Lulu's Fashion Lounge (LVLU) 16 Nov 222022 Q3 Earnings call transcript

Good afternoon and welcome to Lulu's Third Quarter 2022 Earnings Conference Call. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Naomi Beckman-Straus, General Counsel at Lulu’s. Thank you.

You may begin.

thank XXXX joining results. and Lulu’s to everyone, quarter third afternoon, you us for discuss Good

strategies, website of Form estimates on www.investors.lulus.com. our management’s Annual our fiscal of SEC January other with year Any ended XXXX or from our uncertainties, and statements cause regarding well important of our Before represent results, fact for assumptions of market leadership risks, remind year assumptions, including Act objectives transition, call are for not could conference goals Report limited such initiatives, date plans, statements various statements, forward-looking uncertainties or that as future performance financial filed and are you March these results, X, to to forward-looking achievements begin, of opportunities, should that XXXX, implied the statements. we at their XX-K be this expectations, regarding we made the achievements expressed These but all to other relate which and filings on in release, including references afternoon’s this subject and be can call would and our implementations, XXXX, as found risks, XXXX. SEC, statements launches ending All press do by January will and considered factors and the as on growth. Litigation not Private historical XX, this X, management’s or forward-looking our on the Securities statements, outlook the like statements performance product with the the fourth call. differ detailed to results, of within actual Reform expectations meaning this quarter and include which materially matters to These

except as elect forward-looking point law. to required obligation the information, we update statements we revise any or such some forward-looking at in update statements undertake or While may to future, no by

non-GAAP margin debt. reference including today, use as net the our measures and they not represent non-GAAP non-GAAP During in The our more accurately to performance discussions and adjusted presentation be accordance for this financial GAAP. also of we information, operational considered will We results intended our information or financial as substitute is call of in business. with believe of we prepared or information some the certain EBITDA to financial presented and adjusted EBITDA, isolation underlying a financial true superior in

GAAP well be rationale be Our and each from release non-GAAP of as used non-GAAP measures, filing. SEC non-GAAP press Reconciliations description, measures may as limitations the other afternoon’s in this measures measure to different our and found can companies. by in using for

today our Vos. and and me CEO, Mark Joining Crystal on are call CIO, our David CFO, Co-President Landsem; and Co-President our McCreight;

Following our your open prepared I'll With that, over remarks, turn questions. for the the David. call call we’ll to

Thank Co-President, afternoon, good and partners today Crystal. I'm everyone. joined my you, Mark Naomi, and by and

fans. do executing wanted Before I strategy and tremendous brand millions our on I quarter, the delighting our to a LuCrew speak the who to continue job of thank about

made to few the discussing want we a spend afternoon. transition I announcement First, minutes this leadership

Lulu’s two a together, transition their and we profitable the effective what well generation then, home role. for to is apparel potential of to new fulfilling success. now CFO the the we've CIO. the the who is the I participating and internal March team successful a accomplished next ESG to strategy the This time the leadership in With merchandising our I'll instrumental key lead implementing to Board all uniquely result business components. have role I in the advance Co-President proud work results continue transition the evolving CIO, a What the and of current hand of off during strong operating Crystal announced, to well years closely a and numerous her vision of connectivity over role. providing career this I to through stakeholders. company duties could shape to through model, our model, and early-stage evaluation to Co-President, am external of in who CFO of and Mark helped our have appropriate the is only develop a operational potent scale many planning balance Executive wonderful demonstrated and long-term executive of emerging retirement President as in economic ago, all has has Since I as the and after tasked position strategic, core that help Relations years Several values the company. Crystal Lulu the transition out the ago, me Executive XXXX. transition company will she from As as and being Crystal taking not voices, of team me an the the feel excited growth business model, leadership leadership of has market. into Chair, in, she Board; key qualified profitable the helped from currently to Crystal a as our talented has In leadership. to has of CEO and this leader internal understanding Chairman. makes ensure delivering Lulu structure. been the deep place a made proven road Vos, consistently Crystal Landsem, came be noteworthy for transition, past Lulu, and industry always cycle, the be and a under is a partner, in on contributions and she team company, to with extensive take respect of Lulu's for Crystal bright Crystal role, perspective. is Not combination drew discussions, talented the advancing long-term public CEO long lead to Investor Chairman who of announce of Board I'll and years become successor early embodies development CEO be was with financial and Lulu’s we more LuCrew map. to the plan has see growth sheet, guidance conviction been the future who our X, role is as seven Since will XXXX, Crystal to transitioning and We the and Mark and as with managing CEO. that joined can successfully unique the brand the

