Lulu's Fashion Lounge (LVLU) 9 May 232023 Q1 Earnings call transcript

Good afternoon, and welcome to Lulu's First Quarter 2023 Earnings Conference Call. Today's call is being recorded, and we have allocated 1 hour from the prepared remarks and Q&A.

At this time, I would like to turn the conference over to Naomi Beckman-Straus, General Counsel and Corporate Secretary at Lulu's. Thank you.

You may begin.

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

objectives statements of expectations, Before facts macroeconomic of remind year management's Act financial call implementation, plans, conference our business, regarding statements and statements opportunities, and forward-looking that you continued the their forward-looking to begin, of should ending that the we we expectations goals of made but our relate to, market including, and XXXX, this environment be growth. product call would XXXX. the around the All limited XX, results, do will references considered regarding on our Litigation and not Private historical Securities strategies, launches the initiatives our like statements to December future within not Reform impact meaning this expectations on include matters to other

such can XX-K which SEC, be annual the XXXX, SEC found statements the call. including date various X, as our management's filings cause forward-looking with of or XXXX, with other represent are these and this risks, press statements. of of implied subject assumptions statements, the by differ fiscal report on for to our These achievements achievements actual These our performance at on expressed materially from our or year Form the filed release, uncertainties detailed January assumptions estimates to XX, in which as are or Any uncertainties, afternoon's this investors.lulus.com. ended on and results, could all well as results, risks, factors website important performance March

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

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

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

are our David our Joining Executive CEO, on CIO, the our Chairman. Mark Tiffany Landsem; today our CFO, Crystal Smith, and call me President and McCreight, Vos;

we'll Following call open for our the prepared your remarks, questions.

turn I'll call to Crystal. the that, over With

good everyone. Thank Thank you, afternoon, Naomi, you joining today. us and for

team to Before gratitude brand and our I I'd my and quarter, building to create express our to and their brand the relentless dedication for continuing our fans stakeholders. to our like discuss value

balance model. challenges will from challenges, great We to range sheet continue able current companies, to positive healthy and given so we on we believe And make Like do term. are diverse the efficient key despite a initiatives flow our we benefit brand that many are macro external our capital cash managing of several business factors. long progress

continue we judiciously. to growth on expenses view challenges temporary as these and initiatives long-term managing However, while be our laser-focused

her customer were social quarter. million, compared Recall, faced and compared increase representing revenue XXXX anomalous with including comparisons to highlights demand a restrictions against events. an and spike XX% returned in COVID-related pent-up gain the and due into our as we the our weddings wardrobe expectations in tough refreshed the to XX% to XX% wedding-related in Revenues as QX QX a decline calendar amounted we eased, from line up QX heading year and to XXXX into Jumping QX. last $XX for as to

continuation year-over-year. versus to were challenging more was sequentially. reallocate highlight were adjusted million prior I spend this Like year. last us that of the quarters, impacted Similar was to chose a by But others, we as down Our be $X.X would to macro use a promotional into environment, promotions a of promotions efficient EBITDA breakeven which required more capital. we marketing

compared model ability our XX.X% highly For promotional discounts navigate comparisons, at macro represented fresh a to value our of challenging underscores fashion and XX.X% buying of XXXX historical assortment markdowns the and sales of our to This sales. and and environment. QX data-driven

our us and with growth balance Our continued we to debt, and capital-light positions sheet opportunities investing term loan that model continue navigate long-term any macro believe well remains along operating uncertainty. without strong in

up result better count demonstrating Our buying $X.X with starting teams million, months, year, product building should a term. brand customer our challenging QX environment. key during our the our X% We scale loyalty long costing over in over increased year-over-year even began last the to macro margin from out leverage during product customers' few substantial to quarter benefits which a the last few active hires

re-platforming in Phase the the growth. our groundwork quarter, international laying initiatives We for international completed of also I during future investments

to indicate international brand, and to in already for continue on to strong interest Our the foundation increasing the signals. and international growth will Lulu's setting now that allow build benefit insights we consumer believe demand us from

our Southern creative realize our move to of the location office. buying studio, continue to California adjacent a the We recent benefits of

more wear space As pleased collaboration, Denims, to pipeline. confidence that future experienced us a seen work closet and potential wear outerwear quarter. product in our new non-occasion some our core result sweaters, categories. reorder categories. during were These conversion the especially the strong gains to conviction gains particularly our occasion gives the we've were in stronger of we reinforce beyond of the We with in our the occupy product strong in

