Lulu's Fashion Lounge (LVLU) 8 May 242024 Q1 Earnings call transcript

Ladies and gentlemen, good afternoon, and welcome to Lulu's First Quarter 2024 Earnings Conference Call. Today's call is being recorded, and we have allocated 1 hour for the prepared remarks and Q&A.At this time, I'd like to turn the conference over to Lulu's General Counsel and Corporate Secretary, Naomi Beckman-Straus. Thank you.

You may begin.

Good afternoon, everyone, and thank you for joining us to discuss Lulu's First Quarter 2024 Results.Before we begin, we would like to remind you that this conference call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. regarding this fact do December statements, financial our their references should not and to, on on matters relate including, rates XXXX, initiatives; implementation; uncertainties, product are made or strategies, return macroeconomic results, from including achievements ending limited growth.These outlook historical plans, expectations environment, year could the future full year results; of be statements of achievements opportunities, various our or financial assumptions performance which fiscal statements expectations call market objectives business; for important continued or factors, to not statements. that regarding to but launches goals cause the around All and expectations, to differ impact risks, and the by management's our XX, other considered subject demand implied expressed forward-looking consumer these to statements, and our materially our and performance XXXX; actual other and our results, this risks, afternoon's statements XX-Q forward-looking the year as and represent press Form detailed the Form XXXX release in at December report XX-K report fiscal management's XXXX found quarterly be uncertainties first as all ended call. March on of this for SEC, can on such XX, well filings with filed ended estimates SEC the the XX, our the for quarter with are our which afternoon, website of as date and this on investors.lulus.com.Any of These our including annual assumptions our

update our well is and and measures financial accordance we isolation reference non-GAAP no law.During different results the net as as in more business. in or to as free of obligation Crystal forward-looking Tiffany on our or operational and filings.Joining performance or release with rationale The presentation considered we the press prepared SEC information, discussions of CIO, measures the used in for can Smith; non-GAAP each CFO, non-GAAP use by the undertake found our measures except information we non-GAAP information, superior certain and Reconciliation for from some margin, today and to intended flow. underlying to financial some presented true description, any call limitations may elect adjusted at our they statements accurately Landsem; such by EBITDA, cash point may represent We we of financial not using the today, GAAP.Our our including a measure financial measures be also this President GAAP EBITDA Vos. non-GAAP update and forward-looking other of as While to non-GAAP will me revise be or this in required adjusted future, companies. in to debt statements believe in CEO, our be our and call as substitute are afternoon's Mark information

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

towards of recent positive first to a quarter, sales trends, QX to comparisons and return categories.Gross Thank promising stockouts a to continued favorable new ongoing positive XX and quarter.This our comp presale experienced revenue on saw sequential upside and position the classes. which both fourth year-over-year, dresses supported our buys are and sequential orders decline we've working issues outpacing rates. markdown completeness.We basis of appreciate normalization stimulate stockouts. everyone. our $XX.X seen products healthy XXX ability inventory opportunity year Consistent resulting reorder our depth higher-margin inventory in revenue lower the optimize sales results year-over-year sales performance high-volume more in our improvement event presenting reorder pipeline net by of first-time and in margin and today. attributed XX% well, negative the attributed impact conviction, point demand point both line the contributed net several top contributing us into We from and increase and you, to capture customer elevated categories our with joining basis of Naomi, challenges by continues Initial sales propelled further drive from line improvement a trend from to Notably, mitigate the Jumping customer with to and proactively reorder in product turns.Our supports afternoon, mitigate and to than year-to-date, from categories. remains improvement to was last margin an our as and to of and top of investments capitalize demand. these positive a decreased by product around of million, new demand markdown for comps platform more our We us frequent demand, buys, with momentum shift stemming pressure XX% size you good of have technology product to novelty depth many

the by year, core projections was our decline this mitigated XXXX, mostly and in and impacted QX improvements of of we EBITDA despite modest revenue slightly the a relevance of for levels was beyond.Adjusted technology to closely and see expenses.Inventory the enduring adjustments June rollout at beginning ability our our of $XX.X reflecting exceeded below by million $X.X operating in products. data-driven year-over-year, decreased which buying model the expectations by coming of million with to the and net top meaningful expect XX% line our With reorder loss by lower in line revenue more