Despite and EBITDA period, metrics, continue million in $X.X and trajectory we profitable both million. brand deliver macroeconomic confidence produced financial our long-term the testament of to We are $XXX revenues results and quarter. this which to to on and records opportunities. in brand reinforce of challenging a adjusted of our Moving key customer generated

broader continues LPM customers. existing Our past increased customer count XX-month this on in basis grow and $X.X and with gains number closet the We metrics a occupy last from LVLU customer new share positive take their active demonstrate year. Average industry both from as order from continues increased value the over XX% apparel to X% to to believe million. space more these that year

in also acquire are clearly witnessed Like consumer and continuing in most said, and the disproportionately responded likely due impact with assortment new like our and hurt to volatile brand That others by her promotional inconsistent during increasing others negatively industry, which by macro negative a spend. our the Similarly, quarter, EBITDA. impacting activity. fashion levels are behavior the elevated being return we the on conversion, that and resonating fresh is ones. pressures adjusted Z remained line desire characterized had quarter, millennial traffic Gen top to Our the which we industry, to trends during fans work

environment. outlook growth. We discretionary continue cycle this our profitable in continued of to challenges opportunity We our a have of part economic cautious as more manage a inventory view long-term temporary with these actively and conviction for because expenses macroeconomic and

because focus in not solid brand the on and model supported past, capital-light data business of model a fashion, by fresh, decisions, I've are balance our and sheet. fast and our guide the resilient brand luxury key As a promise, to highlighted affordable adaptable use they're a

and is $XXX million. macroeconomic expect the versus of EBITDA to it $XXX reduce million $XXX to million our we guidance to now revenues million adjusted We believe $XXX range. revenue Given uncertainties, of our prudent forecast prior

and operational team our investments Our to marketing has Co-President prior EBITDA these our growth like detail. been the turn Mark? today. provide $XX and business forecast of future discuss new guidance member of been He building to in important like focus major has continued of adjusted mission are the key have $XX of let brand our to initiatives of and to leadership Chief million. over contributor to in a company on to our Officer. And necessary million Mark is the update an an Crystal to range greater now Mark Vos, support some growth. on I'll I'd our call Mark LVLU. to key and further we range at will compared guidance million, million the Captured in larger $XX efforts $XX Information

David. you, Thank

allow center customers QX these at to California California reduce additional inbounds we activities our our The facility, we From QX, next marketing which of processing are of control In Northern of transitioning go polybag the reductions finished fulfillment and robotics waste. materials further early network improvements these and improvements we our replenishment will and QX, for on In in of cost. opened allocation, products further will activities Southern reduce rates us Southern an data-driven into we returns landscape. and back lower end facility end efficiency activities cross automation and QX product and we algorithmic fulfillment and to of Switching at by sales serve and currently the our receiving, this implementing of introduction to have the faster in centers. in the efficiency Southern our fulfillment addition we will California last our Southwestern shipping focused addition gains, split previously, packing, of perspective, our to with plan to customer support mix to vendor of facility fulfillment testing Pennsylvania year and poly reported cross-docking inventory live activities our orders order Eastern from our ship a California year. In the quality to As also automation XXXX. enable of year. added currently therefore, used center, into of in

our our favorably have During to promotional and led be customers increased by increases also repeat new to Gen further measured Lulu’s QX, Lulu’s Z brand to Lulu's additional brand the brand competitive both our Millennial saw incremental promotions tools. across to seen the Both calendar equity monitoring responded the where in apparel promotions, needed. we and downstream space Woman, and and have familiarity adding further activity, as which

Our outlook data will remain and our needed. promotional the to and is and everything will will promotional with And take appropriate demands decisions that term, verticals our continue do leverage to around we highly these Lulu's footwear pricing the when we with to apparel customer promotional actions as stimulate near Lulu's, inform as in analytics activities.

cost of we healthy acquisition the a maintained track. contribution value was through comparable In peers previous stable profitability. XXXX Our with to QX media and XXXX, compared share of margin we first Lulu's customer earned influencer-driven order QX and increased quarters,

earned across and members Towards our about of economic income media increased the QX in discretionary likely segments, Lulu's household ability to household to with our additional deceleration team XXXX in that segments favorably respond and all output. added also macro income and XXXX. also We The and frequency promotions. compared drove we QX less slight August, increased connect see talking our see and environmental return scaled to creators rates value our resulting changes similar to a end to continue all income more customers challenges security of we for drive and order

customers a dressing. our strong new dressing, demand luxury out remain in and event new successful acquired our customers percent outpaced with year-over-year event attracting Lulu's QX total dresses XXXX, and going For that in demonstrating QX, event of slightly with cocktail in our affordable outperformance of as revenue

