Q1 2024 Lulu’s Fashion Lounge Holdings Inc Earnings Call

Operator: 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 one hour for the prepared remarks and Q&A. At this time, I'd like to turn the call over to Lulu's General Counsel and Corporate Secretary, Naomi Beckman Strauss. Thank you. You may begin.

Ladies and gentlemen, good afternoon, and welcome to lose first quarter of 'twenty 'twenty four earnings conference call.

Speaker Change: Today's call is being recorded and we have allocated one hour for the prepared remarks and Q&A.

Speaker Change: At this time I did like to turn the conference over to loose General Counsel and corporate Secretary Naomi Beckman Strauss.

Speaker Change: Thank you you may begin.

Naomi Beckman: 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. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including but not limited to statements regarding management's expectations, plans, strategies, goals, and objectives and their implementation. Our expectations regarding the continued impact of the macroeconomic environment, consumer demand, and return rates on our business.

Speaker Change: Good afternoon, everyone and thank you for joining us to discuss Luiz first quarter 'twenty 'twenty four results.

Naomi Beckman: Our future expectations regarding financial results, references to the fiscal year ending December 29, 2024, including our financial outlook for the full year 2024, market opportunities, product launches, and other initiatives, and our growth. These statements, which are subject to various risks, uncertainties, assumptions, and other important factors, could cause our actual results, performance, or achievements to differ materially from results, performance, or achievements expressed or implied by these statements. These risks, uncertainties, and assumptions are detailed in this afternoon's press release, as well as in our filings with the SEC, including our annual report on Form 10-K for the fiscal year ended December 31, 2023, and our quarterly report on Form 10-Q for the first quarter ended March 31, 2024, filed with the SEC this afternoon, all of which can be found on our website at investors.lulus.com.

Naomi Beckman: 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.

Naomi Beckman: All statements made on this call that do not relate to matters of historical fact should be considered forward looking statements.

Naomi Beckman: Clothing, but not limited to statements regarding managements expectations plans strategies goals and objectives and their implementation our expectations around the continued impact of the macroeconomic environment consumer demand in return rates on our business.

Naomi Beckman: Our future expectations regarding financial results references to the fiscal year, ending December 29, 2024, including our financial outlook for full year, 'twenty 'twenty four market opportunities product lunches and other initiatives and our growth.

Naomi Beckman: These statements, which are which are subject to various risks uncertainties assumptions and other important factors could cause our actual results performance or achievements to differ materially from results performance or achievements expressed or implied by these statements.

Naomi Beckman: These risks uncertainties and assumptions are detailed in this afternoon's press release as well as our filings with the SEC, including our annual report on Form 10-K for the fiscal year ended December 31st 2023, and our quarterly report on Form 10-Q for the first quarter ended March 31st 2012.

Naomi Beckman: Four filed with the SEC. This afternoon, all of which can be found on our website at investors thought Lulu Dot com.

Naomi Beckman: Any such forward-looking statements represent management's estimates as of the date of this call. While we may elect to update such forward-looking statements at some point in the future, we undertake no obligation to revise or update any forward-looking statements or information except as required by law. During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA, adjusted EBITDA margin, net debt, and pre-cash flow. We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business.

Naomi Beckman: Any such forward looking statements represent managements estimates as of the date of this call but.

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

Naomi Beckman: During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITA, adjusted EBITA margin net debt and free cash flow.

Naomi Beckman: We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented.

Naomi Beckman: The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. Our non-GAAP measures may be different from non-GAAP measures used by other companies. Reconciliation of GAP to non-GAAP measures, as well as the description, limitations, and rationale for using each measure, can be found in this afternoon's press release and in our SEC filings.

Naomi Beckman: In accordance with GAAP.

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

Naomi Beckman: Joining me on the call today are our CEO, Crystal Landsem, our CFO, Tiffany Smith, and our President and CIO, Mark Vos. Following our prepared remarks, we'll open the call to your questions. With that, I'll turn the call over to Crystal. Thank you.

Speaker Change: Joining me on the call today are our CEO christal anthem, our CFO, Tiffany Smith, and our president and CIO Mark Foss.

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

Crystal Landsem: Thank you, Naomi, and good afternoon, everyone. We appreciate you joining us today. Jumping into results from the first quarter, net revenue was $77.3 million, a 15% decline from Q1 of last year, attributed to top-line pressure and ongoing elevated return rates. However, initial momentum with our new and novelty products remains promising, and we've seen sequential improvement in many of our reorder categories as well, both of which contributed to a 250 basis point sequential net revenue comp improvement from the fourth quarter.

Crystal Landsem: Thank you Naomi and good afternoon, everyone. We appreciate you joining us today.

Crystal Landsem: Jumping into results from the first quarter net revenue was $77 3, million% to 15% decline from Q1 of last year attributed to topline pressure and ongoing elevated return rates.

Crystal Landsem: Initial momentum with our new and novelty products remains promising and we've seen sequential improvement in many of our reorder categories as well both of which contributed to a 250 basis point sequential net revenue comp improvement from the fourth quarter.

Crystal Landsem: This positive trend supports our reorder pipeline conviction, contributing to positive sales comparisons and favorable margin performance in several of our high-volume categories. Consistent with recent trends, event dresses continue to drive sales with positive year-over-year comps in both categories. Gross margins saw a 60 basis point improvement year over year propelled by lower markdown sales and a shift towards higher margin product costs.

Crystal Landsem: This positive trend supports our reorder pipeline convention contributing to positive sales comparisons and favorable margin performance in several of our high volume categories.

Crystal Landsem: With recent trends event dresses continue to drive sales with positive year over year comps in both categories.

Crystal Landsem: Gross margin saw a 60 basis point improvement year over year propelled by lower markdown sales and a shift towards higher margin product classes, notably markdown sales have decreased by more than 20% year to date attributed to our healthy inventory position and normalization of inventory turns.

Crystal Landsem: Notably, markdown sales have decreased by more than 20% year-to-date, attributed to our healthy inventory position and normalization of inventory. Our new and first-time reorder product continues to stimulate demand, presenting an opportunity for us to further increase the depth of our buys and optimize our ability to capitalize on upside demand. We experienced top-line challenges stemming from customer demand outpacing the depth of our buys, resulting in more frequent stockouts and size incompletes.

Crystal Landsem: Our new and first time reorder products continues to stimulate demand presenting an opportunity for us to further increase the depth of our buys and optimize our ability to capitalize on upside demand.

Crystal Landsem: We experienced top line challenges stemming from customer demand outpacing the depth of our buys.

Crystal Landsem: <unk> and more frequent stockout and sizing completeness.

Crystal Landsem: We are proactively working to mitigate these issues supported by technology platform investments around pre-sale orders to capture customer demand and mitigate the negative impact of product stockouts. With the rollout of this technology at the beginning of the year, we expect to see more meaningful improvements by June and beyond. Adjusted EBITDA of a $2.7 million loss was closely in line with expectations despite revenue coming in slightly below our projection, and was mostly impacted by the lower top line and mitigated by modest adjustments in operating experience.

Crystal Landsem: We are proactively working to mitigate these issues supported by technology platform investments around pre sell orders to capture customer demand and mitigate the negative impact of product stock outs.

Crystal Landsem: With the rollout of this technology at the beginning of the year, we expect to see more meaningful improvements by June and beyond.

Crystal Landsem: Adjusted EBITDA of 2.7 million loss was closely in line with expectations. Despite revenue coming in slightly below our projections and was mostly impacted by the lower top line and mitigated by modest adjustments in operating expenses.

Crystal Landsem: Inventory levels decreased by 20% to $41.3 million for Q1 2024, which exceeded our net revenue decline year over year, reflecting the agility of our data-driven buying model and the enduring relevance of our core reorder product. We are strategically positioned within our current inventory levels and have resumed chase mode for several of our product categories. Additionally, we continue to generate liquidity and maintain our strong balance sheet, supporting our ongoing strategic initiatives that will catalyze our return to growth. We reduced our revolver by $2 million during the quarter, while our cash balance increased by $3 million.

Crystal Landsem: Inventory levels decreased by 20% to $41 3 million for Q1, 'twenty 'twenty, four which exceeded our net revenue declined year over year, reflecting the agility of our data driven buying model and enduring relevance of our core reorder products.

Crystal Landsem: We are strategically positioned within our current inventory levels and have resumed chase mode for several of our product categories.

Crystal Landsem: Additionally, we continue to generate liquidity and maintain our strong balance sheet supporting our ongoing strategic initiatives that will catalyze our return to growth.

Crystal Landsem: We reduced our revolver by $2 million during the quarter, while our cash balance increased by $3 million.

Crystal Landsem: Free cash flow was $6 million in the period, an improvement of $3.4 million over Q1 2023. We started this year with clear targets in mind, including continued refinement of our assortment to align with evolving customer preferences, expanding both depth and breadth to approach pre-pandemic levels. Focus on Product Margin Expansion and Better Leveraging Our Supply Chain and Differentiated Buying Model to Further Expand Merchandise Margin. Brand awareness through a more diversified marketing approach to strengthen our relationship with our customers and ensure we are top of mind for her year-round fashion.

Crystal Landsem: Free cash flow was $6 million in the period.