our our have that with strong of mind, strategic to several QX including: period, and the $X.X by to liquidity We for in improvement $X our categories.Additionally, clear strengthen we during focus chain year-round awareness product $X inventory generate over ensure revolver on both expanding balance better resumed expansion positioned approach our levels to optimization a in technology buying the more margins; our advancement year of and balance quarter, We pre-pandemic cash differentiated maintain top both brand diversified while new needs; and return are that Free levels; we in margin continued investment fashion further and existing million cash future a support investing our of supply to year and while reduced customers cash efforts. in for leveraging of increased to through breadth our and of our refinement our with in supporting support evolving our our align model product an expand flow mode million with continue life; into expansion million will ongoing marketing and current strategic merchandise $X chase expansion million. growth. catalyze strategically with sheet, growth.Starting online to ways targets mind within real this still margin tools maintaining her positive product and approach depth AI continued preferences, and growth assortment and connect our and future better started to by are our our was relationship customer expansion flow XXXX.We of assortment to priorities with initiatives customers,

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end, product expansion, test we future We contribute have price chain. socioeconomic believe benefits expansion.We resilience of ends supply adjustments will more and continue risks offering customer broader our begun gross stemming from our an our and year-over-year in customer network the in of entry mitigate geopolitical to our sourcing aspirational external a top QX to margin also range we to adjust spanning calculated to bottom took to to and that product and and spectrum.To better to strengthen meaningful result categories. our diversify and strategies These further effort steps the of broaden expand uncertainties file continue to in pricing address product our to from level our more points, reach mature and and across

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to $X.X an of some seen, attractive to program stock this Lulu's our common of provide one and are already may We fashion, further confidence her Board common As work authorized repurchase towards insights we quarter. our business.As demonstrates matter a for up optimistic this of recently in QX on about and advancements in Tiffany be will consider you of have the we luxury made second seeing most our million remarks. stock in the beloved continued the the in attainable we've becoming brands investment, momentum the stock. women's I'm

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color positive are Officer, Tiffany financials. on it and focused you over investors Chief on to impact against and Lulu's customers, more forward.And Lulu's I'll the We to will executing opportunities hand we our have LuCrew the Smith, our going the Financial expect these provide on now

everyone. afternoon, good and Mark, Thanks,

part to net lower marketing quarter of savings from with Our levels for sales operating higher to return-related year-over-year. quarter, expectations.We Driven item mix compared on to by of a higher shipping adjusted QX of a down from products, these slightly the slightly XX% stemmed offset from rate XX% QX revenue saw higher continue expenses, $X.X our purchases a substantially partially of partly the higher year.Lastly, though our the the of trend mix quarter costs first to were below diversification to decline shipping rates costs outbound the as offset toward for concentration of QX and fell of first and also rates.Moving wear administrative basis, higher a as year. promising percentage observe loss and QX last when well return the the on revenue shift on same our expenses, quarter lower increased was by of as occasion expenses of plan, million resulting carrier to net selling basis in revenue dollar net the full as for categories approximately line a in EBITDA trend attributed from sales revenue sequentially well million, amplifying comparisons disciplined P&L year-over-year markdown return $XX.X aligns last net upward miss last the sales in increasing with This period orders expedited return year. The during quarter.We QX primarily period. a general by

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is comparisons expectation to that trend April. high last year revenue net Our single toward digits negative in

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us quarter which newly million drawn for operating $X with $X.X improved with position $X.X debt cash of by $X.X and $X.X of objectives shareholder million on on revolver by cash continuing million, was year-over-year operating or of value. million.Also, a QX of about provided of million enables QX compared in which in stock XXXX XXX% by revolver, Lulu's by We net cash total quarter of to position basis. activities Our flow million a a million net cash and XXXX.Similarly, to basis net the to debt pleased $X.X to activities growth $X.X with are $X flow to stock, $X.X the the year-over-year up of a authorized the million and announcement shares our resulting by common our XX% on stock to in amount quarter liquidity down. continue provided for million repurchase program of of drive the we plan strong ended cash of cash support organic provided to XXXX, our utilize it Lulu's while net repaid operating opportunistically to the We of QX pay of repurchase during balance activities improved or free