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women. brand and content Z Our improve and to millennial resonate continues with Gen

active I will quarters resulting an pressures remain, tough a our increased for will growth drop capable hands. my of macro efforts, our for I We strong count next Lulu's to her that to in March over and large discuss David, the it as brand quarter come influencer scale up to share gain quarters customers' Lulu's continue will year, And media I detail. to hand position financial assuming most maintained role earned from customer believe and off, upcoming Crystal, value, in familiarity equity. Lulu's her Lulu's joined perspective, marketing be future CEO although while Crystal the to reach in of is of cost. greater and and excitement in

afternoon Mark, Thanks, everyone. good and

for role. title. truly look head this David and to chapter how I privilege been why team. for with and chosen Let the taking leading the an much collaborating as Lulu's dedicated am affection into our far, and forward CEO words forward the the me the looking years and an be coming steps honor this exceptional customers role on incredible next so and to startup the It's It's teams, seven by an Lulu's such together. of to It's the holding to I'm very saying I Chairman the difficult thrilled we've all of our brand describe he role, March be to built having Executive in

quarterly jumping Now, into results. the

and While we many related we post industry continue that were our and to consumer we not metrics immune remain key of macro challenges, pleased to profitable. gains wide the across were

compared at the diverse active QX X.X We year-over-year. continue we X.X customers million to be At a million active about loyal passionate of proud and Lulu's XXXX, of our the increase end that large had brand. community QX, in the are customers of to of XX% customers end

prior above of this and the same year, we $XXX.X combination base, in QX the year. compared in or QX slightly customers wear, continue our continued from is While a slight in prior period of the $X the We orders higher experience net year. special the of event to levels occasion that a average primarily X% revenues units the transaction. the rates return. in representing to sales new benefited to retail net returns year to and our and markdowns to period partly X% loyalty the of million from Total customer continued to This earlier was over reflective the dressing same discounts into per fell acquired in Similar prior million, formal value the of we by from QX average order typically year. more increase result our decreased existing decrease of compared period saw higher an drive and shift mix expectations and in in $XXX, latter increase X% same in the of QX unit in increased in which

increases two year, both to year addition with consistent same categories roughly saw to in XX.X%, return mix margins prior factors. XXX XXX across shift, in compared most markdowns product industry-wide year. promotional discounts Higher for shipping for third to of in driven The to an same to the from discounting Gross increasingly compared and the gross fell rates to returns behavior. prior and product period and higher was period impact merchandise costs, by and category quarter activities impact overall sales the last promotional return the basis the points the trends environment margin this we compared outbound merchandise In of key basis continued continued higher about in price-sensitive to of points. drive primarily used

revenue our in an year competitive promotional increasingly environment. normalization markdowns of XXXX, for to quickly noting promotional and reinforcing very back for and XXX view over points demand, As in percent around so Lulu reminder, for our merchandise XXXX quarter and inventory of to there impact to of favorably. coming in temporary or sales to of pre-pandemic partially activity discounts the our little with QX preference of basis sales, returning were in QX comparing QX LCM is XXXX, is worth to in We a need inventory last as in net gains activity compared brand. our unit turns that times. compares room the total remain proprietary Also, the a promotional decline our Lulu's margins product partially pressure When XXXX nine QX customers' branded our XX% QX

levels P&L the shifting marketing in Moving some into give some the net marketing to in $X line to period during due reflected down revenue. prior year, support discounts in insights expenses the performance increase spend million, in P&L down captured primarily items. the $XX.X selling to were expense the of QX from same million about quarter, higher and promotional the

returns increase the to this disciplined as an of higher expense margin value equity-based promotions, spite in As compared And related since quarter, related Mark efficiencies, profitable partially spite in percent as a factors. this in resulting challenging of health investments our increase in General variable with to costs pass-through lower a to elevated by of benefits labor year. point was $X.X shipping driving the put from awards IPO to we earlier, costs our offset about compensation the employee order costs the automation a nearly increased XXXX. million of alluded higher of compared in costs basis to and to macro our during QX costs. place warehouse in approach us, fixed to and $XXX,XXX million reinforces $X.X reduction marketing care equity-based year. quarter, revenue reduction remained in The as well to $XX.X amounted carriers. expense contribution These first due of prior of premiums XXXX, of net XX administrative for from primarily the bonus labor expenses due million To variable were costs November health lower

