LVLU 10-K & 10-Q changes, risk factors and insider trading

Our success depends on our ability to acquire customers in a cost-effective manner. InCustomer expectations and the associated competitive pressures have increased, and in order to expand our customer base, we must appeal to and acquire customers who have historically used other means of commerce in shopping for apparel and may prefer alternatives to our offerings, such as traditional brick-and-mortar retailers and the websites and mobile apps of our competitors. We have made significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers. For example, we engage in social media marketing campaigns and maintain relationships with thousands of social media and celebrity influencers. Such campaigns can be expensive and may not result in cost-effective acquisition of customers. We also continue to invest in AI and generative AI technologies to enhance our customers’ shopping experience. We cannot assure that the benefit of acquiring new customers will exceed the cost. If we fail to deliver a quality shopping experience, or if consumers do not perceive the products we offer to be of high value and quality, we may not be able to acquire new customers. If we are unable to acquire or retain customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to drive beneficial network effects with our suppliers, our net revenue may decrease, and our business, financial condition, and results of operations may be materially adversely affected.

We obtain a significant amount of traffic via social networking platforms or other third-party online channels used by our current and prospective customers. As e-commerce and social networking platforms continue to rapidly evolve, we must continue to maintain and establish relationships with these channels and may be unable to develop or maintain these relationships on acceptable terms. WeThese third-party platforms may unilaterally and with little or no notice change, among other things, their algorithms, policies, fee structures, content moderation rules, data access, and programs in ways that could, among other things, increase our customer acquisition costs, or otherwise diminish the effectiveness and economics of our efforts. Our participation on these platforms also acquireexposes us to certain operational and retainreputational customersrisks. throughWe paidhave search/productin listingthe ads, paid social, retargeting, affiliate marketing, personalized email, direct mail marketingpast, and in-personmay experiences.again Ifin wethe arefuture, unableencounter tocounterfeit cost-effectivelyor driveunauthorized trafficsellers tooffering similar or infringing products at lower prices, which could impact, among other things, our website or mobile app, our ability to acquire new customerspricing and ourbrand financial condition would suffer.equity.

A high proportion of our net revenue comes from repeat purchases by existing customers, especially those existing customers who are highly engaged and purchase a significant amount of merchandise from us. If existing customers no longer find our merchandise appealing, they may make fewer purchases and may stop shopping with us. Even if our existing customers find our merchandise appealing, if customer buying preferences change, they may decide to purchase less merchandise over time. Additionally, if customers who purchase a significant amount of merchandise from us were to make fewer purchases or stop shopping with us, then our sales may decline. We experienced a decrease in the number of Active Customers in fiscal 2025 as compared to fiscal 2024. A continued decrease in the number of our customersActive Customers or a decrease in their spending on the merchandise we offer could negatively impact our business, financial condition, cash flows, and results of operations. Further, we believe that our future success will depend in part on our ability to increase sales to our existing customers over time and, if we are unable to do so, our business may suffer.

Our core market of apparel, footwear, and accessories for women is subject to new and rapidly changing fashion trends, constantly evolving consumer preferences and demands, and a modest brand loyalty. Accordingly, our success is dependent on our ability to anticipate, identify, measure and respond to the latest fashion trends and customer demands, and to translate such trends and demands into appropriate, desirable product offerings in a timely manner. A select team of our employees is primarily responsible for performing this analysis and making initial product decisions, and they rely on feedback on fashion trends from a variety of sources, which may not accurately predict evolving fashion trends. Our failure to anticipate, identify or react swiftly and appropriately to new and changing styles, trends or desired customer preferences or to accurately anticipate and forecast demand for certain product offerings is likely to lead to lower demand for our merchandise, which could cause, among other things, sales declines, excess inventories, a greater number of markdowns and lower margins. Further, if we are not able to anticipate, identify and respond to changing fashion trends and customer preferences, we may lose customers and market share to our competitors who are able to better anticipate, identify and respond to such trends and preferences. In addition, because our success depends on our brand image, our business could be materially adversely affected if new product offerings are not accepted by our customers. We cannot assure investors that our new product offerings will be met with the same level of acceptance as our past product offerings or that we will be able to adequately respond to fashion trends or the preferences of our customers in a timely manner or at all. If we do not accurately anticipate, identify, forecast, or analyze fashion trends and sales levels, it could have a material adverse effect on our business, financial condition, cash flows, and results of operations.

