Lulu's Fashion Lounge (US:LVLU)2023-05-13 19:10Financial Data and Key Metrics Changes - Revenues for Q1 2023 amounted to $91 million, representing a 19% decline compared to Q1 2022, but a 32% increase compared to Q1 2021, aligning with expectations given tough comparisons from the previous year [18][46] - Adjusted EBITDA was breakeven, compared to $9.9 million in Q1 2022, reflecting the impact of a challenging macro environment [18][48] - Gross margin for Q1 2023 declined by about 560 basis points from Q1 2022 to 41.7%, but improved sequentially by 440 basis points [27] Business Line Data and Key Metrics Changes - The dress category performed consistently, with non-wedding related special occasion categories showing strength, while wedding-related products met expectations despite tough comparisons from last year [8] - Bridal and special occasion dresses net sales in Q1 2023 were up roughly 80% compared to Q1 2021 and up 29% compared to Q1 2019, indicating market share gains [8] Market Data and Key Metrics Changes - Active customer count increased year-over-year to 3.2 million, up 6% from Q1 2022, demonstrating brand loyalty [7][11] - Customer acquisition was strongest in lower household income brackets, reflecting the effectiveness of the company's affordable luxury positioning [11][39] Company Strategy and Development Direction - The company is focused on long-term growth initiatives while managing expenses judiciously, with a strong balance sheet and capital-efficient cash flow model [6][7] - Plans include expanding international growth and enhancing the customer experience through improved digital channels and operational efficiencies [19][20] - The company aims to shift marketing spend from direct response to brand awareness, enhancing overall marketing efficiency [24][66] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the macroeconomic challenges but noted a soft upward trend in demand as Q2 progressed, with improvements in weekly year-over-year gross revenue comparisons [26][34] - The company expects to maintain revenue guidance of $410 million to $430 million for the year, with adjusted EBITDA projected between $23.1 million and $25.6 million [10][51] Other Important Information - The company has implemented robotics in its distribution centers to improve operational efficiency and reduce costs [13] - Inventory levels at the end of Q1 were $52 million, up about $10 million from the same period last year, with plans to reduce inventory levels sequentially and year-over-year by the end of Q2 [29][49] Q&A Session Summary Question: Improvement in trend quarter to date - Management noted a soft upward turn in demand with noticeable week-over-week improvements, attributing it to a longer selling period for fall/winter products [34][35] Question: Customer acquisition costs and margin outlook - Customer acquisition costs increased due to a focus on brand awareness marketing, but management remains confident in margin improvement through reduced promotions and proactive product costing efforts [37][38] Question: Customer behavior across income brackets - The company observed strong performance in middle to lower income brackets, with new customer acquisition driven by a mix of promotions and brand interest [39] Question: Expectations for shipping costs and return rates - Management expects shipping-related costs to moderate and return rates to follow seasonal trends, with higher rates anticipated in Q2 and Q3 [40][42]