Additionally, by increase year there IPO. we million an paying this compared Interest year, or in professional and off expenses proceeds associated was with insurance $X.X our primarily profitable. the last last have a the our quarter, year resilient insurance $X.X did long-term million in with in XX% result officers to and QX. remain challenges to in the from us fell model expense business services, enabled a increase liability debt of $XXX,XXX director the Despite proved public and not by driven company, costs premiums being

for was the a $X.XX we a in reported EBITDA $X.XX of of $XX.X And quarter period to third quarter, to For finally, share compared adjusted per million diluted same compared the million share third earnings XXXX. XXXX. the in quarter per $X.X earnings in diluted the of

to in in was XXXX. XX.X% period compared adjusted QX EBITDA Our same the margin X.X%

cash reflected reported $X.X sheet. resulting us sheet compared $XX.X we positions the for sheet key beginning in revolver manage year, statement, this the balance assets that to balance offsetting is a and near-term million, not long-term under quarter noting balance past ended to of balance on XXXX, to drawn change debt XXXX million. growth our flow macro net several lease well to worth and XXXat our and believe adopted accounting the the liabilities on Similar We the cash ASC remains were of with million execute our roughly and plans last on the and strong standards $XX we one of Moving on through quarters, uncertainty. sheet the year of balance fiscal

$XX.X and QX XXXX. over end of quarter up million Our $XXX,XXX was $XX X.X% year's levels, inventory at or from up million, balance last

As always, goal receipts our we're our of the manage to ultimate customer demand. data inventory responding leveraging with to

improve higher were and could improve turning those quickly mentioned potentially at too supply we've knew There the customers. inventory customer calls, turns to that risks previous levels, our experience. working year, have exposure we our As slowing more continue and last we are towards inventory the to with sourcing China, experience to disruption chain inventory on needed levels, been vulnerable to to we ultimately de-risk customer historical so delight and

of approximately $X of and optimize million issues, a intentional million remain chain are company of an of We stock we what of to believe inventory growth all turning end our customers. supply against better industry-leading the was the effort As $XX and inflation, hedge inventory that QX, very terms. to quick to with value service size

in customer always, our aim As markdown we the levels risk. management approach, and inventory inventory to pursue further to disciplined optimize be relentlessly to of experience optimization and we'll continue minimize

XX% As of results in markdown roughly buying a model proven sellers being with lower reminder, buys our our risk. data-driven

fresh We inventory mostly our exposed cases for markdown and fast not that fashion, inventory of years, means are fashion and relevant across risk. products obsolescence consists less multiple many so which ensuing to in we're are a seasons concept,

highly operate in flow a generated over to operations. positions positive business cash significant that generate us $XX we to We flow. from continue capital-efficient Year-to-date, million cash

guidance for Now to on XX.X% be which and year. continued range represents Inflationary and previous $XXX of macroeconomic to our between it's between our net given net We million $XXX we now moving uncertainties, and to $XXX and growth revenue compared XXXX million. range $XXX over million the million, revenue to XX.X% reduce guidance. on guidance to consumers weigh expect best headwinds feel

expect to million. For previous million of compared our $XX and $XX between million and guidance range be adjusted million $XX $XX EBITDA, to we between

of other reminder, As typically many QX quarter the our represents in net revenue fiscal year. a retailers, lowest to contrast

space. participate proportionately in We sales are not in not holiday a retail others do season typically gifting the volume and like destination peak

employee quarter immediately $X.X QX we the of primarily facility the million our for year, to expense Stock-based million expected the and around up expense for be since compensation compensation XXXX. from IPO, expense the Stock-based dramatically payoff XXXX, interest long-term of to of expect As stock million debt XXXX. made $X to QX director grants was for down be $XX.X due our approximately following in $X.X IPO. million result from is a

For QX diluted shares. we average XX.X XXXX, million expect weighted count a share fully of approximately