Our success depends on our ability to attract customers cost effectively. With respect to our marketing channels, we rely heavily on relationships with providers of online services, search engines, social media, directories, and other websites and e-commerce businesses to provide content, advertising banners, and other links that direct customers to our websites and retail store. We rely on these relationships to provide significant traffic to our website. In particular, we rely primarily on digital platforms, such as Google and Facebook,Meta, as important marketing channels. Digital channels change their algorithms periodically, and our rankings in organic searches and visibility in social media feeds may be adversely affected by those changes, as has occurred from time to time, requiring us to increase our spending on paid marketing to offset the loss in traffic. Search engine companies may also determine that we are not in compliance with their guidelines and consequently penalize us in their algorithms as a result. Even with an increase in marketing spend to offset any loss in search engine optimization traffic as a result of algorithm changes, the recovery period in organic traffic may span multiple quarters or years. If digital platforms change or penalize us with their algorithms, terms of service, display and featuring of search results, or if competition increases for advertisements, we may be unable to cost-effectively attract customers.

Our relationships with digital platforms are not covered by long-term contractual agreements and do not require any specific performance commitments. These third-party platforms may unilaterally and with little or no notice change, among other things, their algorithms, policies, fee structures, content moderation rules, data access, the types of information we can use for targeted advertising, and programs in ways that could, among other things, increase our customer acquisition costs, or otherwise diminish the effectiveness and economics of our efforts. In addition, many of the platforms and agencies with whom we have advertising arrangements provide advertising services to other companies, including retailers with whom we compete. As competition for online advertising has increased, the cost for some of these services has also increased. A significant increase in the cost of the marketing providers upon which we rely could adversely impact our ability to attract customers cost effectively and harm our business, financial condition, results of operations, and prospects.

We use social media including Facebook, Instagram, Pinterest, Snapchat, TikTok, TwitterX, Threads, and YouTube, as well as affiliate marketing, email, SMS, podcast advertisements, promotional partnerships and direct mail as part of our multi-channel approach to marketing, and we encourage our customers to use social media while shopping. We utilize various marketing-related contests and giveaways that are subject to applicable laws. We also maintain relationships with thousands of social media influencers, who serve as our brand ambassadors, and engage in sponsorship initiatives. Laws and regulations governing the use of these platforms and other digital marketing channels are rapidly evolving. It may become more difficult for us or our partners to comply with such laws, and future data privacy laws and regulations or industry standards may restrict or limit our ability to use some or all of the marketing strategies on which we currently rely. The failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could adversely impact our reputation or subject us to fines or other penalties. In addition, our employees or third parties acting at our direction, including our large network of social media brand ambassadors, may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure of proprietary, confidential or sensitive personal information of our business, employees, customers, or others. Any such inappropriate use of social media tools could also cause business interruptions and reputational damage.

We utilize a diverse array of marketing channels to engage our audience and drive traffic to theour platform. These channels include organic content creation, affiliate marketing, email campaigns, SMS outreach, direct mail, paid search, and social media marketing.marketing, and integrated brand campaigns designed to build awareness and deepen customer engagement. We have also cultivatedmaintain promotional and strategic partnerships to enhanceextend our reach andacross impact.multiple Inconsumer additiontouchpoints, toincluding ourdigital, robust digital strategy, we executed our first national out-of-home campaign in 2024, incorporating out-of-home outdoor advertising, mailers,out-of-home, and connected TVmedia placements. This marked a significant milestone in our efforts to diversify our marketing approach and connect with consumers through a broader range of touchpoints.formats.

Additionally,In addition, the social mediadigital platforms we rely on for marketing purposes are dependent on third-party mobile operating systems,systems suchand asinfrastructure, including iOS and Android, which we do not control. Changes to theseoperating systemssystem policies, privacy frameworks, data-sharing practices, or attribution capabilities could adversely affectlimit our ability to engagetarget, withmeasure, customers,and optimize marketing campaigns, potentially impacting ourtraffic, business,conversion financial condition,rates, and resultsoverall ofmarketing operations.efficiency.

We base our current and future expense levels on our operating forecasts and estimates of future income. Income and results of operations are difficult to forecast because they generally depend on the volume, timing and value of the orders we receive, and return rates, all of which are uncertain. In addition, we cannot be certain that the same growth rates, trends and other key performance metrics are meaningful predictors of future growth. Additionally, our business is affected by general economic and business conditions around the world.world, Acompetition, softeningshifting intrends income, whether caused byand changes in customerconsumer preferencespreferences. orThe arapid weakeningchanges and uncertainty in global economies,trade maypractices, including tariff rates, make it difficult to predict sales, inventory levels and gross margin could result in decreasedsignificant net revenue levels, and we may be unable to adjust our spendingfluctuations in a timely manner to compensate for any unexpected shortfall in income. This inability could cause our net income/(loss)sales, after tax in a given quarter to be higher or lower than expected. We also make certain assumptions when forecasting the amount of expense we expect related to our future share based payments, which includes the expected volatility of our share pricemargins and the expected life of share awards granted. These assumptions are partly based on historical results. If actual results differprofitability from our estimates, our net income in a given quarter may be lower than expected or our net loss in a given quarter may be higher than expected.period-to-period.