Crystal Landsem: An improvement of $3 4 million over Q1, 'twenty two 'twenty three.

Crystal Landsem: We started this year with clear targets in mind, including continued refinement of our assortment to align with evolving customer preferences, expanding both the depth and breadth to approach pre pandemic levels.

Crystal Landsem: Focus on product margin expansion and better leveraging our supply chain and differentiated buying model to further expand merchandise margins.

Crystal Landsem: Expansion of brand awareness through a more diversified marketing approach to strengthen our relationship with our customers and ensure we are top of mind for her year round fashion needs.

Crystal Landsem: Investment in technology and advancement of our existing AI tools to support future growth and expansion into new and better ways to connect with our customers both online and in real life. Maintaining a cash flow positive year while still investing in strategic priorities that support future growth.

Crystal Landsem: Investment in technology, and advancement of our existing AI tools to support future growth and expansion into new and better ways to connect with our customers both online and in real life.

Crystal Landsem: Maintaining a cash flow positive year, while still investing in strategic priorities that support future growth.

Crystal Landsem: Starting with our continued product assortment, optimization, and margin expansion efforts. As we touched on last quarter, we are diligently adapting some more meaningful trend changes while maintaining the enduring quality that defines our brand. We're excited about the tangible value our new product and merchandising team members are bringing and will continue to bring in the near term and long term based on the early progress we've already seen. We continue to test and adjust pricing strategies in an effort to broaden our customer reach and better address the top and bottom ends of our socioeconomic.

Crystal Landsem: Starting with our continued product assortment optimization and margin expansion efforts as we touched on last quarter. We are diligently adopting some more meaningful trend changes, while maintaining the enduring quality that defines our brand.

Crystal Landsem: We're excited about the tangible value, our new product and merchandising team members are bringing and will continue to bring in the near term and long term based on the early progress we've already seen.

Crystal Landsem: We continue to test and adjust pricing strategies in an effort to broaden our customer reach and better address the top and bottom ends of our socioeconomic spectrum.

Crystal Landsem: To that end, we have begun to expand our product offering across a broader range of price points, spanning from entry level to more aspirational and our more mature product categories. These calculated adjustments continue to contribute to our year-over-year gross margin expansion and we believe will result in meaningful future benefits and customer file expansion. We also took steps in Q1 to further diversify our product sourcing network to mitigate risks stemming from geopolitical and external uncertainties and to strengthen the resilience of our supply chain.

Crystal Landsem: To that end, we have begun to expand our product offering across a broader range of price points spanning from entry level to more aspirational in our more mature product categories.

Crystal Landsem: He's calculated adjustments continue to contribute to our year over year gross margin expansion and we believe will result in meaningful future benefits and customer file expansion.

Crystal Landsem: We also took steps in Q1 to further diversify our product sourcing network to mitigate risks stemming from geopolitical and external uncertainties and to strengthen the resilience of our supply chain. While still early we are encouraged by the quality margin and speed of our new vendor partners are able to bring us while decreasing our exposure to.

Crystal Landsem: While still early, we are encouraged by the quality, margin, and speed of our new vendor partners are able to bring us while decreasing our exposure to China over time. In an effort to temper elevated return rates, we rolled out several initiatives, including website optimization and return policy changes to drive a more holistic approach to our customer shopping journey, while also driving more profitable outcomes, which Mark will go into in more depth.

Crystal Landsem: China over time.

Crystal Landsem: And then effort to temper elevated return rates, we rolled out several initiatives, including website optimization and return policy changes to drive a more holistic approach to our customer shopping journey, while also driving more profitable outcomes, which mark will go into in more depth.

Crystal Landsem: Turning to our next priority, we are making investments in brand initiatives and activations that support customer acquisition and retention, as well as reinforcing brand differentiation. As we noted on our last call, in the latter half of January, we opened our first ever bridal boutique within the Melrose Lulu's location.

Crystal Landsem: Turning to our next priority, we're making investments in brand initiatives and Activations that support customer acquisition and retention as well as reinforcing brand differentiation.

Crystal Landsem: As we noted on our last call in the latter half of January we opened our first ever bridal boutique within the Melrose lose location.

Crystal Landsem: The opening event was a huge success, eliciting positive customer sentiment and engagement online and noticeably higher foot traffic, creating a palpable buzz around the store. We are excited about the brand activations we have planned in 2024 to further leverage our space on Melrose and drive brand engagement in support of our e-commerce strategy. Beginning in Q4 and throughout the first quarter, we have been increasing the number of influencers and creators we partner with, while also launching our first of many influencer edits for 2024, which garnered exceptional traction and successfully drove customer engagement in Q1.

Crystal Landsem: The opening event was a huge success eliciting positive customer sentiment and engagement online and noticeably higher foot traffic, creating a palpable buzz around the store.

Crystal Landsem: We are excited about the brand Activations, we have planned in 2024 to further leverage our space on Melrose and drive brand engagement and support of our E Commerce strategy.

Crystal Landsem: Beginning in Q4 and throughout the first quarter, we have been increasing the number of Influencers and creators we partner with while also launching our first of many influencer edits of 'twenty 'twenty, four which have garnered exceptional traction and successfully drove customer engagement in Q1.

Crystal Landsem: On the wholesale front, we continue to host active discussions with several wholesale partners to introduce our brand to new audiences across various omni-channel settings, with in-store wholesale partnerships expected to continue to grow in the second half of this year. Most recently, in early Q2, we launched our first major multi-channel brand campaign ushering in a new era for the Lulu's brand with out-of-home advertising, creative social and influencer activations, and experiential marketing across LA, New York, Chicago, Nashville, and beyond. The launch is an opportunity to further differentiate Lulu's from competitors and underscores our unique role as a brand that's there through all of life's moments.

Crystal Landsem: On the wholesale front, we continue to host active discussions with several wholesale partners to introduce our brand to new audiences across various omnichannel settings with in store wholesale partnerships expected to continue to grow in the second half of this year.

Crystal Landsem: Most recently in early Q2, we launched our first major multichannel brand campaign.

Crystal Landsem: Bring in a new era for the loose brand with out of home advertising creative social and Influencer, Activations and experiential marketing across L. A New York, Chicago Nashville and beyond.

Crystal Landsem: The launch is an opportunity to further differentiate lose from competitors and underscores our unique role as a brand that's there through all of life's moments.

Crystal Landsem: Through the campaign, we expect to build excitement and loyalty among existing customers while also bringing in new customers that we can grow with over time. We believe our test-and-learn approach and data-driven culture allow us to quickly gauge the impact of new marketing channels, enabling us to optimize spending and strategically allocate resources in our long-term marketing mix based on our learning. Our next priority focuses on driving technology enablement that supports customer engagement and customer experience across multiple channels.

Crystal Landsem: Through the campaign, we expect to build excitement and loyalty among existing customers. While also bringing in new customers that we can grow with over time.

Crystal Landsem: We believe our test and learn approach and data driven culture allows us to quickly gauge the impact of new marketing channels, enabling us to optimize spending and strategically allocate resources and our long term marketing mix based on our learnings.

Crystal Landsem: Our next priority focuses on driving technology enablement that supports customer engagement and customer experience across multiple channels.

Crystal Landsem: In the first quarter, we rolled out a complete redesign of our website with various enhancements around product assortment and discovery that have driven positive engagement. We began testing several platforms to enhance our predictive capabilities and responsiveness to changes in demand, which we believe will help refine our buying model and strengthen our ability to navigate future fluctuations in consumer buying patterns more effectively. In the first week of Q2, we simplified our return policy, which now includes a restocking fee to encourage purchasing behavior with the intent to keep the product and support better unit economics and profitability.

Crystal Landsem: In the first quarter, we rolled out a complete re styling of our website with various enhancements around product assortment and discovery that has driven positive engagement.

Crystal Landsem: We began testing several platforms to enhance our predictive capabilities and responsiveness to changes in demand, which we believe will help refine our buying model and strengthen our ability to navigate future fluctuations in consumer buying patterns more effectively.

Crystal Landsem: And the first week of Q2, we simplified our return policy, which now includes a restocking fee to encourage purchasing behavior with intent to keep the product and support better unit economics and profitability.

Crystal Landsem: Lastly, we are maintaining a cashflow positive year while preserving our commitment to growth. We are doubling down on our focus on profitable orders and gross margin expansion, prioritizing sustainable growth over short-term gains, including parting ways with excessive returning and unprofitable customers. Our dedication to long-term growth stems from the continued optimization of our buying model. We're enhancing initial buy depth to accelerate the reorder funnel, embracing newness and novelty further without sacrificing the benefits of our established reorder strategies, while mitigating inventory risk in an increasingly dynamic consumer landscape.

Crystal Landsem: Lastly, we are maintaining a cash flow positive year, while preserving our commitment to growth.

Crystal Landsem: We are doubling down on our focus on profitable orders and gross margin expansion prioritizing sustainable growth over short term gains, including parting ways with excessive returning and unprofitable customers.

Crystal Landsem: Our dedication to long term growth stems from the continued optimization of our buying model, we're enhancing initial buy depths to accelerate their reorder funnel embracing newness and novelty further without sacrificing the benefits of our established reorder strategies.

Crystal Landsem: Mitigating inventory risk in an increasingly dynamic consumer landscape.

