legal proceedings that are expected to have a **material adverse effect** on its business or financial condition[312](index=312&type=chunk) [Mine Safety Disclosures](index=92&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[313](index=313&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=93&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Lulus common stock trades on Nasdaq, the company does not plan future cash dividends, and a $2.5 million stock repurchase program was authorized in May 2024 - The company's common stock is listed on Nasdaq under the symbol "**LVLU**" and began trading on **November 11, 2021**[315](index=315&type=chunk) - The company **does not anticipate paying any cash dividends** in the foreseeable future and intends to retain funds for business development[317](index=317&type=chunk) - On May 8, 2024, the Board authorized a **$2.5 million** stock repurchase program. During Q4 2024, the company repurchased **161,178 shares** for approximately **$220,000**[319](index=319&type=chunk) [Reserved](index=94&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - This item is reserved[320](index=320&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=94&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2024 saw an 11% net revenue decline to $315.9 million and a $55.3 million net loss, raising substantial doubt about the company's going concern ability due to liquidity issues and amended credit facilities - Changing **macroeconomic factors**, including inflation and reduced consumer discretionary spending, directly impacted sales in fiscal 2024[322](index=322&type=chunk)[447](index=447&type=chunk) - The company's financial condition, with a net loss of **$55.3 million in 2024** and limited cash, raises **substantial doubt about its ability to continue as a going concern**. Management is seeking alternative debt financing and implementing cash conservation measures[323](index=323&type=chunk)[324](index=324&type=chunk)[448](index=448&type=chunk)[449](index=449&type=chunk) - A goodwill impairment charge of **$28.4 million** was recorded in Q4 2024, triggered by a sustained decline in the company's stock price and continuing net losses[326](index=326&type=chunk)[363](index=363&type=chunk)[412](index=412&type=chunk) Key Financial and Operating Metrics (2024 vs. 2023) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net revenue (in thousands) | $315,887 | $355,175 | | Net income (loss) (in thousands) | $(55,286) | $(19,334) | | Adjusted EBITDA (in thousands) | $(9,738) | $3,231 | | Active Customers (in thousands) | 2,620 | 2,830 | | Average Order Value | $137 | $133 | - Net revenue decreased by **11% in 2024** compared to 2023, primarily due to a **12% decline in Total Orders Placed**[357](index=357&type=chunk) - The company has **amended its 2021 Revolving Facility four times**, securing waivers for financial covenants but facing reduced borrowing capacity, increased interest rates, and other restrictions. The Fourth Credit Amendment, in March 2025, **prohibits further borrowings**[372](index=372&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=114&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks primarily from floating-rate debt and inflation, while foreign currency risk is currently not significant - The company is exposed to **interest rate risk** due to its **floating-rate borrowings** under the 2021 Revolving Facility[416](index=416&type=chunk) - Foreign currency risk is **not currently material** as most sales and expenses are denominated in U.S. dollars[417](index=417&type=chunk) - The company has experienced **inflationary pressures** in its supply chain and operating costs, which also impacts customer spending[418](index=418&type=chunk) [Financial Statements and Supplementary Data](index=117&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited financial statements, with the auditor's report highlighting substantial doubt about the company's going concern ability due to recurring losses and insufficient liquidity - The Report of Independent Registered Public Accounting Firm includes a "**Going Concern**" paragraph, citing the company's recurring net losses and insufficient access to liquidity as factors that raise **substantial doubt about its ability to continue as a going concern**[425](index=425&type=chunk) Consolidated Balance Sheet Summary (as of Dec 29, 2024) | Metric | Value (in thousands) | | :--- | :--- | | **Assets** | | | Cash and cash equivalents | $4,460 | | Inventory, net | $34,036 | | Goodwill | $7,056 | | Total Assets | $108,198 | | **Liabilities & Equity** | | | Revolving line of credit | $13,090 | | Total Liabilities | $94,830 | | Total Stockholders' Equity | $13,368 | Consolidated Statement of Operations Summary (Fiscal Year 2024) | Metric | Value (in thousands, except per share) | | :--- | :--- | | Net revenue | $315,887 | | Gross profit | $130,248 | | Goodwill impairment | $28,374 | | Net income (loss) | $(55,286) | | Diluted earnings (loss) per share | $(1.33) | Consolidated Statement of Cash Flows Summary (Fiscal Year 2024) | Metric | Value (in thousands) | | :--- | :--- | | Net cash provided by operating activities | $2,601 | | Net cash used in investing activities | $(2,874) | | Net cash provided by financing activities | $2,227 | | Net increase in cash and cash equivalents | $1,954 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=168&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[624](index=624&type=chunk) [Controls and Procedures](index=168&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 29, 2024, with no material changes reported - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of December 29, 2024[626](index=626&type=chunk) - Management determined that the company's internal control over financial reporting was **effective** as of December 29, 2024, based on the COSO framework[629](index=629&type=chunk) - The company is an **emerging growth company**, and therefore this annual report **does not include an attestation report** on internal controls from its independent registered accounting firm[630](index=630&type=chunk) [Other Information](index=170&type=section&id=Item%209B.%20Other%20Information) On March 27, 2025, the company entered a Fourth Amendment to its Credit Agreement, providing covenant waivers, prohibiting further borrowings, and setting refinancing milestones - On March 27, 2025, the company entered into a **Fourth Amendment to its Credit Agreement**, which provided a limited waiver for financial covenants for the quarter ended Dec 31, 2024, and suspended certain covenant tests for Q1 2025[632](index=632&type=chunk) - The Fourth Credit Amendment **prohibits further borrowings**, reduces future commitment amounts, **increases interest rates**, and sets a timeline for a refinancing transaction[632](index=632&type=chunk) - **No director or officer** adopted or terminated a Rule 10b5-1 trading arrangement during the fourth quarter of 2024[634](index=634&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=170&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[635](index=635&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=171&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%2C%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Information regarding directors, executive officers, and corporate governance is **incorporated by reference** from the Company's Proxy Statement for its 2025 Annual Meeting of Stockholders[638](index=638&type=chunk) [Executive Compensation](index=171&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2025 Proxy Statement - Information regarding executive compensation is **incorporated by reference** from the Company's Proxy Statement for its 2025 Annual Meeting of Stockholders[639](index=639&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=171&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership of beneficial owners and management is incorporated by reference from the 2025 Proxy Statement - Information regarding security ownership is **incorporated by reference** from the Company's Proxy Statement for its 2025 Annual Meeting of Stockholders[640](index=640&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=171&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2025 Proxy Statement - Information regarding certain relationships, related transactions, and director independence is **incorporated by reference** from the Company's Proxy Statement for its 2025 Annual Meeting of Stockholders[641](index=641&type=chunk) [Principal Accountant Fees and Services](index=171&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Information regarding principal accountant fees and services is **incorporated by reference** from the Company's Proxy Statement for its 2025 Annual Meeting of Stockholders[642](index=642&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=172&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and a detailed index of all exhibits filed with or incorporated by reference into the Form 10-K - This section contains the list of **financial statements** and the **exhibit index** for the Form 10-K filing[644](index=644&type=chunk)[647](index=647&type=chunk) [Form 10-K Summary](index=181&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary in this section - None[653](index=653&type=chunk)