Our business depends on the transportation of a large number of products. Our ability to accurately forecast and plan expenses could be adversely impacted by limitationsa on fuel supplies or increases in fuel prices that result in higher costsnumber of transportationthird-party andfactors distributionoutside of our products.control, including, but not limited to, supply chain- and transportation-related costs. Although we are able to update our forecasts and estimates based on current data and modify the pricing of our products accordingly, there is often a lag before such modified pricing is reflected in our operating results, and there is a limit to how much of any fuel price or other distributionthird-party cost increasesincrease we can pass onto our customers. Any such limits may adversely affect our results of operations.

Our ongoing customer support is important to the successful marketing and sale of our merchandise. Providing this support requires that our customer support personnel have fashion, retail, technical, and other knowledge and expertise, making it difficult for us to hire qualified personnel and scale our support operations. The demand on our customer support organization will increase as we expand our business and pursue new customers, and such increased support could require us to devote significant development services and support personnel, which could strain our team and infrastructure and reduce our profit margins. If we are unable to hire and retain customer support personnel capable of consistently providing customer support at a high level, as demonstrated by their enthusiasm for our culture, understanding of our customers, and knowledge of the merchandise that we offer, our ability to expand our business may be impaired. Further, if we do not help our customers quickly resolve issues and provide effective ongoing customer support, our ability to sell additional merchandise to existing and future customers could suffer and our reputation would be harmed. If we modify our customer service policies or services, this may result in customer dissatisfaction and our ability to expand our business may be impaired. IfOur customer experience also depends on the availability and performance of third-party platforms and technologies we are unableuse to hire and retain customer support personnelcustomers. capableAny ofoutages, consistentlydisruptions, providingor customerperformance supportissues ataffecting athese highsystems level,could asnegatively demonstrated by their enthusiasm for our culture, understanding of our customers, and knowledge of the merchandise that we offer,impact our ability to expandsupport customers in a timely and effective manner. If we incorporate AI and automation into our businesscustomer support tools, we may be impaired.exposed to risks related to system accuracy, reliability, data handling, or evolving regulatory expectations, which could adversely affect the customer experience and our business.

We experience moderate fluctuations in aggregate sales volume during the year. Historically, our net revenue has typically been highest in our second fiscal quarter and lowest in our fourth fiscal quarter. The seasonality of our business has resulted in variability in our total net revenue quarter-to-quarter. In addition, our customers may change their order patterns and buying habits, including frequency of purchase and/or number of items per order. As a result, we may not be able to accurately predict our quarterly sales. Accordingly, our results of operations are likely to fluctuate significantly from period to period. This seasonality, along with other factors that are beyond our control, including general economic conditions, changes in consumer preferences, weather conditions, including the effects of climate change, the availability of import quotas, transportation disruptions and foreign currency exchange rate fluctuations, could adversely affect our business and cause our results of operations to fluctuate.

We accept payments online via credit and debit cards, Lulus gift cards, Lulus online credit, buy now pay later options, and other digital wallet services, which subject us to certain regulations and risk of fraud, and we may in the future offer new payment options to customers that would be subject to additional regulations and risks. We pay interchange and other fees in connection with credit card payments, which may increase over time and adversely affect our results of operations. Certain payment processors may seek to implement reserves against our processed transactions which could negatively impact our cash flows should we continue to offer these payment methods to our customers. While we use third parties to process credit and debit card payments, we are subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard and rules governing electronic funds transfers. If we fail to comply with applicable rules (such as the new PCI DSS 4.0 requirements coming into effect in 2025) and regulations or experience a security breach involving payment card information, we may be subject to fines, assessments and/or higher transaction fees and may lose our ability to accept online payments or other payment card transactions. Further, payment card associations and/or payment gateways have implemented requirements to engage a Qualified Security Assessor (QSA) or Internal Security Assessor (ISA) to validate our compliance with certain requirements. If we fail to successfully complete such validation or fail to comply with these requirements, we may be unable to complete our annual PCI compliance, which could result in rejection by payment processors, fines from payment card associations, increased transaction fees, or loss of our ability to accept credit card payments, any of which could have a material adverse effect on our business, financial condition, and results of operations. If any of these events were to occur, our business, financial condition, and results of operations could be adversely affected.

We maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks. The domestic bank deposit balances may exceed the FDIC insurance limits. These balances could be impacted if one or more of the financial institutions in which we deposit moniesmoney fails or is subject to other adverse conditions in the financial or credit markets.

We may incur significant losses from customer and /or credit card fraud and theft.

We have incurred net losses for the past twothree years and we may not be able to achieve or maintain profitability in the future. We incurred net losses of $14 million, $55 millionmillion, and $19 million in the fiscal years ended December 28, 2025, December 29, 20242024, and December 31, 2023, respectively. Even as we try to manage our expenses and expand revenue, these efforts may be more costly than we expect and may not result in increased revenue or growth or margin improvements in our business in the future. Any failure to increase our revenue sufficiently to keep pace with our expenses could prevent us from achieving or maintaining profitability or positive cash flow on a consistent basis. If we are unable to successfully address these risks and challenges as we encounter them, our business, financial condition, results of operations and prospects could be adversely affected. If we are unable to generate adequate revenue growth and manage our expenses, we may continue to incur significant losses in the future and may not be able to achieve or maintain profitability.

We may not be able to manage our growth effectively, and such growth may adversely affect our corporateexisting culture.resources and cause us to encounter challenges we have not faced before.

InIt addition,is also possible that we announcedmay not continue to grow as expected, which may result in the need to reduce resources. Any reductions to current personnel, systems, procedures, and controls may not be adequate to support and effectively manage our business and future operations. We have implemented cost reduction measures in recent years that included workforce reductions in the past, such as our announcement in December 2024, and we may makeundertake similar announcementsmeasures in the future. Any such restructuring plans, reductions in force or other cost reduction measures could divert management attention, adversely affect employee morale and turnover, and damage our reputation as an employer, which could increase the difficulty of attracting, retaining and motivating qualified personnel and maintaining our corporate culture. Further, our reduced headcount following such restructuring plans and any further turnover may increase the difficulty of executing on our plans, including due to the loss of historical, technical or other expertise, and challenges of covering leaves of absence with a reduced headcount, which may have an adverse effect on our business, prospects and results of operations.

As we continue to pursue our international growth strategy, our success will largely depend on our ability to manage the unique challenges presented by international marketsmarkets.

We intend to continue to increase sales of oursell products to customers located outside the United States.U.S. Further, we may establish additional relationships in other countries to grow our operations. The substantial up-front investment required, the lack of consumer awareness of our products in jurisdictions outside of the United States,U.S., differences in consumer preferences and trends between the United StatesU.S. and other jurisdictions, the risk of inadequate intellectual property protections and differences in packaging, labeling, privacy, consumer protection, advertising, ESG and related laws, rules and regulations are all substantial matters that need to be evaluated prior to doing business in new territories. We cannot assure that our international efforts will be successful. International sales and increased international operations may be subject to risks such as:

The apparel industry is characterized by low barriers to entry for both suppliers and marketers, global sourcing through suppliers located throughout the world, trade liberalization, continuing movement of product sourcing to lower cost countries, regular promotional activity and the ongoing emergence of new competitors with widely varying strategies and resources. These factors have contributed, and may continue to contribute in the future, to intense pricing pressure and uncertainty throughout the supply chain. Pricing pressure has been exacerbated by the availability of raw materials in recent years. Additionally, the imposition or increase in tariffs, inflation and supply chain constraints could increase pricing pressure on our business. This pressure could have adverse effects on our business and financial condition, including:

We operate in the highly competitive retail apparel industry. We compete on the basis of a combination of factors, including our quality, concept, price, breadth, and style of merchandise, as well as our online experience and level of customer service, our brand image, and our ability to anticipate, identify and respond to new and changing fashion trends and customer demands. While we believe that we compete primarily with national and international apparel retailers and e-commerce businesses that specialize in women’s apparel, footwear, and accessories, we also face competition from Chineseforeign e-commerce platforms, national and regional department stores, specialty retailers, fast-fashion retailers, value retailers, and mass merchants. In addition, our expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could have a material adverse effect on our business, financial condition, and results of operations.

Our competitors may also sell certain products or substantially similar products for prolonged promotional periods through online and also through outlet centers or discount stores, increasing the competitive pressure for those products. We cannot assure investors that we will continue to be able to compete successfully against existing or future competitors. Our expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could have a material adverse effect on us. Competitive forces and pressures may intensify as our presence in the retail marketplace grows.