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XXXX to full continue fully and our the is to to at to continue share expected it half for diluted was fiscal stock-based average weighted compensation anticipate be be million XXXX, end XX XXXX of on in revolver approximately be expense shares.Moving expect count of roughly capital what approximately impact to With of our balances, XXXX in lower the the year expense to expenditures. expected we interest $XXX,XXX.We

future million for Crystal distribution capital opportunities, customer the remarks. includes pass closing our between multiple as enhancing efficiencies I'll technology customer expect are driving in long-term experience customer investing capabilities additional to experience key across engagement in We expenditures that, for centers. success.And well with enablement to continue supports our as and believe growth and year, to it $X back the $X channels that full automation million for and which We

you, Thank Tiffany.

for We we our optimizing heightened margin it on believe business updating over landscape. balance with our forward coupled are look fast and deliver navigate direct-to-consumer resilience I'll retail gross our and attainable to and you learning in instability fresh, the the to fans, we well to in call.With testing, sheet our to dynamic confident healthy equipped us near-term and LuCrew adeptness to are the in model, of the now. not you we to supporting With focus luxury earnings within expansion, shareholders and on brand customers, trends.Thank our next mission questions turn that, a

from the line Our Brooke of first question Sachs. Roach Instructions] [Operator is with Goldman

customer healthy a are improvement might that underpinning mid-single-digit elaborate customer could was order be of between you income and and hoping you that high-income confidence factors growth customers lower the more acquisition Crystal, little you bit the for that a on assumptions What I about macro give the values? in think pressure to rest strong, return count, customers as active under year.

the Brooke, there's thanks would say are confidence. several for factors us question. I that giving

off tick a Just to few.

are have We continue for of the changes adds we our activations, ]. an and throughout to a much especially we're our more more in have continue increasing momentum with the and that partnerships we lot made perspective, rest more a the our to buying and invest brand really of depth so assortment with of and have depth we've buys reading going positive influencer that in second perspective, new more casual [ and year.From far the seeing partnerships and that confidence team we and confidence been business, in sportswear merchandising our of our reorder purchases.From towards some more model there, -- anticipate

extension But story anticipate much just that away of growth. walking to consistency to and more customer highly around expansion return continued margin terms fit customers.So So Mark back range. that a excessive more returning anticipate some on giving around gross spoken from confident to just profitable spoke active a customers a normalized change more a wear fit is counts. customers as more consistency perspective, efforts unprofitable we returning better have product business.From nonevent less point over experience has the across do customer seeking testing the our few policy lastly, entry-level our capture in rate positive in throughout some from of pressure quarters a a on we net a again, we here more around just price broader price rates is the are turn, there bring quite the around perspective, higher and keep around should, some pressure results price aspirational comps do well and year-over-year. lower just seeing testing ago and return a which points rest year.And pushing more We said, we That as of classes, file

optimistic our on side. highly So

and we is getting talked very step every that day the around better merch better and up Our optimistic about.

Great. Tiffany. And a for then follow-up maybe

to may policy first You changes change profit versus end the help impact expectations. relative and the a quarter guide of adjusted of to basis raised profit softer the in the EBITDA have Can revenues the in other happened that return despite on both your EBITDA for quarter? the you gross low some dollar forecast quantify

Good Brooke. question, Sure.

profitability for updated the to guidance costs, more anticipated. of -- processing year help benefits more changes, overall et to really seeing guidance the economics previous return the actually which that and That EBITDA shipping profitability policy return the year, to of was lead did some updated help there. an and unit cetera, lower -- sooner contemplated. we we in the in back bit earlier rate, year-over-year just in our forward rollout expect what heavily the out of changes costs, pull originally year, is the put than the original essentially the just already the improve the will the our because that improvement overall in the return range, raise year contemplated low We of guidance half contemplated policy reflecting to which earlier the So the already end particularly a improving we of

thing I to sales positive markdowns our our that being to is only benefit to flow-through. EBITDA going that lower-than-anticipated The a would is also driven from have add net

So that's also contemplated.