Moving and center, I'd on robotics to balance driven the we on this investment through our implementation XXXX we to in year are Coast continue driving of completed labor expenditures. reiterate fulfillment following to the capital year, successful like the areas focusing East towards which future growth. Earlier has efficiencies. the

we are have our moving for location to with buying a launching Northern we merchandising We move with adjacent forward creative of implementation facility XXXX. QX, Southern in collaboration which California our operations anticipate our the studio planned early efficiency between will office, create greater In teams. studio and completed robotics our California will to and

we and our that experience with internal and to investments and improving platforms experience, customer platforms maintain personalization ensure plan We data continue customer-centric insights. improve custom marketing to also customer our furthering shopping in

technology internal Southern capabilities California further Lastly, our operational fulfillment center. external in and software invest plan to and we including efficiencies, other distribution distribution enhance our and expanding new in to

our in year. capital guidance budget, below recent the full million to to the for on continue macroeconomic most amount customers million focus will projects gain believe of we our us relocation continue CapEx have allow and to coming QX the drive primarily to to of fiscal efficiencies. to invest unique spite spend sheet the we XXXX business We along face, strategically backdrop efficiencies. will volatile most result narrowed such new capital the areas will reprioritization is of as our balance with model range to further the to recruit expenditure In that and to $X.X continue studio likely This challenges the $X and

should closing David well. the to will reductions shipping cost fruit economies underway remarks. I'll that, ordering of are in as the from there in areas us we low-hanging that near-term pass many of in scale back with and grow, it Operationally, initiatives mid-term. be we As to able the benefit process And for benefit

Thank Board and like our our on We'd it turn our moment many for and their over Lulu With you, you, to support each to delighting of to continued now. to take executing work fans, Crew, customers. a Crystal. continue as shareholders, strategy we towards that, thank we'll brand questions

question-and-answer Ladies we and the Chen this with [Operator question proceed your Instructions] you. line gentlemen, comes begin session. Thank Cowen. at from of Our a first time, will Oliver Please with question.

and Mark. David, thanks Hi congrats, and Crystal

Unfortunately, costs on higher and what your customer love and color different control? your is Regarding factors? question marketing. environment, is seeing increasingly inventory? Would we've And really forward? lots how seen and feeling rates Thank on industry happening we've you. the an acquisition the do what effectiveness seeing changes. with previously. of with IDFA with up But and outside compare that triangulate in what less to does What's your adapting been the how A discounting, had terms there of You're promotional other will enough you of large. against and at performance about of going follow-up where factors you're you're have your how didn't levels inventory be environment inventory nature promotional and you are AOS you've to of

Hey Oliver. Thank you for the congratulations.

than typical that group have carrying regards inventory, want exposure, excess it rather it's just typically year had inventory. is we felt from a from we and termed the -- our than go So, done given we out revenue as as next XX% into team But of risk. called say, of approximately, because of sort job margin that flush I fashion to and the Crystal comfortable what terrific forward. over product, reorder comes we of that rest down inventory remind out monitoring spring/summer it working And rather we million, this we're $X the had as not spring/summer your

inventory some And take continues response good seeing sharper styles our Mark to part. to think we're as well. position and we So, get will the second

Yes, mentioned acquisition of stable. our is the as cost I what we prepared see Oliver. remains remarks, Hi in that

we numbers it that to where don't we insight least, trend the see collaborations I it not. see far. does would and marketing -- as to And our our or the to so we relatively we nature others is of cost their teams like the around incremental order attribute the work? that does things basically flat money, at that where -- to in upward how And to work? reported, it And data-driven don't spend Kudos we have yet. it achieve acquisition And that those specifically that have flat do, not from thus

Best regards.

you. Thank

Please Our with next question proceed comes question. from your with the line Jefferies. Garrett of Greenblatt

my taking and Crystal question for Mark. you congrats and Thanks to

Thank you.

guess, into promotional are to we and compare as how in XQ? how XQ? I that does you about about saw going you the And this think thinking what markdowns, cadence

Yes.

in to So was we're to year, of quarter, certainly and actually compared last We're helped QX being the returning. more a given utilize There just in promotional our promotions. us year last position opportunity in about opportunistic especially inventory lot it. third of

well Our to customers it. responding are

lot acquisition. we have that par indicates customers leverage and with higher through be a LTV can data have promotional the staying And to that We knowing we opportunistic certainly that our of a to customer acquire focused on activity. inventory, some there's for of that

approach promotional to We to surgical the to we QX possible just as as that, take continue a as want certainly in through participate expect the be quarter. we more but given be a work environment. macro We'll and optimized

but we also blood not and promotions we're what et what we that I say, holiday very the to cetera, the don't specifically also how -- in participate QX, should what we do and we extreme would I like Yeah. advertising costs, of historically, surgical not to do. in have say

are concept that and customers. what is is affordable us the QX spoke think, promotions. responding and various with and what I for through new luxury about out we remain to the and all data is these is out, go-to brackets that both dressing to remember going continues resonate called that income the to that event I As existing our showing I they're well important and

there well brand feel So our very positioned in the improvements and we're and we that in our there. making we're the that content sense, we're awareness having that that brand and reach further with combination

will what do comfortable. we first does. is be it it all, will promotional. And always in that all So And order being yes, a yes,