with occasion our Performance in special we and related expectations, in our consistent particular saw dress was non-wedding category categories. strength

year's comparisons strong extended events performed in line expected, exceptionally last wedding classes reflected and projections with with product wedding-related that season. Our as results with our tough

occasion comparisons, gaining an to dresses remains us categories QX for shopping we our historical destination and XX% XXXX were customers that For in maids, sales a Lulu's and for QX these in share to roughly when to events XX% up and of up are indication XXXX bridal, net bride that QX of these special day compared events. XXXX,

of that driver year, where key As the ahead new to she to we continue our customer shops, look opportunities to how the as rest future strategies and our channel explore we for digital focusing growth success. on a strengthen of our meet

our providing channels with out have to to our ways to additional our engage are brand committed us. with insights new remain seeking We that connect they customer and with customers shown

enhance our delight our support We digital and customers are reputation, confident our that platform. they will further us brand's help

in connect customer real global product-led a look we meet and taking base channels gap is the through domestic and We to phase is, the experience complete, continue Now first establishing optimize she we customers' experience further are activations additional to market. with break with exploring other at re-platforming our how the the our where as that taking in-person international is customers for international life pop-ups close from a her this website in-person experiences. with of to the step our post-COVID, experience. are to to brand ourselves expanding a goal towards our believe a be in aligned international a on to going critical more customer trusted After fresh customer new

digital will capital-light our between a learn, way supported the efficient with with We you opportunistic to look feel existing progress test several Consistent wholesale and we fuel strategies, allow that next relates when build and and and will by over everything is our growth balance infrastructure as channels. quality Lulu, experience we'll products to at way brand do awareness it in synergy and quarters which model strong profitable of in sheet. while a We on partnerships follow continue to growth to pursuing capital expand our customers our reach initiatives. to leveraging updating be the a our data-driven, forward further physical

continue morale. Coast in move ourselves distribution center implemented week, growth with savings We as We in robotics for driving position our employee this and further are infrastructure strategies. automation operational launching ahead Coast efficiencies, increasing one key East of and centers further future cost distribution our West to improvements we

million are year. to guidance We $XXX the our of $XXX reiterating for million revenues for

our well flexibility in in investments growth to product expansion and the previously, maintaining as our maintain and catalyze both reflects pricing customer of meet as demand near need across term channels. brand articulated to As digital the future distribution in guidance order to physical

million. guidance quarter-to-date, to margin QX of reiterating which We be trends $XX.X have year. quarter trends are our $XX.X both business EBITDA, see these improvement seen the will and balance and adjusted for expect between for improve and expect in our the sequential and to continue million throughout also revenue we the full year we

Vos, our our growth Mark call So analytical key an will Officer. operational like to the and now on insight turn continued with well over share Information customer to to you efforts I'd Chief further and increasing support engagement. as update President and as He

Mark?

you, Thank Crystal.

our million Our compared XXXX, in QX as XXXX, the QX in million of positioning Lulus' trended marginally being where active frequencies lower year-over-year. the household X% QX had per active units XXXX. we compared particularly. at QX increase to broad to new increased At patterns and to customers customer transactions relates it brackets. showed affordable repeat to customers income strongest X.X of XXXX as customers the customers expected resonates segment end Order XXXX quarter-over-quarter similar customer her acquisition year-over-year X.X luxury well end A QX a with

our the environment, to brand, quality encouraged more of brand in of a retain macroeconomic of Lulu's products our the hub. which are We difficult by the and effectiveness the customers Lulu's affordable strength ability confirms

and overall to margin performance while brand of to revenue our From ability resulting shift introduce more strategy within aided as to spend our response remain marketing continue awareness, targeted efficacy spend efficiency of brand the strategy keeping a a overall. from to our profitable. in investments Lulu's marketing leads marketing, marketing ranges marketing awareness contribution improved improve perspective, and to of we consumers and to first our to marketing more order percent unaided This work higher direct to

benefit ambassador provide Lulu's multiple we that the channels, have us support on our and seen in should reach, our with to word-of-mouth Lulu's are which impressions the media We path, meaningful we of the confidence gains marketing. social voice value expand growth have generated right and continued in Based data, investments influencer future. efficiency the brand share which Lulu's to improve across media on earned of and