Crystal Landsem: Our cashflow generative model will allow us to invest in our future growth, as well as opportunistically repurchase Lulu stock. As some of you may have already seen, our board recently authorized a stock repurchase program of up to $2.5 million of Lulu's common stock.

Crystal Landsem: Our cash flow generative model will allow us to invest in our future growth as well as opportunistically repurchase Lulu stock and some of you may have already seen our board recently authorized a stock repurchase program of up to 2.5 million of Lulu common stock.

Mark Vos: Tiffany will provide further insights on this matter in her remarks. We consider our common stock to be an attractive investment, and this demonstrates our confidence in the business. As we work towards becoming one of the most beloved women's brands for attainable luxury fashion, I'm optimistic about the announcements we made in Q1 and the continued momentum we are seeing in the second quarter. We are passionate about supporting our customers through all of life's moments and remain focused on driving these initiatives forward and continuing to strategically invest in our brand.

Crystal Landsem: And he will provide further insights on this matter in her remarks, we consider our common stock to be an attractive investment and this demonstrates our confidence in the business.

Mark Vos: As we work towards becoming one of the most beloved women's brands for attainable luxury fashion I'm optimistic about the advancements we've made in Q1 and the continued momentum we are seeing in the second quarter.

Mark Vos: We are passionate about supporting our customers through all of life's moments and remain focused on driving these initiatives forward and continuing to strategically invest in our brand.

Mark Vos: We believe the steps we are taking now will position us for strong growth and profitability, which will be further accelerated once consumer and inflationary headwinds ease. With that, I'd like to turn the call over to Mark Vos, our President and Chief Information Officer, who will share some updates on our progress against our 2024 priorities.

Mark Vos: We believe the steps we are taking now will position us for strong growth and profitability, which will be further accelerated once consumer and inflationary headwinds ease.

Mark Vos: With that I'd like to turn the call over to Mark Voss, Our President and Chief Information Officer, He will share some updates on our progress against <unk> 'twenty 'twenty four priorities Marc.

Mark Vos: Thank you Crystal.

Mark Vos: I'll start by providing an update on our customer and how she interacted with us during the quarter. Despite a year-over-year decline in active customer counts, we are encouraged by the increase in penetration of active customers that are repeating on a quarter-over-quarter basis, indicating continued strong customer loyalty. Compared to Q1 2023, we also grew the number of new loyalty program entrants, total loyalty program membership, and saw more customers upgrade to our top three member tiers, which are all strong indicators of Lulu's brand loyalty and future revenue opportunities. Due to the reduced availability of Markdown inventory on the one hand.

Mark Vos: I'll start by providing an update on our customer and how she interacted with us during the quarter.

Mark Vos: Despite a year over year decline inactive customer counts, we are encouraged by the increase in penetration of active customers that are repeating on a quarter over quarter basis.

Mark Vos: Indicating continued strong customer loyalty.

Mark Vos: Compared to Q1 'twenty to 'twenty three we also grew the number of new loyalty program entrance total loyalty program membership and saw more customers upgrades to our top three member tiers, which are all strong indicators of loose brand loyalty and future revenue opportunity.

Mark Vos: Due to reduced to say a ability of markdown inventory on the one hand.

Mark Vos: And a general lack of depth in new and novelty full-priced products to meet the demand. On the other hand, we have seen impacts to our new customer acquisition rate. The buying and merchandising teams are working hard to improve our inventory position in new and novelty products and subsequently improve our new customer acquisitions. The investments we are making in Lulu's brand awareness will further support our new customer acquisition growth over time. Additionally, in Q1, we saw a year-over-year increase in average unit retail, driving a higher average order value, coupled with increased merchandise margins.

Mark Vos: And a general lack of depth in new and novelty full priced products to meet the demand on the other hand, we have seen impacts to our new customer acquisition rate.

Mark Vos: The buying and merchandising teams are working hard to improve our inventory position and new innovative products and subsequently improve our new customer acquisition.

Mark Vos: The investments we are making in rubles brand awareness will further support our new customer acquisition growth overtime.

Mark Vos: Additionally, in Q1, we saw a year over year increase in average unit retail driving a higher average order value coupled with increased merchandise margins in the quarter.

Mark Vos: Reviewing the purchase behavior by customer household income segments shows stable trends across our core segments, 50,000 to 150,000 annual income, both from a new customer acquisition as well as a repeat customer perspective. A micro trend we have observed in Q1 2024 is that high-income segments outside and above our core sectors, on a Q1 year-over-year basis outperformed from new customer acquisition, order counts, and net revenue, and they did so with higher discount usage.

Mark Vos: Refueling of purchase behavior by customer household income segments show stable trends across our core segments 50000 to 150000 and you link them.

Mark Vos: Both from a new customer acquisition as well as repeat customer perspective.

Mark Vos: Our micro trends, we have observed in Q1 'twenty 'twenty four is that high income segments outside and above our core segments on a Q1 year over year basis outperformed from a new customer acquisition order counts and net revenue perspective.

Mark Vos: They did so with higher discounts usage.

Mark Vos: We expect that these segments will continue to gravitate towards Lulu, supported by our expanded price ranges and new and novelty product offers. While international sales still remain a very small percentage of our total company sales, in the first quarter, we saw a Q1 year-over-year unit sales comp of 50% in our top 15 countries outside the U.S.

Mark Vos: We expect that these segments will continue to gravitate towards blues supported by our expanded price ranges and new and novelty product offering.

Mark Vos: While international sales still remain a very small percentage of our total company sales in the first quarter. We saw in Q1 year over year unit sold comp of 50% and our top 15 countries outside the U S.

Mark Vos: Given the positive early trends we've seen in international markets, we are confident that we can grow ex-U.S. revenue into a meaningful part of our revenue mix by 2022 by optimizing our current business model of shipping from the U.S. with selective investments in brand activation. Crystal briefly recapped some of the progress against our 2024 priority. But I'll drill down a bit more to share some additional detail around the specific actions we're taking. Number one, product assortment optimization. We are well underway in diversifying our product range to include more new and novelty items, as well as casual and sportswear. The strategic move, we believe, will fuel our long-term growth.

Mark Vos: Given the positive early trends we've seen in international markets. We are confident that we can grow ex U S revenue into a meaningful part of our revenue mix by 2026 by.

Mark Vos: By optimizing our current business model of shipping from the U S with selective investments and brand activation.

Mark Vos: Crystal briefly recap some of the progress against our 2024 priorities, but I'll drill down a bit more to share some additional detail around the specific actions we're taking.

Mark Vos: Number one product assortment optimization.

Mark Vos: We are well underway and diversifying our product range to include more new and novel T as well as casual and sportswear.

Mark Vos: Tissue move we believe will fuel our long term growth.

Mark Vos: The merchandising and buying teams are firing on all cylinders, evolving and refining our assortment to best meet the changing preferences of our core Lulu's customers. As part of this process, we've made investments in advanced machine learning and predictive AI modeling to more effectively forecast demand and better navigate trend cycles. With the demand volatility we have experienced in recent years, we see an opportunity to further enrich our demand forecasting algorithms with external data sources like trends, weather, geography, and other macro data to detect earlier and more accurately changes in demand patterns and volume.

Mark Vos: The merchandising of buying teams are firing on all cylinders evolving and refining our assortments to best meet the changing preferences over our core lose customer.

Mark Vos: As part of this process, we've made investments in advanced machine learning and predictive AI modeling to more effectively forecast demand and better navigate trend cycles.

Mark Vos: With the demand fall until we have experienced in recent years, we see an opportunity to further enrich our demand forecasting algorithms with external data sources like trends, whether geographic another macro data.

Mark Vos: Detect earlier and more accurately changes in demand patterns and volume.

Mark Vos: We look forward to incorporating the new forecast capabilities into our buying algorithms, starting in Q2 of 2024, for products arriving in Q3 and later. As previously discussed last quarter, several initiatives are currently in progress to support our assortment optimization and reduce risk related to sourcing, geopolitics, and return. Our goal is to improve on the modest margin expansion contemplated in our 2024 guidance in 2025 and beyond.

Mark Vos: We look forward to incorporating the new forecast capabilities into our buying algorithms starting in Q2 of 'twenty 'twenty four for products, arriving in Q3 and later.

Mark Vos: As previously discussed last quarter several initiatives currently in progress to support our assortment optimization and reduce risk related to sourcing geopolitics and returns.

Mark Vos: Our goal is to improve on the modest margin expansion contemplated in our 2020 for guidance in 2025 and beyond.

Mark Vos: We continue to see ongoing product margin improvements driven by our fortified product costing, and we expect to see additional margin expansion in 2025. Our efforts to consolidate our vendor network are progressing as we focus on improving product costs by balancing purchasing power per vendor. Diversifying Geographical Product Sourcing to reduce Dependencies on Certain Countries of Origin and Improving Consistency in our Fabrics and Styles. As Crystal mentioned, in the first week of Q2 2024, we implemented return policy changes to stabilize our return rates and reduce the financial impact of returns on our net contribution margin.

Mark Vos: We continue to see ongoing protocol margin improvements driven by our four to five products crossing team and we expect to see additional margin expansion in 2024.