Financial Performance - Net revenue for fiscal year 2024 was $315.9 million, an 11% decrease compared to 2023, driven by a 12% decrease in total orders placed[5]. - Active customers decreased by 7% to 2.6 million, down from 2.8 million in 2023[5]. - Gross profit decreased by 12% to $130.2 million, with gross margin decreasing by 50 basis points to 41.2%[5]. - Net loss for fiscal year 2024 was $55.3 million, compared to a net loss of $19.3 million in 2023, including a non-cash goodwill impairment charge of $28.4 million[5]. - Adjusted EBITDA for fiscal year 2024 was ($9.7) million, compared to $3.2 million in 2023[5]. - For the fiscal year ended December 29, 2024, Lulus reported a net loss of $55,286,000, compared to a net loss of $19,334,000 for the previous year, indicating a significant increase in losses[15]. - The company's Adjusted EBITDA for the fiscal year was $(9,738,000), a decline from $3,231,000 in the prior year, reflecting ongoing operational challenges[30]. - Gross Margin decreased to 41.2% for the fiscal year ended December 29, 2024, down from 41.7% in the previous year, indicating pressure on profitability[30]. - Active Customers decreased to 2,620,000 in the fiscal year 2024, down from 2,830,000 in 2023, suggesting a decline in customer engagement[30]. - Cash provided by operating activities was $2,601,000 for the fiscal year, a decrease from $15,421,000 in the prior year, highlighting cash flow challenges[15]. - Net loss margin for the thirteen weeks ended December 29, 2024, was (48.2)%, compared to (9.6)% for the same period in 2023[31]. - Adjusted EBITDA margin for the fifty-two weeks ended December 29, 2024, was (3.1)%, down from 0.9% for the same period in 2023[31]. Future Outlook - The company expects net revenue for fiscal year 2025 to be between $280 million and $310 million, representing a decrease of 11% to 2% compared to 2024[12]. - The company anticipates adjusted EBITDA for fiscal year 2025 to be between $0 and $6 million, an increase of $9.7 million to $15.7 million compared to 2024[12]. - The outlook for fiscal year 2025 emphasizes growth in operating cash flow and a focus on profitability[7]. - Lulus plans to focus on growth opportunities and a return to profitability in the coming quarters, as stated in their forward-looking statements[18]. Cost Management - Cost reduction efforts resulted in a 175 basis point reduction in total expenses as a percentage of net revenue in Q4 2024[1]. - The company completed the consolidation of its West Coast distribution facilities in Q1 2025 to optimize costs[2]. Cash Flow and Investments - The company experienced a net cash decrease of $1,954,000 during the fiscal year, compared to a decrease of $7,713,000 in the previous year, indicating improved cash management[15]. - Lulus reported a net cash used in investing activities of $(2,874,000) for the fiscal year, down from $(4,003,000) in the previous year, reflecting a reduction in capital expenditures[15]. - Cash and cash equivalents as of December 29, 2024, were $4,460 thousand, compared to $2,506 thousand as of December 31, 2023[31]. Customer Engagement - Average Order Value (AOV) for the fiscal year was $137, compared to $133 in the previous year, showing a slight increase in customer spending per order[30]. - The company is actively investing in new product development and market expansion strategies to enhance customer experience and drive sales[17].

Core Insights - Lulu's Fashion Lounge Holdings, Inc. reported a net revenue of $315.9 million for Q4 2024, an 11% decrease compared to the previous year, primarily due to a 12% decline in total orders placed and higher return rates, despite a 3% increase in average order value [8][14] - The company experienced a net loss of $55.3 million in Q4 2024, which included a non-cash goodwill impairment charge of $28.4 million, marking a significant increase from a net loss of $19.3 million in Q4 2023 [8][14] - The financial outlook for fiscal year 2025 anticipates continued growth in operating cash flow, driven by strategic cost reductions and a focus on special occasion and event wear, while casual categories are being repositioned [6][10] Financial Performance - Q4 2024 highlights include a gross profit of $130.2 million, a 12% decrease from the previous year, and a gross margin of 41.2%, down 50 basis points [8][14] - Active customers decreased by 7% to 2.6 million compared to 2.8 million in 2023 [8] - Adjusted EBITDA for Q4 2024 was ($9.7) million, compared to $3.2 million in Q4 2023, indicating a decline in operational performance [8][14] Cost Management and Strategic Initiatives - The company successfully implemented cost reduction plans, resulting in a 15% decline in selling, marketing, and administrative expenses, amounting to $5.5 million lower year-over-year [5][6] - Consolidation of West Coast distribution facilities was completed in early 2025, aimed at optimizing costs and improving operational efficiency [5][6] - Expansion of strategic wholesale partnerships is intended to enhance customer reach across various shopping channels while maintaining a scalable growth model [3][6] Future Outlook - The company expects net revenue for 2025 to be between $280 million and $310 million, reflecting a decrease of 11% to 2% compared to 2024 [14] - Anticipated adjusted EBITDA for 2025 is projected to be between $0 and $6 million, representing a significant increase compared to the previous year [14] - The company aims to strengthen its cash position and return to profitability while maintaining healthy inventory turns [6][10]