in brand our momentum. of that ability to do believe With these in the in brand these for XXXX Lulu's. marketing potential seen by at pay response Lulu's continue cost growth to programs. data-driven we and to teams and forward investments our will content, awareness new funnel creative build brand top and we'll us, of the their brand of acquisition learn, familiarity this quarters. with we much equity. brand ahead marketing, non-direct everything have investments QX see Asia over see the test confirmation our tools, for our and Kudos Consistent delivering brand off in and We unison approach used out next of tracking and increases in several increase Through increase customer we an

investing broaden with the number to We forward looking awareness overall are improve to valuable, further marketing our continue of in stimulate closets and products. Lulu's to marketing word-of-mouth Lulu's efficiency brand to and

we Mid-February, our the a for vastly international shopping technology partner with live improved went experience who customers.

experience XX potential friction line local can process customers international the and the rates are with the our improve for taxes Early communicated experience tariffs step pay capitalize cart in to our with, to and meaningfully in Lulu's in opportunity. now in international payment encouraging local checkout their overall the their their and that many has more their demand currency from duties, can Shoppers clearly we or in pricing shopping product import abroad. see that supported with international otherwise Bringing in cases, on conversion the method Our and checkout removing data languages. signals is over in first included indicates preferred process. domestic customers shop

and in will Hub rankings prudently We select other experience improve abroad influencer paid on test iterate brand expose search continue to to the to shopping to activations Lulu's improving the international and test and regions. into

reduced far, XX-day our we to packaging higher outbound efficiency reduction. negative have impact both an Mid-March, drive Pennsylvania behavior QX, and non-abusive only our returns an window policy the efficiency the also operational policy, perspective, but operational distribution returns Eastern was cost have performance. which late thus beneficial for change. we automation continuing we and in continued our well as From material reduction while update is launched countering out improve throughput unit center, shipment support to and update and automation. introduced a successfully a abusive increased our for We from to This at and excessive within not seen our as usage, policy packaging packaging customers. In free waste not rolled launched which return we aimed returns

and We packaging our other expand will within facilities. add automation

with we California week, went distribution robotics also center. This in live Northern our

fulfillment improvement in shipping would well and I In in accomplish in QX As engineering further to reduced express center. unit financials. cost we predictive by have on QX diversified networks position seen inbound Well our Financial deep carrier have over to will Tiffany our automation Officer, XXXX carrier compared meaningfully other carrier delivery to the XXXX, Northern the operations, we mitigate this and into offset like I per gains diversification we hand outbound in outbound shipping facility, I'll done. our our as aim Eastern a to to through in labor who reduced believe mentioned also Pennsylvania times issues better and also XX% outbound the complements modeling, to productivity to which the data similar Lulu's results our it variable position. of in QX, implementations. previous as and us strengthen Chief gratitude to over some our us put my teams network, allowed now better of carriers. costs reliability cycle processes, our as immediately and distribution California continuous We Smith, dive And successful increases call,

and Mark, everyone. Thanks, afternoon, good

where difficult net fully shared, calendar. and refreshed her QX in returned we year As faced wardrobe to social comparisons increased our last customer 'XX revenue we as XX% her previously to

comparisons. tough to macroeconomic the trends further improving 'XX, sequentially to to addition revenue in year-over-year late weekly softened pressures. weeks into In comps, observed XX attribute QX improving mid- QX gross which March, X with we've we demand

that selling a well for summer product During QX to coupled related fall March, 'XX, to better-than-normal through products we a season start sales winter-related noted and begin and build QX. during spring slower-than-normal with our typically

the of approximately high value from of continue million of to the our XXXX, $X.X expectations As XX% average prior was for net The by million paying result yet results our the net spending by revenue provided factors marketing both mid- during generative in enabled flow generate our quarter of year-over-year, teens. the decreased with free a into these our we shift to X% and line discounts orders cash total business negative for Compared by XX% cash to strength to first results, the Compared quarter. to and top to $XX to operating us million down With margin decided quarter and QX, factors, QX. of of and cash period, $X.X $XXX. and down line activities of these of net respect revolver our year-over-year revenue comparisons flow promotions impacted XX%. first decreased the grew order year in combination