Appreciate you how top at sense. trends return some progressed wonder the then, well? on, color as and throughout quarter looking makes how back line it. XQ, rates I And give trended if could Great, just the

as continues other that saw trend consistency in the typically of to But rates, Part our has we board, that classes just rates we similar side QX. elevated. in spoken a product with is Starting mix that business be that have the return and higher in QX, across more similar as we event-driven and Yeah. of saw formal demand return across and in the saw to rates. space it about return retailers increasing all

the then terms in And other progressed. of

a Oh, August, started see we That I'm low to we progressed. just deceleration question October. address quarter but were July, how double-digit to around positive. single-digits sorry, the your into September. low into positive, continued

us. just big And that our for so for is rationale and that's a for the more QX quarter, a play not conservative QX outlook knowing lowest it's

possible in as to wanting as see just that we're, conservative regard. So

Understood. Thank you much. very

from comes Telsey next of Telsey with Please question. the with proceed Advisory. your question Dana Our line

afternoon become going you with and think then, forward? going lastly, I inventory the year? year, margin of the did on Thank overall, into then just or see? piece, Good October wanted September and to how luck. you. congratulations, robotics we And and progression, through David about is sales And we touch and next inventory about next Crystal the on fourth negative Hi. Mark quarter best deceleration enhancement you're as that to turn what as then and a did also thinking go tool

So overreacting usual, balanced to a not our pretty she's methodical approach putting inventory way. and under-reacting lead she's to we're not. And that based to that relates and really her on to QX and want or and approach money take the go macro times, to balances. we're our data-driven to as it's given more as forward, be make where able our as we always, in where to agile managing And derisked and a of customer it sure it relates demand adjusting very taking as just business inventory,

gets levels, about. good from of a to total that we've be. we inventory past, spoken to want do we're our X% dollars positioning while but X% is and think allows long-term. a the and for have low lower It our slower the to worse, also again, In XX% we macro to macro in for return risk so be reorders, our place get within if for that better is, inventory upside turn, it's we right the So provide elevated inventory its the where calculations terms risk

me, about excuse inventory complete year. she X%, per said, is Crystal And talking X% turns to

basis, right. LTM an that's on Yes,

Right.

to for refer robotics. Mark I'll

Yes.

robotics costs what in seen thus as reduction we what it and a to relates reported we automation there. the have far, more variable so in general, was indeed are Crystal And

the is we that objective, have. so focus And that the that's

sorry, those continue were And us, so for path, benefits reduce map road we unit. of seek to that do year, those -- down have relates those realize is front QX we our how -- and further we need or over can time. asking think that we will per cost to with that we to costs next as for which small it opportunities we variable incremental believe in of And about you a

Got it. cadence the what just on in saw And then the color quarter and you the of more any changes?

beyond already Not Crystal No. what, mentioned.

Got you. it. Thank

Right. This addressed wasn't that is then? specific,

you it for So, as side by...? to revenues around more relates do robotics mean and automation Dana,

sales out turned September the at revenue the leveling On side, and And you're October? negative that in all any seeing?

down, up I out, and certainly and to conservatism although, choppy, is more conservative makes been a leveling for to overlay with outlook. been Yes, it's some thing the it's similar that wanted QX, where very it

and we so again, communicate very QX, But yes. we to certainly, a environment approach it's like manage dynamic it for just wanting So it. about to in how reiterated cautious take

lastly, of And there label achieve? own you percentage and had you brand. performance you seeing sales private your Lulu's that mentioned What Thank then in expected to just you. are

saw brands in third-party of of the team. our job, it. with is mean, year quality. we growing deceleration a And which from and quality our a over actually truly done great the Lulu's in I of coming product threshold this testament They've to sales the with that than really to Yes. XX% QX a customers brand more our XX% the appreciation product crossed just kudos and brand merchandising customers' own, for our in and more Lulu's connecting favor our our of our

the proud of So and what team they did really, there. really

proceed Our Altschwager next Mark line Robert Baird. question Please with the your comes of from question. with W.

my Good afternoon. taking Thanks for question.