Mark Vos: Our efforts to consolidate often the network are progressing as we focus on improving product cost by balancing purchasing power per center.

Mark Vos: First defying geographical product sourcing to reduce dependencies on certain countries of origin.

Mark Vos: Roofing consistency in our fabrics and fit.

Mark Vos: As Christal mentioned in the first week of Q2 2024, we implemented return policy changes to stabilize our return rates and reduce the financial impact of returns to a net contribution margin.

Mark Vos: The changes added a modest restocking fee to all returns, as well as tightened return policies. Early data suggests that our policy changes are yielding favorable outcomes in attracting customers with a stronger inclination to retain products. We will continue to monitor, evaluate, and enhance our return policy to further discourage excessive return behavior and minimize unprofitable costs. On the fit front, we're striving to reduce fit-related returns by implementing a holistic approach that enhances the overall shopping journey for our customers while optimizing our bottom line.

Mark Vos: It changes added a modest restocking fee to all returns as well as tightened return window.

Mark Vos: Preliminary data suggests that our policy changes are yielding favorable outcomes and attracting customers with a stronger inclination to regain products.

Mark Vos: We will continue to monitor evaluate and enhance our return policy to further discourage excessive return behavior and minimize unprofitable customers.

Mark Vos: On the fifth front, we're striving to reduce fifth related returns by implementing a holistic approach that enhances the overall shopping journey for our customers, while optimizing our bottom line.

Mark Vos: We've improved our collaboration and communication channels with key vendors to streamline FIT communication and to refine products with improved FIT flexibility and consistency, while preserving the Lulu's fit expression. The anticipated benefits from these enhancements are expected to affect our assortment by late Q2 of 2022. We're also exploring utilizing real customer feedback to enhance fit information on the Lulu platform, empowering shoppers to make more informed sizing decisions.

Mark Vos: We've improved our collaboration and communication channels with key vendors to streamline food communication and to refine products has improved with a flexibility and consistency.

Mark Vos: For serving the loose with expression.

Mark Vos: The anticipated benefits from these enhancements are expected to affect our assortment by late Q2 of 'twenty 'twenty four.

Mark Vos: We're also exploring utilizing real customer feedback to enhance fifth information on the loose platforms empowering shoppers to make more informed sizing decisions.

Mark Vos: Number two, continued investments in the Lulu's brand. Building on the success of our brand activations at Lulu's on Melrose, we are promoting the Lulu's brand in new and exciting ways with a number of in-person activations, including experientials and publications. Our first major multi-channel brand campaign, Friends for Life, launched in early Q2. It is a key example of how Lulu's is working hard to reinvigorate our core customers and cultivate a new era for Lulu's where we can reinforce our differentiated brand image.

Mark Vos: Number two continued investments into lose Brent.

Mark Vos: Building on the success of our Brent Activations have loosened Melrose, we are promoting the lose brands in new and exciting ways with a number of in person activations, including through experiential and pop ups.

Mark Vos: Our first major multichannel brand campaign friends for life launched in early Q2.

Mark Vos: It is a key example of how loose is working hard to reinvigorate our core customers and cultivate a new era for us where we can reinforce our differentiated brand image.

Mark Vos: The Friends for Life campaign, which centers on a group of four women during a pivotal year in their lives, underscores how Lulu's is there for women during all of life's moments, from the everyday to the extraordinary, for testing new out-of-home opportunities, and designing experiential events that celebrate community and bring the brands to life.

Mark Vos: The friends for life campaign, which centers on a group of four women during a pivotal year in their lives underscores how looses here. Therefore women during all of life's moments from the everyday.

Mark Vos: The extraordinary.

Mark Vos: We're testing new out of home opportunities the signing experiential events that celebrates community and bring the brands to life.

Mark Vos: Activating new social and influencer initiatives and exploring strategic partnerships that align with Lulu's customers. For example, we have launched a Besties That Brunch series where we meet our customers for brunch across several cities in the US and effectively bring the URL and the IRL brand together. We are focused on driving partnerships, influencer edits, and social content creation volume and amplifying impact and reach through earned media, brand relationships, and other channels.

Mark Vos: Activating new social and Influencer initiatives and exploring strategic partnerships that align with the list customer.

Mark Vos: For example, we have launched a Besties death Brunch series, where we meet our customers for brunch across several cities in the U S and effectively bring the U R L and the IRL Bronco brand Huck together.

Mark Vos: We are focused on driving partnerships influencer edits and social content creation volume and amplifying impacts entries through earned media Brent relationships and other channels.

Mark Vos: Our first Influencer edit of 2024 with Kennedy Alliance saw great success in February. The edit garnered close to 5 million video views, over a million impressions, and was successful in driving new visitors to Lulu's platform. We are very encouraged by the strong return on these types of collaborations, and we are looking forward to launching several additional influencer edits in the coming months, in addition to growing our overall creator count per month.

Mark Vos: Our first Influencer editor of 'twenty 'twenty four with Kennedy Lois saw great success in February.

Mark Vos: The other is growing with close to 5 million video views over a million impressions and was successful in driving new visitors to lose platforms.

Mark Vos: We are very encouraged by the strong return on these types of collaborations and we are looking forward to launching several additional influencer edits in the coming months. In addition to growing our overall creator count front per month.

Mark Vos: We also received significant exposure in the first quarter on Los Angeles' KTLA News and the Kelly Clarkson Show, which featured Lulu's on-air and offered nearly 200 guests in the audience gift cards. To date, we've seen high double-digit redemptions resulting from our appearance on the ladder, with the majority of redemptions coming from new customers.

Mark Vos: We also received significant exposure in the first quarter on Los Angeles, KTLA News and the Kelly Clarkson show, which featured loose on air and offered nearly 200 guests in the audience gift cards.

Mark Vos: To date, we've seen high double digit redemptions, resulting from our appearance on the ladder with the majority of redemptions coming from new customers we.

Mark Vos: We are very excited about the high conversion rate we are seeing through these placements and promotions, and we will continue to seek these opportunities. We've undertaken a strategic approach to media, third-party brand partnerships, and creator content, aimed at maximizing impact and amplification of our content and campaigns. Third-party brand partnerships are a major initiative for us this year in our efforts to expand our customer reach and leverage other brands' platforms to increase awareness of the Lulu's brand.

Mark Vos: We are very excited about the high conversion rate, we were seeing through these placements and promotions and we will continue to seek these opportunities.

Mark Vos: We've undertaken a strategic approach to media third party brand partnerships and creator contents aimed at maximizing impacts and amplification of our content and campaigns.

Mark Vos: Third party brand partnerships is a major initiative for us this year in our efforts to expand our customer reach and leverage other brands platforms to increase awareness for the Lulu spreads.

Mark Vos: For example, recently, we collaborated with footwear brand Teva for our Desert Disco Festival showroom event, where we hosted more than 100 influencers and secured media coverage of the event in consumer lifestyle publications. Additionally, this year, we've achieved notable publicity milestones, including expanding our relationships with media, hosting successful press briefings, and fostering discussions with several brand franchises and studio productions for potential partnerships. We are encouraged by this strategy's impact and reach, as well as the increased interest from various media outlets we are receiving.

Mark Vos: For example, recently, we collaborated with footwear brands Tesla for our deserts Disco Festival showroom event, where we hosted more than 100, Influencers and secured media coverage of the offense in consumer lifestyle publications.

Mark Vos: Additionally, this year, we have achieved notable publicity milestones, including expanding our relationships with media hosting successful press briefings and fostering discussions with several brand franchises and studio productions for potential partnerships.

Mark Vos: We are encouraged by this strategy's impact and reach as well as the increased interest from various media outlets we are receiving.

Mark Vos: We are building a foundation and are very excited about our packed roster of upcoming influencer edits and brand and media partnerships that we will expect to continue to build the momentum of the Lulu's brand, Lulu awareness, and ultimately, Revit. Number three, technology enablement.

Mark Vos: We are building a foundation and are very excited about our pact roster of upcoming influencer of edits and brands and media partnerships that we will expect to continue to build the momentum of the loose brands Luby's awareness and ultimately revenue.

Mark Vos: Number three technology enablement.

Mark Vos: In the first quarter, we rolled out a complete redesign of our website with various enhancements around product discovery that have driven positive engagement. Product detail pages show large photography and video where available. We have added video to an increasing number of our products to provide our customers with a better perspective on how the garments look and flow with movement. The website redesign provides for a clean shopping experience distinction between Lulu's and Lulu's Wedding, such that each is better tailored to its specific product discovery needs. Our product listing pages have been enriched with additional content elements, including video, to support our customers in their product discovery within and across product categories.

Mark Vos: In the first quarter, we rolled out a complete re styling offer our website with various enhancements around product discovery that has driven positive engagement.

Mark Vos: For detailed pages show large photography and video were available we have added video to an increasing number of our products to provide our customers with a better perspective on how the garments, Luke and slow with movement.

Mark Vos: The website redesign for fives for a queen shopping experience distinction between loose and lose weddings, such that each is better tailored to specific protocols covering these.

Mark Vos: Our product listing pages have been enriched with additional content elements, including video to support our customers in their product discovery within and across product categories.