'XX basis XXX to about XXX 'XX, product year was declined to higher to to gross higher several to impact centers. first in allocations the higher sequentially were costs of points. cost QX a compared QX quarter XX The our points depreciation that improved the impact higher costs. XXXX. last well Compared year finally, last was basis surcharges primarily to distribution as continued included elevated margin costs points, roughly by merchandise compared basis of shipping points fuel by but as basis related shipping and basis of of roughly XXX impact And of margin less XXX declined factors: and result margin markdowns points. discounts, for XX.X%, discounts as and Gross markdowns The of gross from QX which

positive as our have a diversification sequential note, is already a savings of and a we year. for seen implemented actions result mid-quarter, the improvement in which carrier X-figure On meaningful expect our drive we guidance contemplated to

Moving down some into insights expense the to items. P&L give line

wedding-related to QX QX will as events, QX demand was $XX.X revenue expenses in QX period. due we of remarkable ratio more weddings some past. a against related $X.X This selling performance about 'XX 'XX comparisons done normalized component into include quarter and marketing comparisons some to discounts, a that Given as 'XX with from pent-up unusually net partially high and expense the spend down marketing the following million a was 'XX. million, were shifting have

and selling impact compensation stock-based variable lower marketing and 'XX. is administrative of relative approximately percentage by we reasonable pressures and QX 'XX, The points in was our about expenses. a QX level, above macroeconomic by revenue costs driven $X.X fell expenses discounts which and current net combination to in lower General labor million expenses believe $XX.X as to QX of given XXX net basis the the 'XX million

pleased cost structure offers resilience that with us. are our the We highly variable

administrative cost above revenue. our a revenue fixed and not that 'XX. quarter in Our are general quarter driven XXX by to for costs were company public for costs QX compensation of Interest with as primarily stock-based levels, expenses do decline and percentage for structure of amounted approximately the declines headcount net parts by that net adjusted expense points versus basis of commensurately and in payroll characterized QX higher $XXX,XXX the $XXX,XXX 'XX

of first adjusted which EBITDA same we the million a quarter, of adjusted in the a XXXX. $X.XX quarter compared quarter And per of of of decrease $X.XX per first in was share $X.XX in earnings to period EBITDA compared share the and reported breakeven $X.X for For the to XXXX. loss finally, is positive

in 'XX. compared same EBITDA was positive adjusted of X% margin to the Our X.X% period QX a

about believe cash our operations and million $XX of $X.X the near-term We growth plans million. balance our million million and well long-term us a generation the inherent through balance ended cash positions in debt flow opportunities with strong ability cash manage cash sheet is business drawn macro remains We of uncertainty. net quarter our Our in to generate free our $XX indicative of execute million in of on revolver, resulting $X.X $X and to flow roughly and in model. from

We the In banking highlight remaining revolver relationship with $X the outstanding the revolver million recent of our again America. pay our in by balance year-end. corporate we we plan maintain Bank that to and first of light to our repaid during industry, wanted disruptions the remains quarter, on of banking

peak a end the Also, sequential typically in up balance 'XX and our QX we season. $XX and that model. risks, better from fast-turning to our this about their balances of million at and Much selling summer previously With to spring and to was year-over-year inventory, on LTM $X inventory over needed quarter $XX from chain to intentional our inventory Xx customers for last inventory had respect levels preparation growth million, more from basis. inventory, was turning the support insulate China. we serve Our our better million was help and an that on same growth chase indicated period specifically supply planned basis highest at in us up year QX in are

we the are inventories indicating our QX basis to saw that sales improved growth better our approximately inventory 'XX, quarter, becoming growth During sales. by spread XX from points with first our aligned

We growth comparisons. be sales and expect positive to both QX inventory with quarter last the negative

a in in able observed to levels we'll be inventories a productive, already QX, QX, end first manner. the in confidence that sales inventory we brand-appropriate improved decline X align weeks our of and seen which margin With of accretive the trends the since $X us gives million have

reasonable On continued the well and sequentially the inventory the to of levels half decline expect million our in by feel into an we annual achievable on sales as normalization a the sales We range end trajectory. of mid-$XX dependent trends year-over-year further extending and QX, target back inventory basis, with year. balance inventory of year-end as is our

with a before, As quick inventory what we brand we believe we've turns. highlighted turning are industry-leading are

remains that trends to year still X while anticipate true, X inventory this to slower results. While inventory ideal per and as prioritizing continue turns of do range turns we than normalize be our LTM margin improving year sales our to

