Lulu’s Fashion Lounge (NASDAQ:LVLU) reported a narrower first-quarter loss and improved profitability metrics as management said the online fashion retailer continues to work through an assortment reset aimed at strengthening margins, improving order economics and returning the business to growth later in fiscal 2026.
On the company’s first-quarter fiscal 2026 earnings call, CEO Crystal Landsem said Lulu’s has completed “much of the foundational reset work” that began in 2025 and is positioning the business for “recovery and re-acceleration” in the second half of the year. The company continued to see strength in higher-margin, event-driven categories, particularly special occasion apparel, while taking targeted actions to reduce exposure in casual apparel and footwear.
Margins improve as occasion wear mix increases
Gross margin rose 480 basis points year over year to 45.1%, which Landsem said was Lulu’s highest first-quarter gross margin percentage since 2022. Crane attributed the improvement to a sales mix shift toward higher-margin categories and lower outbound shipping costs from freight rate savings, partly offset by increased markdowns in casual apparel and footwear.
Landsem said the company continued to see “healthy demand for special occasion,” led by reorder cocktail dresses, color additions across the occasion wear assortment and newly introduced styles that performed well. Sell-through for new product introductions improved during the quarter, she said, with reorder eligibility rates nearly doubling year over year.
Management said the stronger performance in occasion wear reinforced Lulu’s positioning as a destination for weddings, graduations, prom, vacations, date nights and other social occasions. Landsem said the company’s brand marketing remains focused on “culturally relevant moments” that resonate with its Gen Z and millennial customers.
Casual apparel and footwear remain under reset
President and Chief Information Officer Mark Vos said casual apparel and footwear remain important to the company’s strategy because they support more frequent, year-round purchasing behavior and generally carry lower return rates than occasion products. However, Lulu’s took “more aggressive steps” in late 2025 and the first quarter of 2026 to reset those categories.
Vos said new product launches in casual apparel and footwear were down more than 50% in the first quarter compared with the prior-year period, as the company limited introductions to items with higher conviction and stronger alignment with the brand. Inventory at quarter-end was down meaningfully, including a 39% reduction in casual apparel categories and a nearly 46% reduction in footwear, according to Landsem.
Despite the lower launch volume, Vos said SKU productivity improved, with units transacted per new product launched in casual apparel and footwear up 56% from the first quarter of 2025 and up sequentially from the fourth quarter of 2025. He said the company expects launch volume in those categories to normalize and return to growth in the second half of the year.
Return rates increased year over year in the quarter, which Landsem said was primarily due to a greater mix of elevated occasion product and higher average unit retails. Management expects return trends to improve as casual apparel and footwear assortments normalize in the back half of 2026.
Wholesale channel continues to scale
Lulu’s wholesale channel continued to expand during the quarter. Landsem said wholesale revenue doubled year over year, while Vos said wholesale revenue for the last 12 months ended in the first quarter of 2026 increased 112% compared with the prior-year period. Revenue from the same major accounts rose 94% over that period.
Vos said Lulu’s expanded from shipping to four major accounts in the last 12 months ended in the first quarter of 2025 to 10 major accounts in the comparable 2026 period. He also noted that Lulu’s is now available in all Nordstrom doors and doubled its presence to 100 doors with its prom assortment at Dillard’s.
Management described wholesale as a strategic, capital-efficient growth channel that increases brand awareness and helps the company reach customers where they already shop. Landsem said the in-store experience allows customers to engage directly with the quality, fit and value of Lulu’s products.
Expenses decline and loss narrows
Selling and marketing expenses totaled $14 million, down $1.9 million from the prior year, due to lower marketing costs and merchant processing fees. General and administrative expenses fell $2.6 million to $15.5 million, a 14.3% year-over-year decline. Crane said the decrease reflected cost controls, lower variable labor and benefits tied to reduced sales volume, productivity gains from distribution center consolidation, lower equity-based compensation and reduced fixed headcount.
The company reported a first-quarter net loss of $4.1 million, compared with a net loss of $8 million a year earlier. Adjusted EBITDA was a loss of $1.5 million, improved from a $4.7 million loss in the prior-year quarter. Adjusted EBITDA margin was negative 2.7%, compared with negative 7.3% a year earlier.
Diluted loss per share was $1.44, compared with a diluted loss per share of $2.86 in the first quarter of 2025. Interest expense declined to $394,000 from $577,000.
Net cash provided by operating activities was $6.9 million, compared with $8.3 million a year earlier. Crane said the year-over-year comparison was negatively affected by $2.2 million tied to a large prior-year income tax refund. Excluding income tax refunds, operating cash flow improved by $800,000. Free cash flow was $6.5 million, compared with $7.8 million a year earlier.
Total debt decreased by $1.1 million during the quarter to $13.3 million, while net debt fell by $5.8 million to $5.9 million. Inventory was $33.1 million at quarter-end, down $6.6 million, or 17%, from the prior year.
Management reiterates outlook for positive adjusted EBITDA
Crane said Lulu’s expects adjusted EBITDA to turn positive in the second quarter of 2026 and outperform the comparable period last year. For fiscal 2026, the company continues to expect adjusted EBITDA to be positive, compared with negative $1.2 million in 2025. Management also continues to expect the net revenue growth trend to improve year over year after an 11% decline in 2025.
The company maintained its capital expenditure outlook of $2 million to $2.5 million, including capitalized software, which Crane said is comparable to 2025.
Vos also addressed tariffs, saying uncertainty around rates, refunds and timing remains ongoing. He said Lulu’s has managed incremental tariff impacts through vendor collaboration, strategic pricing and assortment optimization, and that potential refunds have not been factored into guidance. The company is also working on sourcing diversification, vendor relationships, product costs and disciplined pricing.
Management highlighted several technology and operations initiatives, including improvements in distribution center efficiency, inbound and returns processing, click-to-ship times and on-time delivery. Vos said customers are adopting Happy Returns at high rates, and that consolidated return shipping should help offset increases in fuel surcharges. He also pointed to updated “complete the look” functionality designed to improve merchandising and the shopping experience.
Landsem said Lulu’s remains focused on expanding in wedding-related occasions and other event-adjacent categories, deepening customer engagement and scaling wholesale as both a growth driver and customer acquisition channel.
About Lulu’s Fashion Lounge (NASDAQ:LVLU)
Lulu’s Fashion Lounge, Inc is a publicly traded e-commerce apparel retailer that specializes in women’s fashion. Headquartered in Chico, California, the company operates under the “Lulus” brand, offering a curated selection of apparel, footwear and accessories designed to meet the trends and needs of a diverse female audience. Since completing its initial public offering and listing on the NASDAQ under the ticker symbol LVLU, Lulu’s has focused on expanding its direct-to-consumer business model and enhancing its online platform to drive global reach.
The company’s core product portfolio includes dresses, tops, denim, swimwear, jumpsuits and outerwear, complemented by a range of shoes, jewelry and handbags.
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