Mark Vos: We are implementing various technology platform enhancements to better capture customer demand. At the end of January, we launched pre-sale order technology, which allows customers to place pre-orders on products that are out of stock or have limited size availability at the point of sale. We saw a successful pre-sale conversion during testing, and we have since initiated a broader rollout of this tool to support the customer shopping journey and mitigate potential for loss savings.

Mark Vos: We are standing up various technology platform enhancements to better capture its customer demands.

Mark Vos: At the end of January we launched presale order technology, which allows customers to place pre order. Some products that are out of stock or have limited size availability ability at the point of sale we.

Mark Vos: We saw a successful presale conversion during testing and we have since initiated a broader rollout of this tool to support the customer shopping journey and mitigate the potential for lost sales.

Mark Vos: We continue to improve our operational efficiency with strategic investments in automation and robotics in our distribution centers. In Q2, we will be adding additional automation to our largest fulfillment center in eastern Pennsylvania, which we expect will improve order accuracy, reduce our cycle time, and improve our unit economics in that facility. We are excited about the many initiatives we have in place to get the right products into the hands of customers who connect with the Lulu's brand beyond the transaction.

Mark Vos: We continue to improve our operational efficiency with strategic investments in automation and robotics in our distribution centers.

Mark Vos: In Q2, we will be adding additional automation in our largest fulfillment center in eastern Pennsylvania, which we expect will improve order accuracy reduce our cycle time and improve our unit economics in that facility.

Mark Vos: We are excited about the many initiatives we have in place to get the right products into the hands of customers that connect with the Lewis brands beyond the transaction.

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

Mark Vos: We are focused on executing against these opportunities and the positive impact we expect it will have although looses customers Hulu crew and our investors going forward.

Mark Vos: And now I'll hand, you over to Tiffany Smith, Lucius Chief Financial Officer to provide more color on our financials. Thanks.

Tiffany R. Smith: Thanks, Mark, and good afternoon, everyone. Our net revenue for the first quarter was approximately $77.3 million, down 15% year over year. Driven by the net revenue missed from our plan, partly offset by disciplined levels of operating expenses, our first quarter adjusted EBITDA loss of $2.7 million fell slightly below our Q1 expectations. However, we continue to observe a promising upward trend in occasion wear purchases with the sales mix of these categories increasing sequentially from Q4 and from Q1 of last year.

Tiffany R. Smith: Thanks, Mark and good afternoon, everyone our net.

Tiffany R. Smith: For the first quarter was approximately 77.3 million down 15% year over here.

Tiffany R. Smith: Given by the net revenue Miss to our plan, partly offset by disciplined levels of operating expenses, our first quarter adjusted EBITDA loss of $2.7 million fell slightly below our Q1 expectations. We continue to observe a promising upward trend in occasion wear purchases with the sales mix of these categories increased.

Tiffany R. Smith: Seen sequentially from Q4 and from Q1 of last year.

Tiffany R. Smith: This trend aligns with a sales mix shift toward higher return rate products, amplifying return-related costs for the quarter. We also saw a higher concentration of expedited orders for part of the quarter, resulting in increased outbound shipping expenses partially offset by a full quarter of savings from shipping carrier diversification when compared to Q1 of last year. Lastly, selling and marketing costs, as well as general and administrative expenses, were substantially lower on a dollar basis, though slightly higher on a percentage of net revenue basis attributed to the higher return rate.

Tiffany R. Smith: Let's try and aligns with a sales mix shift toward higher return rate products amplifying return related costs for the corner.

Tiffany R. Smith: We also saw a higher concentration of expedited orders for part of the corner, resulting in increased outbound shipping expenses, partially offset by a full quarter of savings from shipping carrier diversification when compared to Q1 of last year.

Tiffany R. Smith: Lastly, selling and marketing costs as well as general and administrative expenses were substantially lower on a dollar basis. It was slightly higher on a percentage of net revenue basis attributed to the higher return rates.

Tiffany R. Smith: Moving on to the Q1 P&L line item comparisons to the same period last year, the 15% decline in net revenue year over year stemmed primarily from higher return rates as well as lower markdown sales during the period.

Speaker Change: Moving on to the Q1 P&L line item comparisons to the same period last year.

Tiffany R. Smith: The 15% decline in net revenue year over year stemmed primarily from higher return rates as well as lower markdown sales during the period as our customers preferences in Q1 continue to lean toward newness and novelty an occasion, where the resulting product mix and lower final cell ratios drove our overall return rate in the first quarter.

Tiffany R. Smith: As our customers' preferences in Q1 continued to lean toward newness, novelty, and occasion wear, the resulting product mix and lower final sale ratios drove our overall return rate in the first quarter above that of the prior year. With return rates continuing to compress our sales growth and the cost of returns impacting our profitability through Q1, we implemented return policy changes in early Q2. These policy changes, while aimed at directly improving our profitability by reducing return rates and partially offsetting the cost of returns, are designed to work alongside other site enhancements and fit improvements to arm our customer with better information, increasing confidence in her purchases so that she can shop with greater intent to keep more of her purchases.

Tiffany R. Smith: Above that of the prior year.

Tiffany R. Smith: With the return rates continuing to compress our sales growth and the cost of returns impacting our profitability through Q1, we implemented return policy changes in early Q2.

Tiffany R. Smith: These policy changes, while aimed at directly improving our profitability by reducing return rates and partially offsetting the cost of returns are designed to work alongside others site enhancements and fit improvements to arm, our customer with better information increasing confidence in her purchases. So that she can shop with greater intent to.

Tiffany R. Smith: Keep more of our purchases.

Tiffany R. Smith: Our early Q2 reads since the return policy change suggest that while our gross demand is down year over year, primarily driven by lower UPTs, an indication that our customers are being more selective about their purchases, we expect lower return rates and higher contribution margins. Our expectation is that net revenue comparisons to last year will trend toward negative high single digits in April. We expect continued sequential improvements in net revenue trends. Gross margin ended the quarter at 42.3%, an increase of 60 basis points compared to the same period last year, driven by lower markdown sales as well as a higher-margin product mix, as newness, novelty, and occasion wear continue to resonate with our customers.

Tiffany R. Smith: Our early Q2 reads since the return policy change suggests that while our gross demand is down year over year, primarily driven by lower U P. Ts an indication that our customers are being more selective about their purchases, we expect lower return rates and higher contribution margins are.

Tiffany R. Smith: Our expectation is that net revenue comparisons to last year trend toward negative high single digits. In April we expect continued sequential improvements on net revenue trends.

Tiffany R. Smith: Gross margin ended the corner at 42.3% an increase of 60 basis points compared to the same period last year, driven by lower markdown sales as well as higher margin product mix as newness novelty and occasion wear continue to resonate with our customers.

Tiffany R. Smith: Building on the margin improvements observed in Q1, along with the benefits of the return policy changes implemented in Q2, we are also seeing improvement in our April gross profit dollars, which are expected to be down mid-single digits compared to the same period last year. Moving down the P&L to give some insights into expense line items.

Tiffany R. Smith: Building on the margin improvements observed in Q1.

Tiffany R. Smith: Along with benefits of the return policy changes implemented in Q2. We are also seeing improvement in our April gross profit dollars, which are expected to be down mid single digits compared to the same period last year.

Tiffany R. Smith: Q1 2024 selling and marketing expenses were $17.7 million, down about $1.8 million from Q1 2023 due to lower marketing spend and merchant processing fees in the period. As we've highlighted in the past, we manage our marketing spend in conjunction with markdowns and discounts, and in the first quarter, we maintain the combination of these items within our typical range as a percentage of revenue. General and administrative expenses decreased by about $3.2 million to $21.1 million, a 13.3% decline compared to Q1 2023.

Tiffany R. Smith: Moving down the P&L to give some insights into the expense line items.

Tiffany R. Smith: Q1, 'twenty 'twenty, four selling and marketing expenses were $17 $7 million down about $1.8 million from Q1, 2023 due to lower marketing spend and merchant processing fees in the period.

Tiffany R. Smith: As we've highlighted in the past, we manage our marketing spend in conjunction with markdowns and discounts and in the first quarter. We maintained the combination of these items within our typical range as a percentage of revenue.

Tiffany R. Smith: General and administrative expenses decreased by about $3 $2 million or $21.1 million, a 13.3 decline compared to Q1 2023.

Tiffany R. Smith: The decrease was primarily driven by a reduction in stock-based compensation expenses due to a one-time reversal of previously accrued expenses, coupled with lower variable labor costs driven by lower sales volume, as well as lower insurance costs.

Tiffany R. Smith: The decrease was primarily driven by a reduction in stock based compensation expenses due to a one time reversal of previously accrued expenses, coupled with lower variable labor costs, driven by lower sales volume as well as lower insurance costs.

Tiffany R. Smith: Our net loss of $5.7 million was in line with the net loss of $5.6 million in the same period last year. Our adjusted EBITDA loss for the quarter was approximately $2.7 million compared to Q1 2023's adjusted EBITDA gain of $16,000. Our adjusted EBITDA margin for Q1 was negative 3.4% compared to 0% in the same period last year. Interest expense for the quarter was approximately $383,000 compared to $523,000 in Q

Tiffany R. Smith: Our net loss of $5.7 million was in line with the net loss of $5.6 million in the same period last year our.