be after company, carry instead that integrity. a is to seasonless in remainder is multi-season, but Approximately markdowns, current our We a year be and year concept. which further round, are season our can way This from the assortment sold fashion fast brand and inventory brought can in one us back of fresh year. confidence minimizes and ultimately a inventory levels half preserves risk not and next move ability through gross gives margin to fashion

and disciplined always, management our relentlessly minimizes inventory to about be in The risk. we'll that approach point inventory is levels aim the we to balances our of pursue that experience inventory and buy continue pipeline. further As final optimization markdown well, and risk. our see of We data-driven markdown roughly lower sellers proven reorder which strengthens styles in our XX% particularly were quarter being new future buys model results during fuels our encouraged the with resonate customer to

guidance. to on Moving

revenues continue weeks observed April year-over-year We between XX%, XXXX full gross million QX mark in sequentially $XXX to improve. comparisons. $XXX which a and XXXX positive high X improving that with million. expect net We net QX into revenue up signals should year year-over-year was 'XX, was so comparisons Note revenue

the encouraged first discounting, assistance margins. of improved has in the higher We or are that weeks promotions further significant of merchandise quarter the without X yielding demand

we QX slower guidance season. in start sales selling revenue of our net revenue for softness the end is to and the our While year, confident given the full observed in a range guidance year lower to our spring the range peak pacing net remain

revenue be of a peak QX. to the higher typically gifting in sales and than event season a to revenue typically business, dressing. QX in like net in As year, our think typically second do and quarters revenue moderately we retailers This other participate you lowest third volume, our expect net normalized our not QX demand fiscal and proportionately year, modeling year quarter space. seasonality not is our represents as holiday for for about net our due we profit highest destination in revenue are fiscal

refreshed growth, social year comparisons, relates demand As in half keep quarters return last wardrobe for respectively, her customer that reflected from as mind to and pent-up net QX XX% revenue calendar. and year-over-year benefited our as to it and please QX first XXXX XX% those

expect the moving net we the to that second to contemplates flat comps half quarter XXXX. continue negative with second into revenue positive comps guidance in of Our

strong to our supported guidance performance comparisons, easing in months. recent have new that the is of products addition In by tested confidence well our in

As our proven of a means model buying sellers. buys reminder, our XX% that data-driven are roughly

This forecast year to We full margin between EBITDA million X.X% continue an adjusted equates million. between and of $XX.X $XX.X adjusted EBITDA to and X%.

carrier adjusted result year incremental coupled seasonality actions. are fuel likely expectations or in with surcharge similar To and EBITDA our initiatives, Our transportation-related guidance for of EBITDA adjusted captures of our margin our the rate of investments proactive longer-term a have distribution and net quarterly in-person expanding fluctuate the as Offsetting broadening investments purposes, latter below including easier costs part on quarter. support activations. these set as expectations of modeling diversification moderating comparisons full rates depending our in above the guidance revenues year, fluctuations will

approximately result balance in a $X.X outstanding interest down continue to driven XXXX partially million our of following XXXX lower line higher paying with As by modest long-term and levels revolving for rates. by offset interest credit, on line of the expect debt our a of IPO, we

revolver, drawn for from XXXX. the have As million compensation pay by was our XXXX. QX Stock-based down the $XX $XX today, we million of our off end of quarter plan to on revolver expense of million $X we

$XX approximately compensation million million We continue forecast to of in stock-based expense XXXX. $XX to

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

Moving to on expenditures. capital

for the driving growth $X year. and enhancing on focused for and million the million customer experience stage investing operating opportunities, We're the further Our efficiencies. plan between future remains setting $X

continue it to remarks. further For invest in and Crystal XXXX, expected labor are capabilities, for that, robotics center back to closing we distribution automation with drive efficiencies. to I'll will And pass which

of take crew, work delighting to support fans, With questions their now. over to our customers. you, We'd moment continue our and strategy turn that, Tiffany. you, our Thank brand Lulu thank we and each for a I'll like shareholders towards continued executing Board long-term the our to as it to

Sandler. We question-and-answer Instructions] from be And will [Operator Yruma now from Piper question the begin the Ed session. will first

look trend seen the in difference you to improvement were trying as what Have what's guess, the fairly quarter I kind seems of a on changed? macro the sharp It first, but in of documented date. obviously, pressures to consumer half you view. a the here? all you the March, understand, compressor like as kind assume in of maybe some I'm is what then are embedded about the think that that kind macro Or you of do you do of talked assumptions guess of from I assume back of when the kind you And guide? improves buying? expecting, in about year, at, kind

This your I'll take is Tiffany. question.