Core Insights - Lulus is launching a multi-phased brand campaign aimed at enhancing its position as a leading dress destination, starting during International Women's Month and running for three months [1][2] - The campaign focuses on emotional storytelling and product-driven messaging to foster brand affinity and long-term customer loyalty [1][2] Brand Strategy - The campaign is a strategic investment in customer engagement, aiming to deepen relationships with both existing and new customers while enhancing brand perception [2][10] - Lulus emphasizes creating experiences rather than just selling products, which is expected to drive brand loyalty and lifetime value [2][10] Marketing Execution - The campaign will utilize a diversified strategy that includes influencer collaborations, customer-facing events, and expanded out-of-home marketing to reach new customers [3][8] - Each phase of the campaign will align with key consumer touchpoints, focusing on moments in a woman's life where fashion plays a significant role [6][9] Out-of-Home Advertising - Lulus is extending its out-of-home advertising efforts, including prime billboard placements in high-traffic areas such as New York's Times Square and near college campuses [7][8] - The previous year's campaign significantly increased brand recall, and this year's initiative aims to build on that success by engaging audiences beyond digital channels [7][8] Growth and Collaborations - The campaign reflects Lulus' commitment to building a differentiated brand experience and leveraging its strong digital presence for profitable growth [9][10] - Recent collaborations with brands like Nuuly, Poshmark, and Nordstrom are expected to enhance product offerings and expand brand visibility [9][10]

Core Viewpoint - Lulu's Fashion Lounge Holdings, Inc. will release its fourth quarter and full year 2024 financial results on March 27, 2025, after market close, followed by a conference call with the investment community [1] Financial Results Announcement - The financial results and live webcast will be accessible through the Investor Relations section of the Company's website [2] - A conference call will be held at 5:00 p.m. Eastern Time on the same day [1] Conference Call Details - To access the call, U.S. callers can dial 1-877-407-0792, while international callers can use 1-201-689-8263 [2] - A replay of the conference call will be available for seven days after the call [3] - The access code for the replay is 13750832 [3] Company Overview - Lulus is an attainable luxury fashion brand for women, headquartered in California, serving millions of customers worldwide [4] - The brand focuses on modern, feminine designs at accessible prices for various occasions [4] - Founded in 1996, Lulus utilizes direct consumer feedback to refine product offerings and enhance customer experience [4] - The company emphasizes exceptional customer service through personal stylists and a bridal concierge [4]

Core Insights - Lulus is expanding its distribution strategy through collaborations with Nuuly, Poshmark, and Von Maur, as well as enhancing relationships with Dillard's and Nordstrom to become the go-to destination for dresses [1][2][4] Distribution Expansion - The company is focusing on reaching new customers by tapping into rental and resale markets, with partnerships aimed at engaging modern consumers [3][4] - Collaborations with Poshmark and Nuuly are designed to position Lulus within the growing resale and rental economies, appealing to a younger audience [3][4] Retail Partnerships - Lulus is strengthening its relationships with key department stores, expanding product assortments at Nordstrom and increasing prom collections at Dillard's from a 30-store to a 60-store footprint [4][5] - The company is also entering new markets through collaborations with additional department stores like Von Maur [4] Brand Positioning - Lulus aims to be the premier destination for dresses, offering options for various occasions, and is hosting exclusive in-store activations to enhance customer experience [5][6] - The company is leveraging partnerships with iconic brands to provide a curated shopping experience, building on the success of previous collaborations [6][8] Long-term Strategy - The wholesale strategy is part of a broader growth plan, focusing on sustainable long-term brand growth and customer engagement [8] - By expanding across various retail platforms, Lulus aims to increase brand discovery, deepen customer loyalty, and reach new audiences [8]