Tiffany R. Smith: Our adjusted EBITDA loss for the quarter was approximately $2.7 million compared to Q1 2020, Three's adjusted EBITDA gain of $16000. Our adjusted EBITDA margin for Q1 was negative 3.4% compared to zero percent in the same period last year.

Tiffany R. Smith: Interest expense for the quarter was approximately $383000 compared to $523000 in Q1, 2023.

Tiffany R. Smith: For the quarter, we reported a diluted loss per share of $0.15, which is a decrease of $0.01 compared to a diluted loss per share of $0.14 in the first quarter of 2023. Throughout the first quarter of 2024, our balance sheet remained resilient, positioning us to execute our long-term growth plans with agility while adeptly navigating any new or lingering macroeconomic headwinds. Are net cash provided by operating activities for the quarter improved by $3.2 million, or 88% on a year-over-year basis, with $6.9 million of net cash provided by operating activities in Q1 of 2024, compared to $3.7 million of net cash provided by operating activities in Q1 of 2023?

Tiffany R. Smith: For the quarter, we reported a diluted loss per share of <unk> 15 cents, which is a decrease of one <unk> compared to a diluted loss per share of 14 cents in the first quarter of 2023.

Tiffany R. Smith: Similarly, free cash flow for the quarter improved by $3.4 million, or 127% on a year-over-year basis. We repaid $2 million of the revolver during Q1 2024 and plan to continue to pay it down. We ended the quarter with cash of about $5.5 million and a total debt position of $6 million, which was the amount drawn on our revolver, resulting in a net debt balance of half a million dollars.

Tiffany R. Smith: Throughout the first quarter of 2024, our balance sheet remained resilient positioning us to execute our long term growth plans with agility, while definitely navigating any new or lingering macroeconomic headwinds.

Tiffany R. Smith: Our net cash provided by operating activities for the corner improved by $3 $2 million or 88% on a year over year basis with $6 $9 million of net cash provided by operating activities in Q1 of 'twenty 'twenty four compared to $3 7 million of net cash provided by operating activities in Q1 of two.

Tiffany R. Smith: 23.

Tiffany R. Smith: Similarly, free cash flow for the quarter improved by $3 $4 million or 127% on a year over year basis, we repaid $2 million of the revolver. During Q1, 'twenty 'twenty four and plan to continue to pay it down we ended the quarter with cash of about five and a half million dollars and a total debt position of.

Tiffany R. Smith: $6 million, which was the amount drawn on our revolver, resulting in a net debt balance of half a million dollars. Also we are pleased with the announcement of our newly authorized stock repurchase program of up to two and a half million dollars of lose common stock, which enables us to utilize our strong liquidity and cash flow position to opportunistically repurchase shares.

Tiffany R. Smith: Also, we are pleased with the announcement of our newly authorized stock repurchase program of up to $2.5 million of Lulu's common stock, which enables us to utilize our strong liquidity and cash flow position to opportunistically repurchase shares of Lulu's stock while continuing to support organic growth objectives to drive shareholder value. We will continue to take a holistic view when evaluating how we allocate capital on a quarterly basis to ensure we are getting the highest return on our investments while also maintaining a healthy financial position. Our inventory balance at quarter end was $41.3 million, down about 10.6 million from the same period last year.

Tiffany R. Smith: Louis stock, while continuing to support organic growth objectives to drive shareholder value.

Tiffany R. Smith: We will continue to take a holistic view when evaluating how we allocate capital on a quarterly basis to ensure we are getting the highest return on our investments while also maintaining a healthy financial position our inventory balance at quarter end was $41.3 million down about $10 6 million from the same period last year.

Tiffany R. Smith: This 20% inventory decrease year over year exceeded our 15% year over year sales decrease, which reflects our ability to manage inventory in challenging macro environments. Our primary focus is on maintaining brand integrity and preserving gross margin levels as we strengthen our buying model. Moving on to guidance.

Tiffany R. Smith: 20% inventory decrease year over here exceeded our 15% year over year sales decrease which reflects our ability to manage inventory and challenging macro environments.

Tiffany R. Smith: Our primary focus is on maintaining brand integrity and preserving gross margin levels as we strengthen our bio model.

Tiffany R. Smith: Moving onto guidance.

Tiffany R. Smith: Due to our softer Q1 sales, as well as the impacts of our new return policy and our conviction in seeking more profitable customers, we are slightly revising our expectations for full year 2024 net revenue to be between $350 million and $360 million, a $10 million reduction from the previous range of $350 to $370 million. We believe our return policy changes will encourage customers to purchase with greater intent to keep and discourage excessive return behavior.

Tiffany R. Smith: Due to our softer Q1 sales as well as the impacts of our new return policy and our conviction in seeking more profitable customers. We are slightly revising our expectations for full year 'twenty 'twenty four net revenue to be between $350 million and $360 million or 10 million reduction from the previous range of three.

Tiffany R. Smith: <unk> hundred $50 million to $370 million.

Tiffany R. Smith: We believe our return policy changes will encourage customers to purchase with greater intend to keep and discourage excessive returning behavior.

Tiffany R. Smith: Additionally, given our inventory health and return to chase mode for many of our product classes, we anticipate more difficult comparisons related to markdown sales that will not be anniversaried. As a result, we expect to see less upside in net revenue this year but improved gross margins as our updated return policy will drive more profitable unit economics. We anticipate 180 to 200 basis points of year-over-year gross margin expansion throughout the balance of the year. As such, we are raising the low end of our adjusted EBITDA range to reflect an updated full-year adjusted EBITDA range of $6 to $8 million, compared to our previous range of $5 to $8 million.

Tiffany R. Smith: <unk>, given our inventory house and returned to chase mode for many of our product classes, we anticipate more difficult comparisons related to markdown sales that will not be anniversaried. As a result, we expect to see less upside in net revenue this year, but improved gross margins as our updated return policy will drive more profitable.

Tiffany R. Smith: Unit Economics, we anticipate 180 to 200 basis points of year over year gross margin expansion throughout the balance of the year as.

Tiffany R. Smith: As such we are raising the low end of our adjusted EBITDA range to reflect an updated full year adjusted EBITDA range of $6 million to $8 million compared to our previous range of $5 million to $8 million.

Tiffany R. Smith: This equates to an adjusted EBITDA margin of between 1.7% and 2.2%, a modest improvement compared to 2023, as we make progress on our previously highlighted initiatives. These updates to our sales and profitability outlook for 2024 emphasize our focus on profitable orders and gross margin expansion, even if it comes with a more tempered top-line outlook in the short term. As a reminder, our baseline guidance anticipates that our core customer, who is heavily positioned within the $50,000 to $150,000 income range, will continue to face macro headwinds throughout 2024. Additionally, when modeling revenue for our business, seasonality of demand plays an important role.

Tiffany R. Smith: This equates to an adjusted EBITDA margin of between 1.7% and two 2% a modest improvement compared to 2023 as we make progress on our previously highlighted initiatives. These updates to our sales and profitability outlook for 'twenty 'twenty four emphasize our focus on profitable orders and gross margin expansion.

Tiffany R. Smith: Even if it comes with a more tempered top line outlook in the short term.

Tiffany R. Smith: As a reminder, our baseline guidance anticipates that our core customer who is heavily position within the 50 to $150000 income range will continue to face macro headwinds throughout 2024.

Tiffany R. Smith: When modeling revenue for our business seasonality of demand plays an important role in a normalized year. Our net revenue typically peaks in the second and third corners, driven by heightened demand for event dressing with fiscal Q4, and Q1 typically representing the lowest net revenue and profit quarters of our fiscal year end.

Tiffany R. Smith: In a normalized year, our net revenue typically peaks in the second and third quarters, driven by heightened demand for event dressing, with fiscal Q4 and Q1 typically representing the lowest net revenue and profit quarters of our fiscal year. In fiscal 2024, we anticipate that Q1 will be our lowest sales and profit quarter of the year. We expect our net revenue comps to increase sequentially each quarter this year, with the most significant step-ups in Q2 and Q3, and a more modest step-up in Q4.

Tiffany R. Smith: Fiscal 'twenty 'twenty four we anticipate that Q1 will be our lowest sales and profit quarter of the year. We expect our net revenue comps to increase sequentially each quarter. This year with the most significant step ups in Q2, and Q3 and a more modest step up in Q4 also given our updated return policy, we expect to see slightly.

Tiffany R. Smith: Also, given our updated return policy, we expect to see slightly lower average order values driven by lower units per transaction. However, we anticipate net units per transaction kept after returns will remain relatively flat. In order to set expectations for modeling purposes, our quarterly adjusted EBITDA margin rates have similar seasonality fluctuations as our net revenues and will likely fluctuate above or below our full-year guidance rate depending on the quarter. With respect to the previously cited year-over-year gross margin expansion of 180 to 200 basis points, we expect the most significant gains to occur in Q2 and Q3.

Tiffany R. Smith: Lower average order values driven by lower units per transaction. However, we anticipate net units per transaction capped after returns will remain relatively flat.

Tiffany R. Smith: In order to set expectations for modeling purposes, our quarterly adjusted EBITDA margin rates have similar seasonality fluctuations as our net revenues and will likely fluctuate above or below our full year guidance range, depending on the corner.