So more sharp summer that pronounced improvement, a that demand. our we've and just for period product. is it would a curve, saw merchandise of the fall/winter things the has really chopped in QX noticeable of and spring -- improvements up to trend-wise a more upward necessarily I in maybe caveat turn longer, And been think far selling what I we've say, some we QX so but a soft in not slower of seen turn would on the sales our I of week-over-week

anything nature. of not that we're or so And meteorologists

but not what than season through just So it ever pointing winter selling we've fall went QX the seen. more weather, pronounced to was that longer finger a

And up the moved picked that into quarter. second as definitely so we

So that's our been improve season, an normal peak continue know, year. we've to encouraging sign seen is as that this of you time

so And quarter. the riding wave here we're second through this of sort

We trends. have not seen worsening

they're improving fact, week week. In over

from seen were back of promotional. and promotions second much compared scale say where we were aside of in we've other quarter to a of QX of level towards -- we lot actually the demand, to that pacing were I'll the highly March, that, The able we part

in had we a positive on So demand. outcome pulled back and fact, And that a had it's on negative detriment hasn't margins.

not -- we've us. with question but upturn, noticeable for think then seen, it's but it's there? there we're dramatic what far, certainly So was pleased not more one -- maybe I And a

a choppy guidance, of very environment. we terms macroeconomic view In this as still

ups we're Our affecting guidance through don't and downs and is is rest us the contemplates improvement year. going effect be expecting for view that. there not of right of We're terms what some could now the done trend the year. in macro We still the throughout in necessarily

Our up about comps choppy as very the and we've more as end ease year, much the rest into guidance the environment. the viewing -- the before, it May of comps the towards as we're and for we for do -- year. full point us contemplates QX still that's And just the one a back of talked move half through then and that of also

And question will Sachs. the from Brooke be from Goldman Roch next

conviction of and wondering costs was could rest help that quantification context outlook you increase additional the customer for of for I your that -- acquisition the some then can you if in And the year? you the us you on secondly, perhaps better, quarter in provide and and the getting saw sequential does understand you understand to outlook? this worse? the when relative in the And embedded have what's us last the look getting improvement to what's in full And that's how quarter year it help margin spoke confidence last?

Mark. is about this acquisition I'll talk the cost. customer Brooke,

to we of we more shift move also solid is engagement and the I've a how specifically on nature we've awareness that in. general customer positioned by also share see up. the what path of Lulu's We that trending go marketing. well because of are have in this and focusing things these into performance more as dollars longer-term are have of have And in we brand not to right, and amount specific essentially type the about the the given metrics continuing play, and of longer-term that Lulus' that cost well. ability of increase Lulu's costs always QX spoken the That I of what present past, marketing investment, at voice same more spoken awareness from is awareness the but invest that that course, as because our year in for spend acquisition the the we on us time, there, the want basically were in the recently, that and numbers are top gives are how the that belief brand of we side, that's growing are trending. on about costs the But funnel how will market seen of the and products that how that from brand Then,

obviously call And want but perspective, so I from XXXX. that in last to did comparison that, QX out cost up to are we went that happy,

cover as promotional We main factors margin some the through do really to One the in into seen responsive we've general. our the less seen rest customers being we've for in you. And the heading already I'll there. year, and have price Brooke, margin QX, improvement is, full question X confidence be of

one So also develop continue, that for be us. improve factor talked that certainly margin where we've we're to Product to costing we proactively going costing staffing a to about to There's vendors prior to there We investments a in working pencils there -- our with and started product expect component. QX margin QX of that's make towards sharper calls. really taking is should with areas to our team support us that. terms of on closely positive trend the end into and

Now that pan not something the will likely that's probably in until year. out later

big where area immediate but have wouldn't we're a that's impact, I an focus necessarily us. anticipate that for So and investing it's to

we shipping And costs do margin. in then our gross lastly, include

shipping So as everything, year-over-year of where war to a is bit escalated of comp we impact kind be the last one there'll Ukraine were and that following up. moderating the start the little fuel implemented surcharges cost bumped surcharges year

measures QX. of to spoke taking move some much proactive there. the diversification. So rate that we'll during higher comp we're forward that benefits the to We seen the carrier around charges first then we ourselves at to that, quarter. already here start pretty And started on also some We've in

there will year. to continue Additional actions throughout our the margins benefit