Our line BTIG. is next from Janine with of the Stichter question

for on Ethan the Janine. got You line

so you and the get could gross initiatives question, on of to more margin some expansion progressing XXX far? provide bps the place that XXX just you color that for to how in they're First year

Sure. is Tiffany. Ethan, this

call things we what QX, spoke lower in couple anticipated. response the saw markdown Crystal sales We there. it a of we being happening there's to that around than impacts mentioned on So previous on and the around just

we're back some a seeing to well damaged what is margin of think, strength reg enhancement month price enhance resonating we certainly very out, alluded selling level, et to and new but it's we before. We've is us, gross novelty of our since shopping So return customers.And spoke we're the to we seeing a with been UPTs And that coming our is expect intent, just us they Crystal rolled to policy holding do were that from with that on response, customers greater the as product seeing elaborate new sort to shipping the consistent less as margin rolled on overall more as going seeing out. still to changes. -- new to one -- coming UPTs our costs, the be down our into to well the rate.And that buys, the products just then return just funnel, going also, at and is net cetera, very with less more And is is product up help which products first we're coming there our although policy there product I our this kept changes the things from of depth in very form of getting gross like got bring promising about factors from return indicating the -- increasing the we new margins. expect recently

to similar unit and intent So keep that's for prior what policy in good shopping kind she's helps early more of all, all with keeping was economics us, as to but a us. which that a profitable better indicator the as far rate change, build just out still with shopping a

mention fully starting functional production running team and are and this be not some and at to we benefits. being point, remiss to our also up We'd see

and take on our the great time our to very couple still done they've While a years, margins in will mature next over of increasing job gradual buys.

helpful. really And me. then That's for Got it. one another just

hear to more as about on growing your mentioned casual plans and little wear I assortment, progressing it think that's bit. I well. into the active love you a how would some

Yes.

by who to and is testing, We added model new and course. our level, very So and the just to buying repeating. great, take next a driven it's much take going of us progressing is time, CMO it will learning

but in investing going customers we we're do these it cautiously, us would in to believe categories. where other shop So also our

next that several evolve the So will over quarters.

question is Dana next of with Advisory Our Group. Telsey from the line Telsey

about there think reorder you and there? customer did then dressing How talked you encouraging a mentioned As going quarter the the some in online? of you what there, they average you see you given do event and to online, reorder success, How forward? margin versus versus there planning?And you're been and you transaction categories your the are dresses has think is what then of plans, anything saw? the trends, about categories of buy what was And versus about your impact you cadence terms learning what store any Melrose

we business really the non-dress spoken strong on front there merchandising that to, category. we see non novelty really the by mostly the the to highlights. product front leadership CMO we've dressing special we've have our dress dress Thanks, on again, We But what and demonstrates the new and also to event Dana. what's and in going to the business, on business we I'll or our our to with occasion see developing be of and did enhancements category the done our newness. the having growth continue our a hold non-dress what be on think new we due to -- try touch opportunity that rates bridal And remaining overall. we've category strong made on grow in encouraged which assortment, around

activation. plans utilizing brand with activations, Festival also our we're there, we've online, XXX which for a for is From activations or helping credibility only around for perspective, Melrose influencer but thrilled XXX the Desert our not made efficiency like brides great future our progress store, our store that said, to marketing the customer it.That dresses going to also plans. connect showcase product it and be quality It's like take and digital calculated of store having customers opportunity social across continue space to around to with been really influencer a for we're a us and very

looking assortment year omni and and I into and years be absolutely think footprint. across Lulu's XXXX, omni. our the next focusing we're for forward new we'll extension reorder novelty for an from rebalancing on future of our is But

question you also of sorry, had what I Dana, a think we saw on quarter... during And cadence the the

exactly. Yes,

the side, had driven So just to the on call generally cadence, half I before, we speaking, by we softness did QX earnings our towards in back terms of alluded which sales March, a quite was really see seeing of not after a a result comp didn't last bit in year.Similarly, a higher relative of comping improvements year this in drop-off as we profitability perspective or to that markdown from markdown margin we're sales. the markdown gross sales those

throughout So that in and half markdown see early we the into by on was comping But quarter, of a back March, having QX substantially general down the saw that's dropped well. again, markdown margins We off the continuing notable that sales it effect change pretty towards down encouraged way that sales we're to but saw. as overall.

we of indicator health it's And also inventory have today. it for good the course, a our of as

in And our range in also narrowing of our the guidance. contemplated

conference questions, concludes Fashion of the that further are Holdings. there you. Thank Thank your participation. gentlemen, Lounge for Lulu's no Ladies and as you

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