Tiffany R. Smith: With respect to the previously cited year over year gross margin expansion of 180 to 200 basis points. We expect the most significant gains to occur in Q2 and Q3.

Tiffany R. Smith: We incur modest levels of interest expense associated with our operating revolver and equipment leases for our distribution facilities. With the impact of lower expected revolver balances, we continue to anticipate interest expense for the full year 2024 to be approximately $600,000. We continue to expect our stock-based compensation expense in 2024 to be roughly half of what it was in fiscal 2023, and our weighted average fully diluted share count at the end of 2024 is expected to be approximately 40 million shares.

Tiffany R. Smith: We incur modest levels of interest expense associated with our operating revolver and equipment leases foreign distribution facilities with.

Tiffany R. Smith: With the impact of lower expected revolver balances, we continue to anticipate interest expense for the full year 2020 for the approximately $600000.

Tiffany R. Smith: We continue to expect our stock based compensation expense in 'twenty 'twenty four to be roughly half of what it was in fiscal 'twenty 23, and our weighted average fully diluted share count at the end of 'twenty 'twenty four is expected to be approximately 40 million shares.

Tiffany R. Smith: Moving on to capital expenditures, we continue to expect between $5 million and $6 million for the full year, which includes capital expenditures for technology enablement that supports customer engagement and customer experience across multiple channels, as well as additional automation capabilities in our distribution centers.

Tiffany R. Smith: Moving on to capital expenditures, we continue to expect between 5 million and $6 million for the full year, which includes capital expenditures for technology enablement that supports customer engagement and customer experience across multiple channels as well as additional automation capabilities in our distribution centers.

Tiffany R. Smith: We believe investing in future growth opportunities, driving efficiencies, and enhancing the customer experience are key to our long-term success. And with that, I'll pass it back to Crystal for her closing remarks. Thank you, Tiffany. We are going to go ahead and close the call.

Tiffany R. Smith: We believe investing in future growth opportunities driving efficiencies and enhancing the customer experience are key to our long term success.

Tiffany R. Smith: And with that I'll pass it back to Crystal for closing remarks.

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

Crystal Landsem: Thank you Tiffany we are confident in the resilience of our fresh not fast direct to consumer business model, coupled with the adapt newness and testing learning and optimizing within the dynamic retail landscape.

Operator: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

Operator: With a healthy balance sheet and heightened focus on gross margin expansion. We believe we are well equipped to navigate the near term instability and trends.

Operator: Thank you to our brand fans blue crew and shareholders for supporting us in our mission to deliver attainable luxury to our customers and we look forward to updating you on our next earnings call with that I'll turn it over to questions now.

Operator: Thank you.

Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. Ladies and gentlemen, we will wait for a moment while we poll you for questions. Our first question is from the line of Brooke Roach with Goldman Sachs. Please go ahead.

Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session.

Brooke Siler Roach: If you'd like to ask a question. Please press star and one on your telephone keypad.

Operator: A confirmation tone will indicate your line is in the question queue.

Operator: You May press star two if you'd like to remove your question from the queue.

Brooke Siler Roach: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keith.

Operator: Ladies and gentlemen, we will wait for a moment, while we poll for questions.

Brooke Siler Roach: Our first question is from the line of Brook Road with Goldman Sachs. Please go ahead.

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

Brooke Siler Roach: Good afternoon, and thank you for taking our question Crystal I was hoping you could elaborate on the factors that give you confidence in a return to strong healthy mid single digit growth for the rest of the year, what assumptions are underpinning that improvement as you think about active customer count customer acquisition between high income.

Brooke Siler Roach: Customers and lower income customers that might be under a little bit more macro pressure and order values. Thank you.

Operator: Thank you.

Crystal Landsem: Hey, Bob Thanks for the question I would say, there's several factors that are giving us confidence and just to tick off a few we have a lot of brand activations partnerships and influencer partnerships that have been so far reading really positive for our business and we continue we're going to continue to invest in that throughout the rest of the year from an assortment perspective.

Crystal Landsem: Hey Brooke, thanks for the question. I would say there are several factors that are giving us confidence. Just to tick off a few, we have a lot of brand activations, partnerships, and influencer partnerships that have so far been really positive for our business, and we're going to continue to invest in that throughout the rest of the year. From an assortment perspective, the depths of our buys are increasing, and we have more and more confidence in our reorder model and some of the changes that we've made towards buying with more depth and more confidence in our second purchases.

Crystal Landsem: There's the depth of our buys are increasing and we have more and more confidence in our reorder model in some of the changes that we've made towards buying with more depth and more confidence in our second purchases from.

Crystal Landsem: From a casual sportswear perspective, we anticipate seeing much more momentum there, especially with our new merchandising team and so highly confident around just returning to a more normalized non event where business from a fit consistency perspective, Mark has spoken to some of the efforts that we have around just giving our customers a better experience and more picky.

Crystal Landsem: From a casual and sportswear perspective, we anticipate seeing much more momentum there, especially with our new merchandising team ad, so highly confident around just returning to a more normalized non-event wear business. From a fit consistency perspective, Mark spoke about some of the efforts that we have around just giving our customers a better experience and more fit consistency across product classes, which should, in turn, bring lower return rates and just a higher net keep rate throughout the rest of the year.

Crystal Landsem: Insistency across product classes, which should in turn bring lower return rates and a higher net keep rate throughout the rest of the year and then lastly, just from a price extension perspective, we are testing and seeing quite positive results around more entry level price points as well as more aspirational price point testing to capture a much broader.

Crystal Landsem: And lastly, just from a price extension perspective, we are testing and seeing quite positive results around more entry-level price points, as well as more aspirational price point testing to capture a much broader customer range. That said, we do anticipate some continued pressure on our active customer file counts. We spoke a few quarters ago about a return policy change around pushing back on more excessive return customers and walking away from less profitable customers.

Crystal Landsem: Customer range that said, we do anticipate some continued pressure on our active customer file counts are we spoke a few quarters ago around our return policy change around pushing back on more access of returning customers and walking away from less profitable customers. So we do anticipate that there is some pressure in terms of comps year over year, but again.

Crystal Landsem: So we do anticipate that there is some pressure in terms of comps year over year. But again, the story here is more gross margin expansion over seeking unprofitable growth. So, highly optimistic on our side. Our merchandise is getting better and better every day, and very optimistic around the step up that we've talked about.

Crystal Landsem: The story here is more gross margin expansion over seeking unprofitable growth so highly optimistic on our side, our merchants getting better and better every day and I'm very optimistic around the stuff that we talked about.

Brooke Siler Roach: Great. And then maybe a follow-up for Tiffany. You raised the low end of the EBITDA guide despite some softer revenues in the first quarter versus expectations. Can you help quantify the impact of the return policy change to your profit forecast for both gross profit and adjusted EBITDA on a dollar basis relative to other changes that may have happened in the quarter? Thank you.

Speaker Change: Great and then maybe a follow up for Tiffany you you raised the low end of the EBITDA guide. Despite some softer revenues in the first quarter versus expectations can you help quantify the impact of the return policy change to your profit forecast for both gross profit and adjusted EBITDA on a dollar basis.

Brooke Siler Roach: Relative to other changes that may have happened in the quarter. Thank you.

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

Tiffany: Sure. Good question broke up so our previous guidance the original guidance that we put out for the year actually already contemplated benefits to improving return rate, particularly a bit more heavily in the back half of the are seeing some year over year improvement there that wasn't really already contemplated.

Tiffany R. Smith: We did pull forward the changes to the policy earlier in the year, which is contemplated in the updated guidance and the updated the raise of the low end of our EBITDA range essentially reflecting just an earlier rollout of the policy changes, which we expect to help.

Tiffany R. Smith: Improve the unit economics overall.

Tiffany R. Smith: You'll need to more profitability overall, just because of lower return processing cause returned shipping costs et cetera that will help our profitability sooner in the year than what we originally anticipated.

Tiffany R. Smith: The only thing that I would add to that is our lower than anticipated sales being driven from markdowns is also going to have a net positive benefit to our EBITDA flow through. So that's also contemplated.

Tiffany R. Smith: The only thing that I would add to that is our lower than anticipated sales being driven from markdowns is also going to have a net positive benefit to our EBITDA flow throughs, but that's also contemplated.

Operator: Great. Thanks so much. Thanks, Brooke. Thank you. Thank you. Our next question is from the line of Janine Stichter with BTIG.

Speaker Change: Great. Thanks, so much I'll pass it on.

Janine Marie Hoffman Stichter: Thanks Brook. Thank you. Thank you.

Operator: Our next question is from the line of Janine Stichter with BTIG. Please go ahead.

Operator: Our next question is from the line of Janine Stichter, but B P. I T. Please go ahead.

Operator: Hi, everyone you got Ethan on the line for Janine first question could you just provide some more color on the gross margin initiatives in place that get you to that 180 to 200 bps of expansion for the year and how they are progressing so far.

Tiffany R. Smith: Sure, hi Ethan, this is Tiffany. There are a couple of things going on there. We spoke on the call around impacts that we saw in Q1, and Crystal just mentioned it on the previous response around markdown sales being lower than what we anticipated. So seeing more strength from our reg price selling is certainly going to enhance gross margin that we alluded to, as well as just the sort of new and novelty new products that we're seeing responding very well with our customer.