Cowen. Kim question And next Jungwon the TD from is from

curious across seeing income price? just of group than you the acquired Was can if others? you color during new you Are the how customer more those through certain plan the to different during more And pullback on quarter? customers income do quarter give or or Just any on And sort retain any promotions full customers? softness from brackets. it behavior the

was a as our an So affordable brackets. seen income quarter it very income similar to XXXX first acquisition comparatively we've from to that actually very speaking from say, serves to a to we lower customer where middle the the, perspective, QX the quarter quarter, last the well. doing of offers the what broad luxury essentially bracket group from relates of income and -- Lulu's, And perspective, positioning in is new brackets to were let's were year-over-year delighted see with

and is purely were to for our really that a then a so to by certainly how so new variety first customers, It customer And say, as And concept so it we or those speaks Lulu's in for as acquisition. would we was promotions of promotion. that relates -- new the that driving the resonating. try luxury I affordable it there's time the want as mix, offered were relates QX. result to us were to intrigued always of to this promotions out a that. That that characterize a not is

joined Lulu's whether we and that or there you give perspective, are our is say by as that from from and that that, for family out brand changed our -- the do not strongest and that our customers, marketing acquisition. oftentimes, buy but hasn't just more categories we dresses. our don't And with over a also family loyalty also broader we collective Lulu's, would I to products. we more critical other on, also introducing through closet marketing that what the and offer advertisers just her grow component Gogo's the friends well. in build them And in into and also is word-of-mouth driving for is exposing see customers one But opportunities that performance that with -- And what wear [indiscernible] of forget general, relationship the program, Lulu's opportunities and that customer new and

from question of Bank is Alice America. next Xiao from The

margin give through quantifications the levels, component I carrier diversification details, headwind? higher you efforts. have big missed. freight return an what rates Following more for any How and each And we the a by offset go higher whether incremental can be? up piece the still What may be of might other What tailwind? just could components on year, be you can lapping surcharges expect each it's markdown of as gross

Al. Sure.

end good actions say would the the I think We on last so at my X-figure comment do So to in during implement, second the first the we We portion during I ballpark of increase on shipping-related I least QX, being soon in diversification an basis. benefit start ease remarks, carrier of prepared of that items, would quarter. we those here saw did the late quarter. start I full as wise. towards the to didn't should mid- say, year a annualized the fuel get a lap did up to should what surcharges

the for the be so of will And that year. place rest in

some underway the We also diversification have in other actions second quarter.

are the to those going So go. year we as think, and, of stack I kind throughout increase

year rates But typically of that impacts the kind the with Generally that most We're how for into normally I second us and being of discounting first for the period. heavily implementation quarter half, in of markdown done less our margin. the half us, during speaking, would say, benefiting terms peak in leaning considering second, season. of full third

QX more because I very lighter expect at tends the QX, in QX marketing discounts to areas it those we to in expensive back tend year. the be marketing So would general, and pick then generally -- performance to be of just marketing, be end of to in up terms

just lay markdown that's of bit sort out. a the of discounts will how little So

us. rates, for return follow those flow of terms somewhat again, are, a seasonal In

And fairly how in XXXX. those we've out modeled consistent they were with

rates And more because they're 'XX, consistent follow we full modeling we're level As along they discounts those our if return. people price, them paying ratcheted typically of before, and promotional about the with we've low all-time their are during price-sensitive 'XX. is pretty XXXX to talked tendency and had return with 'XX, also during will up

in there's period, lower expect mix be higher of return and sale. rates we'll final our during to So and we generally higher the then return where a QX quarter X, and X QX, have rates quarter more promotional

gives sense So hopefully, on some you timing. that

our would Crystal to like this Landsem and for conference session. over I any closing back Ladies concludes the remarks. question-and-answer to turn gentlemen,

Just we're wanted call. our today your evening. forward a time on looking progress next all of and your great and thank our to everyone support, for to on you continued updating Have

you The today's conference has now concluded. presentation. for attending Thank

You disconnect. may now