Lulu's Fashion Lounge outlines direct sourcing expansion and projects continued positive adjusted EBITDA through 2025

Earnings Call Insights: Lulu's Fashion Lounge Holdings, Inc. (LVLU) Q2 2025

MANAGEMENT VIEW

* Crystal Landsem, CEO and Interim CFO, reported that "we built on our positive momentum from the start of the year with encouraging trends continuing across key areas of the business" and cited "meaningful sequential improvement in our quarterly year-over-year net revenue comparisons and generated positive adjusted EBITDA for the second quarter, in line with our expectations." She highlighted strong growth in special occasion and bridesmaid categories, noting "we delivered our strongest Q2 performance ever in special occasion with formal and bridesmaid categories seeing robust year-over-year and net sales growth."
* Landsem stated the company "continued to make progress strengthening our financial position with positive adjusted EBITDA performance and a reduction in our total debt position."
* She announced the company is "actively negotiating a new asset-based revolving credit facility" following an extension of the forbearance period and maturity date under its current credit agreement.
* Landsem emphasized product margin improvement, stating "product margins improved for the third consecutive quarter and increased by roughly 170 basis points compared to the prior year period."
* She also addressed cost controls, reporting "OpEx declined 15% year-over-year. And within that, fixed costs were down 19%, supporting our inflection to positive adjusted EBITDA for the quarter."
* The CEO acknowledged ongoing challenges in shoes and separates, with "early signs of improvement" and plans for "refined merchandising strategy" to align with event-focused apparel.
* Landsem confirmed the CFO transition, stating she is "currently serving as interim CFO while we conduct a search for our next finance leader."
* Mark Vos, President and CIO, noted continued traction in brand engagement, with "Love Rewards loyalty program membership...saw year-over-year double-digit growth in the second quarter, driving an overall increase in total membership."

OUTLOOK

* Landsem projected, "for the third quarter, we once again expect to generate positive adjusted EBITDA and are confident in the work we are doing to strengthen our liquidity position while focusing on driving the success of our business."
* She stated, "we now expect capital expenditures for the full year to be approximately $2.5 million, which represents the low end of our previously estimated range of between $2.5 million and $3 million."
* The CEO reiterated that the company "continue[s] to evaluate options to help mitigate the potential impacts of tariffs through a combination of vendor collaboration, sourcing diversification, strategic pricing and assortment optimization."

FINANCIAL RESULTS

* Landsem reported "net revenue was approximately $81.5 million, a decrease of 11% year-over-year, driven by a 16% decrease in total orders placed, partially offset by a 1% increase in average order value and the favorable impact of lower return rates."
* Gross margin for the quarter was "45.3%...up from 40.3% in Q1 2025."
* Selling and marketing expenses were "$22 million, down about $2.9 million year-over-year."
* General and administrative expenses decreased "$3.9 million to $17.5 million in Q2, an 18% decline year-over-year."
* Net loss for Q2 improved to "$3 million from $10.8 million in the same period last year."
* Adjusted EBITDA was approximately "$0.5 million compared to a $0.2 million loss in Q2 2024."
* Diluted loss per share for the quarter was "$1.08 compared to a diluted loss per share of $3.92 in Q2 of 2024."
* Net cash used in operating activities was "$1.4 million, a $5 million decline from $3.7 million of cash provided in the same period last year."
* Free cash flow during Q2 was negative "$1.9 million, reflecting a $4.9 million decrease year-over-year."
* Net debt was "$4.2 million at the end of Q2, a $4.4 million reduction from our net debt position of $8.6 million at the end of the fourth quarter 2024."
* Inventory balance at quarter end was "$37.3 million, a $0.3 million or an approximately 1% decrease year-over-year."

Q&A

* Operator indicated, "At this stage, there are no questions. Ladies and gentlemen, thank you for your attendance. You may now disconnect your lines."

SENTIMENT ANALYSIS

* No analyst concerns were presented during the Q&A due to the absence of questions.
* Management maintained a confident and optimistic tone in prepared remarks, repeatedly emphasizing progress, improvement, and optimism for future quarters, as reflected in statements such as "we are well positioned to continue investing in our brand," and "we remain extremely optimistic about our growth potential in wholesale."
* Compared to the previous quarter, management's tone has shifted from cautious optimism to greater confidence, with more assertive language on returning to positive adjusted EBITDA and cost discipline.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for positive adjusted EBITDA in Q3 2025 is a reiteration of Q2's expectation and follows through on Q1's projection for a return to profitability in the second quarter.
* Strategic focus remains on event-focused apparel, margin expansion, cost controls, and supply chain enhancements, with a heightened emphasis on direct sourcing and SKU rationalization compared to Q1.
* Key metrics show net revenue in Q2 ($81.5 million) up from Q1 ($64.2 million), and gross margin improved sequentially from 40.3% in Q1 to 45.3% in Q2.
* Management's sentiment in Q2 reflects more confidence than in Q1, while analysts' tone cannot be compared due to no Q&A in Q2.

RISKS AND CONCERNS

* Landsem highlighted ongoing softness in the casual wear and footwear businesses, stating "shoes and separates continued to weigh on top line results."
* The company continues to face macroeconomic uncertainty and potential impacts of tariffs, which remain "closely managed and partly offset with the ramp of our direct sourcing strategy."
* The extension of the forbearance period and ongoing negotiations for a new credit facility indicate continued attention to liquidity and refinancing risk.

FINAL TAKEAWAY

This quarter, Lulu's Fashion Lounge emphasized substantial progress in margin expansion, cost control, and brand engagement, while reaffirming a clear path to continued positive adjusted EBITDA. Management highlighted strong results in special occasion categories, improvements in return rates, and ongoing strategic investments in direct sourcing and supply chain diversification. The company remains focused on further strengthening its financial position, with active negotiations for a new credit facility and expectations for sustained profitability through disciplined execution and operational efficiency.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/lvlu/earnings/transcripts]

MORE ON LULU’S FASHION LOUNGE HOLDINGS

* Lulu's Fashion Lounge Holdings, Inc. (LVLU) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4813364-lulus-fashion-lounge-holdings-inc-lvlu-q2-2025-earnings-call-transcript]
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