Lulu's Fashion Lounge Holdings, Inc.

Good afternoon and welcome to Lulu's Fashion Lounge first quarter 2026 earnings call. Today's call is being recorded. At this time, I'd like to turn the conference over to Lulu's General Counsel and Corporate Secretary, Naomi Beckman-Strauss. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us to discuss Lulu's first quarter fiscal 2026 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. These forward-looking statements are subject to various risks, uncertainties, assumptions, and other important factors, which could cause our actual results, performance, or achievements to differ materially from results, performance, or achievements expressed or implied by these forward-looking statements. 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 28, 2025. which can be found on our website at investors.lulu.com. During our call today, certain non-GAAP financial information, including adjusted EBITDA, adjusted EBITDA margin, net debt, and free cash flow. 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. We also use certain key operating metrics, including gross margin, average order value, and active customers. The description of these metrics can also be found in this afternoon's press release and in our SEC filing. Joining me on the call today are our CEO, Crystal Lansom, our CFO, Heidi Crane, and our President and CIO, Mark Voss. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Crystal.

Thank you, Naomi, and good afternoon, everyone. We appreciate you joining us today. In the first quarter, we continued to make meaningful progress across the business as we executed against the operational and merchandising initiatives supporting our reset. We exited 2025 in the first quarter of 2026, having completed much of the foundational reset work and are now positioning the business for recovery and reacceleration in the second half of the year. We believe the continued strength of our higher margin event-driven categories, combined with our assortment optimization efforts, have improved order economics, deepened customer engagement, and further reinforced our position as a special occasion brand. Lulu's remains a trusted destination for life's most meaningful moments, from graduations and weddings, to birthdays, vacations, date nights, and the everyday social moments in between. These emotionally resonant purchase occasions continue to support strong customer engagement, repeat purchasing behavior, and full price demand across our core Gen Z and millennial customer base. What differentiates the Lulu's brand is our ability to combine elevated, feminine fashion with accessible price points while helping customers feel confident and photo-ready for the moments that matter most. While we took targeted actions during the quarter to further optimize portions of our casual apparel and footwear assortments, we continue to see encouraging momentum across key areas of the business, including sustained strength in event-driven categories, significantly improved assortment productivity, expanding gross margins, and continued progress against our operational efficiency initiative. To that end, let me share some additional detail on key positive developments during the first quarter of 26. We continue to see healthy demand for special occasion, led by reorder cocktail dresses and supported by color ads across occasion wear assortment, as well as chasing the high-performing newly introduced styles. Additionally, sell-through for new product introductions improved significantly during the quarter, leading to reorder eligibility rates that nearly doubled year over year, highlighting the effectiveness of our more refined assortment strategy and identifying styles that better align with what the Lulu's customer is looking for. Gross margins expanded by 480 basis points to 45.1%, marking our highest first quarter gross margin percentage since 2022. The continued expansion in gross margin reinforces that the structural improvements we have made across sourcing, assortment discipline, and inventory productivity are driving healthier order economics and improving the earnings profile of the business. We have seen great brand momentum to start the year, supported by growing engagement across experiential marketing, influencer partnerships, earned media and social channels, all while maintaining disciplined marketing efficiency. Our brand marketing strategy remains focused around culturally relevant moments that resonate with our customer, including weddings, graduations, prom, vacations, and other social occasions where customers turn to Lulu's with confidence. During the quarter, our 2026 prom event, creator collaborations, influencer and celebrity placements, and seasonal occasion dressing stories generated strong engagement and visibility across channels. We also announced our 2026 brand campaign in early April, which we anticipate will further drive awareness, positioning the business well to build momentum and scale as we celebrate moments that matter to our customers and that align with our brand identities. We also continue to benefit from the scale and authenticity of our community, which now includes more than 9 million social media followers and a broad network of influencers and ambassadors that help amplify the brand organically. Combined with the launch of our brand campaign, we believe these efforts further reinforce Lulu's example luxury positioning. Our wholesale channel is scaling rapidly, with revenue in the quarter doubling year over year as it complements and amplifies our D2C business by meeting our customers where they already shop, and increasing awareness of the Lulu's brand across new audiences and new channels. The in-store experience allows customers to engage directly with the quality, fit, and value of our product assortment, helping deepen trust and engagement with our brand. We continue to view wholesale as a highly strategic and capital-efficient growth channel, expanding brand awareness and driving incremental customer acquisition. And last, adjusted EBITDA improved significantly year over year, highlighting our progress, prioritizing profitability, maintaining a lean cost structure, and driving operational focus. Despite dipping negative in the first quarter as anticipated, driven by our planned inventory reset, we expect to see a return to positive adjusted EBITDA in the second quarter and for the full year. Importantly, during the first quarter, we made significant progress on the reset of our casual apparel and footwear businesses, as we discussed on our last call, while intentionally prioritizing profitability and assortment quality to support a faster and healthier return to growth. During the quarter, we intentionally maintained disciplined inventory receipts and a tighter, more curated assortment within casual apparel and footwear as we continued optimizing these categories around productivity, customer alignment, and profitability. These actions contributed to a meaningfully cleaner inventory position exiting the quarter and that positions us well to reintroduce higher quality, more productive newness through the balance of the year. We will continue to iterate on new product in the coming quarters, identify top performers, and build back reorder momentum behind the styles that resonate with customers most. Inventory at the end of Q1 was down meaningfully year over year, including a 39% reduction in casual apparel categories, nearly 46% reduction in footwear, while markdown exposure exiting the quarter was also substantially lower. As expected, return rates increased year over year during the quarter, driven primarily by a greater mix of elevated occasion product and higher average unit retails. We expect return trends to improve as casual apparel and footwear assortments normalize through the back half of the year, positioning us for healthier revenue trajectory and improving return rates. We're encouraged by the progress we made in the first quarter, including improved margins, stronger inventory productivity, continued wholesale momentum, and meaningful balance sheet improvement. We see opportunities to deepen engagement and grow revenue per customer by expanding further into wedding-related occasions and other event-adjacent categories that naturally extend the customer lifecycle, increase purchase frequency, and support continuous engagement throughout the year. Most importantly, we remain deeply focused on serving our customers strengthening the emotional connection they have with our brand, and continuing to deliver the confidence, quality, and experience they expect from Lulu's during life's most meaningful moments. With that, I'd like to turn the call over to Mark Voss, our President and Chief Information Officer. Mark will provide updates around progress we are seeing against our strategic focus areas. Mark?