times the few extrapolate that QX is maybe your not a and mentioned it's you business given for for us seasonality. unique So the to best period

in how thoughts and versus you growth was choppy uncertain balancing this growth into think you're backdrop? you So and given XXXX? with hoping top margins could protecting that us some on planning how give And about bottom-line mind, I macro high-level

Hey, here. Mark. Thanks for the David question,

For on the sure we back great see good value in making spring. this half, we discounting in not great we're that focused full price,

-- and to it's and for indicators still Board still Some to very too expect brands inventory quality forced XXXX, purge for the goes We're companies XXXX. really us meeting be through watching early have other the process, to of and year sort season, been the reviewing what get we exit on with quickly any what doing things. for we our and inventories comfortable going in we're And our give it. working with as of budgeting what have to we into into

XXXX. now we're in going So signal not to right

current think if rates. cetera? well, freight correctly. efficiency And protect returns to, elevated versus And policy XXXX. How follow-up They in forward you respect to margins? just heard Can returns to on initiatives And some impact to surcharges respect and with you. doing I with what on alluded the enough. given as you're much I that expand maybe I of Thank and are to still that just are broadly you more your where to your et with structural return Fair respect return with going just backdrop you're a actions think, any cyclical? to planning there relative were that you the for is Okay. respect

than our say at return And business Lulu’s, I having that mind always the over higher been given of Yes. are details on I return moment product rates. that part return seven say it's think which years within heavily our culture there. year. around going with and I say policy at is the last policy our to make But quarter It's everyone scales a of certainly top of cyclical it's and that, evolve. also is Lulu's constantly rates rather to And are just to within my I sure say their or safe a is would just with doing model. would processes what into look to struggling be returns trends looking dependent and we're classes a industry-wide that course,

to but want see New Year, might don't we just the detail You yet. them changes in

Thank you. luck. Best of

question. Brooke Roche Our Goldman of from next proceed Please question your with the Sachs. comes line with

margins and And drivers, can for hoping into then talk that's give back seeing Thank half year planning you. some you transitory. afternoon is you that split you margins. about adjusted through year? of the taking persist pressure you fourth our or And the bit EBITDA year? freight the expense so as of those could the I us other questions. might pressures Good of and to view much pressures buckets, items gross how thank maybe you question proportion little for margin quarter returns, for the between you you're was the And quarter you're other next that onetime context more the some first cost talk as or promotions, a of gross on as and My whether to in that what which contemplate

asking all the would how I given see negative the it our again, we and them the from is to accessorial where relates been versus but acquire potentially. efficient a gross fully as competitive toward marketing margins customer think us headwinds discounts we're for very expect adjusted what is marketing And team going profitability, what's our cost incremental that's thing a and really, between dynamic somewhat the with is really versus that spend. quarter, But for going buck how So as and the discounts a focus customers had engage performance the new QX, reallocation revenue net and managing experiencing. to space use for where lower and contribution target, QX, of is, fuel, that best slightly selling us you'd marketing to continued we largely see our discount with burdened in margin interchangeably customers all allocation is considering the through from marketing in bring payoff team I good and QX, would that determining best the expenses everyone's to is spend. on more that

nine pass-through say a gross I'd of mind QX other all from the were over from repeating we perspective, going the your... times a margin perspective, logistics from of comparison So margins, from especially we're lower to course, trending year. negative do promotional our Brooke, have part the That impacts you activity, comparable a last carriers. including

and that feel next. And all. in Mark here. to Crystal, in of jump on jump first free Thanks I'll

inventories. surprised cleaner that the down forward be activity relates it and the going to industry end think comes those factors January, right-size As of -- activity about, to down of as same get we that of and looking level charges, the half wouldn't the those that of would date competitive through nature one-time. been promotional would don't in to risk if out have promotional I cycle will customers' of has some to accessorial their risk we which freight you expect now, is in other I inventory, of versus as the the pressure carryover Again, driven I some by inventory as attention. macro Right and ask think our this the knowing come some as the they people by next also.

competitive customers and We'll industry or to seems some higher push hurdle I'd the I view, down promotional simple of behavior probably and the expect in Consumer more activity freight industry. because back. some the a create for come broad-based from a be down from that supply coming demand. So others of burden think return to pivot share XXXX. will And and

question follow-up color. One That's helpful very from perspective. a high-level Great.