Financial Data and Key Metrics Changes - Net revenue for Q3 2024 was $81 million, a 3% decrease year-over-year, with adjusted EBITDA showing a loss of $3.6 million compared to a gain of $1 million in the prior year [12][40][41] - Gross margin decreased by 220 basis points to 38.1% due to higher markdowns and discounts [22][41] - Net loss increased to $6.9 million, up $3 million year-over-year, primarily due to lower net revenue and reduced gross margin rates [43] Business Line Data and Key Metrics Changes - Special occasion and bridesmaid dress categories saw net sales grow nearly 40% year-over-year, while total dress sales increased by 6% over Q3 2023 [15][40] - The casualwear segment faced challenges, prompting a reassessment to align better with core strengths in event-focused apparel [11][20] - The separates and shoe business remained challenged, driving the majority of year-over-year declines in net sales [20] Market Data and Key Metrics Changes - Wholesale gross revenue increased by 28% compared to Q3 last year, with a strategic collaboration with Dillard's enhancing market presence [19] - International sales achieved high double-digit growth for the third consecutive quarter across the top 15 countries outside the U.S. [29] Company Strategy and Development Direction - The company is focusing on enhancing brand awareness, customer engagement, and disciplined cost reduction efforts to position for sustainable growth [53] - Strategic initiatives include optimizing the data-driven merchandising model, improving customer insights, and leveraging technology for better decision-making [13][14][30] - A commitment to reducing SKU count by 10% to 25% to create a more curated offering in separates and shoes [56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to growth, particularly in dresses and wholesale businesses, while acknowledging the need to reset the casualwear segment [25][53] - The company is actively pursuing alternative debt financing options to enhance flexibility [11][48] - Preliminary results for October indicate a mid-single-digit decline in net revenue year-over-year, with expectations for a 7% to 10% decline in Q4 [49][50] Other Important Information - The company reduced capital expenditure expectations for the year from $3.5 million to $3.2 million [24][52] - Inventory levels were well managed, down 7% year-over-year, outperforming the net revenue decline [17][46] Q&A Session Summary Question: Reevaluation of strategy focusing on event wear versus casual wear - Management indicated a narrowing of assortment to create a more curated offering, expecting a SKU count reduction of 10% to 25% [56] Question: Additional liquidity generation levers - Management discussed headcount reductions, pay adjustments, and renegotiation of vendor contracts as measures to improve liquidity [58][60] Question: Impact of markdowns and promotions on gross margin - Management acknowledged that markdowns were driven by both product assortment needs and liquidity generation, expecting this trend to continue into Q4 [62] Question: Performance of physical retail - Wholesale business has been strong, with double-digit comps, and the Melrose store serves as a brand activation center [64] Question: Health of the consumer and competitive landscape - Management noted a dependency on China for sourcing but is diversifying to mitigate potential tariff impacts, while also addressing competitive pressures through inventory resets [68][70]

Core Insights - Lulus Fashion Lounge Holdings, Inc. reported a net revenue of $80.5 million for Q3 2024, a decrease of 3% from $83.1 million in Q3 2023, attributed to a 3% decline in total orders placed and a 2% decrease in average order value [4][6] - The company experienced a net loss of $6.9 million in Q3 2024, compared to a loss of $3.9 million in the same period last year, indicating ongoing financial challenges [4][5] - Lulus is focusing on strategic initiatives and cost reduction efforts to enhance financial flexibility and long-term growth, while also managing inventory proactively [2][3] Financial Performance - Q3 2024 highlights include: - Active customers decreased by 10% to 2.7 million compared to 3.0 million in Q3 2023 [4] - Gross profit fell by 9% to $30.6 million, with gross margin decreasing by 220 basis points to 38.1% [4][24] - Adjusted EBITDA for Q3 2024 was ($3.6) million, down from $1.0 million in Q3 2023 [4][24] Inventory and Cost Management - The company ended Q3 2024 with a 7% decline in inventory, which was more significant than the 3% decline in net revenue, indicating effective inventory management [2][4] - Lulus is strategically reevaluating its casual wear business to better align with its focus on event attire, which has seen record growth [2][5] Updated Financial Outlook - For Q4 2024, net revenue is expected to be between $67.5 million and $70.0 million, down from $75 million in Q4 2023 [6] - Full-year 2024 net revenue is projected to be between $317.5 million and $320 million, compared to $355.2 million in fiscal year 2023 [6] - The capital expenditure plan for 2024 has been reduced to approximately $3.2 million, a decrease of $0.3 million from previous estimates [6] Debt and Liquidity - Total debt increased by $11.5 million during the thirteen weeks ended September 29, 2024, indicating rising financial obligations [4][10] - The company is working towards securing more flexible, long-term financing options to support its financial position [3][5]