Janine Marie Hoffman Stichter: Sure Hi, Ethan this is Stephanie so there's there's a couple of things happening there or we spoke to on the call around impacts that we saw in Q1 and Crystal just mentioned on the previous response around markdown sales being lower than what we anticipated so seeing seeing more strength from our Reg price selling.

Tiffany R. Smith: Is certainly going to enhance our gross margin that we alluded to.

Tiffany R. Smith: As well as just the sort of new and novel T. New products that we're seeing are resonating very well with our customer and as we crystal spoke to on the first response, just increasing the depth of our buys them getting more new product into our product funnel I think is going overall help bring up our <unk>.

Tiffany R. Smith: And as Crystal spoke to in the first response, just increasing the depth of our buys, getting more new product into our product funnel, I think is going to help bring up our product margins overall. And then the return policy changes, we expect, although this is still very new and has recently been rolled out, we do expect there to be some margin enhancement coming from that in the form of things like less shipping costs, less damaged products coming back to us, et cetera.

Tiffany R. Smith: <unk> margins.

Tiffany R. Smith: And then the return policy changes also we expect although this is still very new and very recently rolled out we do expect there to be some margin enhancement coming from that in the form of things like less shipping cost less damaged product coming back to us et cetera from them from the return rate and just to elaborate on the return policy.

Tiffany R. Smith: And just to elaborate on the return policy changes, we've got about a month since it's been rolled out, and one of the promising factors that we're seeing is UPTs coming down at a gross level, which to us is indicating that customers are shopping with greater intent, but we're seeing our net UPTs kept holding consistent with what they were before. So that's a good early indicator that she's still shopping with us, but just shopping with better intent and keeping a similar keep rate as far as what was prior to the policy change, which all in all kind of helps to build out a more profitable unit economics for us. We'd also be remiss not to mention our production team being fully functional and up and running at this point. And we are starting to see some benefits very gradually.

Tiffany R. Smith: Changes you know we've got about a month since it's been rolled out and one of the one of the promising factors that we're seeing is there is a U P cheese coming down at a gross level, which to us is indicating the customer shopping with greater intent, but we're seeing our net U P. T is cut.

Tiffany R. Smith: Holding consistent with what they were before so that's a good early indicator that she is still shopping with us, but just shopping with better intention and keeping them a similar cheap rate as far as what was our prior to the policy change, which all in all kind of helps to build out a more profitable unit economics for.

Tiffany R. Smith: Yes.

Tiffany R. Smith: We'd also be remiss not to mention our production team being fully functional and up and running at this point, and we are starting to see some benefits. While very gradual and will still take time to mature over the next couple of years, they've done a great job of increasing our margins on our buys. Got it. That's really helpful. And then just another one from me.

Tiffany R. Smith: We would also be remiss in not mentioned, our production team being fully functional and up and running at this point and we are starting to see some benefits, while very gradual and will still take time to mature over the next couple of years, they've done a great job in and increasing our margins on our buys.

Tiffany R. Smith: Yeah.

Crystal Landsem: I think you mentioned a little bit. We'd love to hear some more about your plans for growing active and casual wear into the assortment and how that's progressing as well. Yeah, so it's progressing great. Of course, we just added a new CMO who is going to take us to the next level, but it will take time. And our buying model is very much driven by testing, learning, and repeating. So we're going to do it cautiously, but also investing in where we believe our customers would shop for us in these other categories. So that will evolve over the next several quarters.

Tiffany R. Smith: Got it that's really helpful. And then just another one for me I think you mentioned it a little bit wed love to hear some more about your plans on growing active and casual wear and are into the assortment, how that's progressing as well.

Crystal Landsem: Yeah. So it's progressing great of course, we just added a new CMO, who is going to take us to the next level and it will take time and are buying model is very much driven by testing learning and repeating so we're gonna do it cautiously, but also investing in where we believe our customer with chocolates in these other categories. So that will that will evolve over the next several quarters.

Crystal Landsem: Alright, thanks. That's it for me.

Speaker Change: All right. Thanks, that's it for me.

Speaker Change: Thank you.

Operator: Thank you. Thank you. Our next question is from the line of Dina Telsey with Telsey Advisory Group. Please go ahead.

Crystal Landsem: Thank you. Our next question is from the line of Dana Telsey with Telsey Advisory Group. Please go ahead.

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

Dana Lauren Telsey: Hi, Good afternoon, everyone. As you think about reorder categories, and you talked about encouraging trends.

Dana Lauren Telsey: What did you see there how do you think of dresses and even dressing versus some of the reorder categories and the margin impact going forward, how you're planning and then was there any cadence to the quarter in terms of what you saw and then your store plans. Given you mentioned Melrose has been a success anything you're learning.

Dana Lauren Telsey: About your customer there versus online what they buy they're what the average transaction is versus online. Thank you.

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

Speaker Change: Thanks, Dana I'll kind of touch on the non or the dress category business and product category highlights we did see our growth.

Crystal Landsem: Growth rate in special occasion, and bridal remaining strong due to the enhancements that we've made in our assortment, mostly around novelty and newness.

Crystal Landsem: And we think that what we've done on the dress front demonstrates the opportunity that we have also to grow our non dress business, which we've spoken to you again with our new.

Crystal Landsem: CMO and our new merchandising leadership really having a strong hold on what is going to be developing narrow in the non dress categories, but we continue to be really encouraged by what we see on the <unk>.

Crystal Landsem: Event dressing front of the business overall.

Crystal Landsem: From a store planning perspective, we're thrilled with the progress that we've made around utilizing our Melrose store, not only for brand credibility online, which is helping marketing efficiency there, but also for influencer activations, customer activations, like our 100 Dresses for 100 Brides or our Desert Festival activation. It's been a really great opportunity for us to showcase the quality of our product and also take it to the digital space across social media, having customers and influencers like connect with it.

Crystal Landsem: From a store plans perspective, we're thrilled with the progress that we've made around utilizing our Melrose store not only for brand credibility online, which is helping marketing efficiency there, but also for Influencer activations customer activations like are under addressed this for 100 rides or our Desert Festival activation, that's been a really great opportunity for us to showcase.

Crystal Landsem: The quality of our products and also take it to a digital space across social and having customers and then go into like connect with it that said, we're going to continue to be very calculated around future store plans I think the future for Lulu is absolutely omni, but for 2024, we're focusing on rebalancing our assortment across new novelty and reorder and we'll be looking in June.

Crystal Landsem: That said, we're going to continue to be very calculated around future store plans. I think the future for Lulu's is absolutely omnichannel, but for 2024, we're focusing on rebalancing our assortment across new novelty and reorder, and we'll be looking into next year and years forward from an extension of Barclays.

Crystal Landsem: Year on year sport, where from an extension of our footprint.

Tiffany R. Smith: And sorry, Dana, I think you had a question also on the cadence of what we saw during the third quarter and the exit rate. Yeah, exactly.

Speaker Change: And sorry, Dan I think you had a question also on the cadence of salary quarter industry exit rate going yeah exactly.

Tiffany R. Smith: So just generally speaking, in terms of the Q1 cadence, after we had our earnings call towards the back half of March, we did see softness on the sales side, which alluded to before was really driven by quite a bit higher markdown, or a drop off in markdown sales relative to last year, which we didn't comp this year. Similarly, we're seeing improvements in profitability from a gross margin perspective as a result of not comping those markdown sales.

Dana: So just generally speaking in terms of the Q1 cadence. It after we had our earnings call towards the back half of March we did see soft the softness on the sales side, which alluded to before it was really driven by a quite a bit higher markdown or a drop off.

Tiffany R. Smith: The markdown sales relative to last year that we didnt comp. This year. Similarly, we're seeing improvements in profitability from a gross margin perspective, as a result of not comping. Those markdown sales. So that was a notable change.

Tiffany R. Smith: So that was a notable change that we saw. We saw markdown sales in general down throughout the quarter, but they dropped off pretty substantially towards the back half of March, and we're continuing to see markdown sales comping way down into early Q2 as well. But again, encouraged by the effect that that's having on margins overall.

Tiffany R. Smith: Change that we saw we saw marked down sales in general down throughout the quarter, but it dropped off pretty substantially towards the back half of March and we're continuing to see markdown sales comping.

Tiffany R. Smith: Way down into early Q2, as well, but again encouraged by the effect that that's having on on margins overall.

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

Tiffany R. Smith: Yeah.

Tiffany R. Smith: And of course it is also a good indicator for the health of our inventory as we have it today.

Tiffany R. Smith: and also contemplated in our narrowing of our range and guidance.

Tiffany R. Smith: And then also contemplated in our or narrowing of our range of guidance.

Tiffany R. Smith: Okay.

Dana Lauren Telsey: Thank you very much.

Speaker Change: Got it thank you very much.

Speaker Change: Thank you Lena.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, as there are no further questions, this concludes the conference call of Lulu's Fashion Lounge Holdings. Thank you for your participation. You may now disconnect your line.

Speaker Change: Ladies and gentlemen, as there are no further questions that concludes the conference of Lulu fashion launch holdings.

Speaker Change: Thank you for your participation you may now disconnect your line.

Operator: Yeah.

Operator: [music].

Operator: Hum.

Operator: Yeah.

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