you. some you that you the in continue you advances customer your upcoming And count brand to place remarks, time playing a customer talk customer building. ensure see long-term growth AOV? about that tougher As And that what to Thank think, you you versus you your quarters, and algorithm initiatives you of your a on prepared count Mark, share? relationship over how capture active think do Can about much between have this you your compare and out customer talked little bit in said market about grow have count. in I

see will Not we so sure. high-growth to attract but has size, what the customers, and tougher to that basket a be first be again but get new component that well. question. as when grow Yeah, that time although, of coming where the as there. part the the in quarters, And think customer, it's to on mean repeat relationship and harder. over is just are or a frequency. against. when where obviously, you Great on continues of focused course, not different focused has to more and That the with we XXXX essence, quarters. it context to core comes customers Yeah, are I repeat frequency will of And really it's increasing averse to our That program that, of cannot to we our XXXX examples, we key be can necessarily, our our clarified, the existing focused which is think customer And expand on compare and going I doesn't growth, increasing way the how focus about we order that that is that do we it's in be about forth. the overall, with order when our app, our going loyalty instruments

the that, whether and components, the the portfolio what of come is that with be wants getting, to they're benefits – the focusing the service on. really to And to that, or as for that our we're back, enrich so additional customer to and customers experience make well around wants such

much. you Thank I'll very it pass on.

proceed with can come line from question of next your Markets. Capital KeyBanc Zatzkin Our with Noah the Please question.

Thanks taking for question. my Hi.

consumer in you trends lockstep? saw quarter. Have during you any the seen any differences Just levels or in could wondering, geographies color around largely across income you moved differences if provide or any behavior

household those have is so in type moved seen We of it we've we've say, across order from that, that seen, tiers slight what And a we for trends frequency. the differences tiers, were income – Any so for is some reduction So between visible continued bracket. then saw that in the change all order, what would more lockstep. through example, income essentially for items example, QX. had

we're we So moving doing income, one out rate essentially higher What – really it's as all in that, is a actually, sign when are we we change formula that And is, records, or where of they're shift a is that we successful. – rankers. of stable. income jumps that our say, see records sense, all we not that relevant really customer working what is for is at attracting There's don't see lower to and are let's about income our comparable. think and a that

you. Thank

Our question line Sandler. comes Piper Please the with Edward Yruma question. your proceed from next with of

guys. good taking for question. Thanks Hey, evening, Congrats, Crystal. the David and

ones me. two So for I quick guess

First, that as it's difference then a you everyday kind you. follow-up, did you moving kind a special had can some to seems pretty Any blue of people how provide I are like And interesting targeted are you more of performing comments anchors in on And Thank see TikTok. platform? And I of on there? performance kind It but line, know between performance of kind know, occasion? you clothing. a marketing.

question. good a Yes, it's

the of events was last we and did see So [indiscernible] for we a see all be that our more spend in so Where stock back little quarter events we bit, or struggle everyday in events continue over destination and regard. affluence where third to pull year, some a business. on it

typically protecting the and in fashion. to life backdrop, for. good and be that a trying macro and really products, new those more on is able she's us events her our about what there them given on the feel just separate, gateway temporary, pull to into So casual day back event we're quarter the makes every It spend dresses need are we moments

high through with in Mark's at couple then, points. doing -- a number on And hair’s you're -- that theme the a different of And we’ve largest Ed, how there to when have generation, console in look of also volume factoring grand one’s ever data team got was brand quarter. And we supporting thought really -- you as very we a for us. good a the team pull that search have search

It's in combination of there. activity watching on positive the seen more a [indiscernible] search in progress has team for making promotional this book, them. works in that We're there. So getting looking the the

Great. Thanks much. so

question from next -- your question America. Our Lorraine questions. with for our from with Hutchinson of next Bank line comes comes Please proceed with the

levers tough afternoon. over Good assume macro larger any been And are can that you. to choppiness Thank a you It's environment. buckets cost next if protect we or the pull the profitability? continue several to there continues quarters,

Yes. Absolutely.

EBITDA. point we the have still around I in highly variable a XXXX fairly was. cost fixed comparable we a our high to pull cost And how say, into even XX% want pretty structure. public expenses team I managed very new we of So, have reactionary structure. everybody company, variable would revenue, being to through actually outside With And less a and

very, make forward. our to and and very sense, about we're manage to growth that that team is but be in -- expectations well conditioned realistic for us, too back far to been just opportunistic continue So expenses, pulling preserving and sure we we're not go want

in to We balance to have sheet. we push for to a a growth. continue where ago, Compared clean very were a good pretty year we're spot

Thank you.

Lorraine. Thanks,

Thank conclude further no participation. questions for your you the in are teleconference. does queue. today's There This

day. disconnect your and time, have lines at may a You this wonderful