Lulu’s Fashion Lounge Holdings, Inc., a Delaware Corporation (“Lulus”, “we”, “our”, or the “Company”) is a customer-driven,women’s primarily online, digitally-native attainable luxury fashionclothing brand for women, offering modern, unapologetically feminine designsstyles at attainableaccessible prices for allevery of life’s fashionable moments.occasion. Our goal is to become the most trusted and number one destination for dresses, helpingmake every womancustomer feel their most confident and celebrated, supporting herbeautiful for allthe ofmoments life'sthat occasions.matter most. Lulus primarily serves a large, diverse community of MillennialGen Z and Gen ZMillennial women, who typically meet us in their 20s and stay with us through their 30s and beyond. We focus relentlessly on giving our customers what they want by usinguse direct consumercustomer feedback and insights to refine product offerings and elevate the customer experience. Lulus’ world classworld-class personal stylists, bridal concierge, and customer care team shareprovide anthoughtful, unwaveringpersonalized commitmentservice to elevating style and quality and bring exceptional customer service and personalized shopping to customersshoppers around the world.

Changing macroeconomic factors, including inflation, interest rates, student loan repayment resumption, tariffs or bans, world events, wars and domestic and international conflicts, existing and future lawslaws, regulations and regulations, directives (includingand executive orders),orders, and overall consumer confidence with respect to current and future economic conditions have directly impacted our sales in fiscal 2024 as discretionary consumer spending levels and shopping behavior fluctuate with these factors. We have responded to these factors by taking appropriate pricing, promotional and other actions to stimulate customer demand. These factors are expected to continue to have an impact on our business, results of operations, our growth and financial condition.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. DuringThe 2024primary sources of funds for our business activities are cash flows from operations and 2023,our 2025 Credit Agreement. We believe the Companycash incurredon net losses of $55.3 million and $19.3 million, respectively, and net income of $3.7 million in 2022. As of December 29, 2024, we had totalhand, cash provided by operations and cash equivalents of $4.5 million and $13.1 million in outstanding amountsavailable under the 20212025 Credit Agreement,Agreement aswill amended,enable classifiedus withinto totalmeet currentour liabilities.obligations Duringfor 2024,at we borrowed $33.1 million underleast the 2021next Credit12 Agreement, as amended, and repaid $28.0 million of the outstanding balance.months. For further information on the 20212025 Credit Agreement, as amended, see Note 5, Debt of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.Debt.

We define Active Customers as the number of customers who have made at least one purchase across our platform in the prior 12-month period. Active Customer count is measured as of the last day of the relevant period. We consider the number of Active Customers to be a key performance metric on the basis that it is directly related to consumer awareness of our brand, our ability to attract visitors to our primarily digital platform, and our ability to convert visitors to paying customers. Active Customers counts are based on de-duplicationdeduplication logic using customer account and guest checkout name, address, and email information.

We define Average Order Value (“AOV”) as the sum of the total gross sales before returns across our platform in a given period, plus shipping revenue, less discounts and markdowns, divided by the Total Orders Placed (as defined below) in that period. AOV reflects the average basket size of our customers. AOV may fluctuate as we continue investing in the development and introduction of new LulusLulus’ merchandise and as a result of our promotional discount activity.

We report our financial results in accordance with generally accepted accounting principles in the United States of AmericaU.S. (“GAAP”). However, management believes that certain non-GAAP financial measures provide investors with additional useful information in evaluating our performance and that excluding certain items that may vary substantially in frequency and magnitude period-to-period from net income (loss) provides useful supplemental measures that assist in evaluating our ability to generate earnings and to more readily compare these metrics between past and future periods. These non-GAAP financial measures may be different than similarly titled measures used by other companies.

Adjusted EBITDA,EBITDA and Adjusted EBITDA Margin, and Free Cash FlowMargin

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss) before interest expense, income taxes,taxes or benefit, depreciation and amortization adjusted to exclude the effects of equity-based compensation expense and goodwillother impairment.non-routine expenses. Adjusted EBITDA is a key measure used by management to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors and others in understanding and evaluating our operating results and in comparing operating results across periods.

To supplement our audited consolidated financial statements which are prepared in accordance with GAAP, we use “Adjusted EBITDA”, and “Adjusted EBITDA Margin” (collectively referred to as “Adjusted EBITDA”) and “Free Cash Flow” which are non-GAAP financial measures. Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. There are several limitations related to the use of our non-GAAP financial measures as compared to the closest comparable GAAP measures. Some of these limitations include:

Due to these limitations, Adjusted EBITDA,EBITDA and Adjusted EBITDA Margin, and Free Cash FlowMargin should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of depreciation and amortization, interest expense, income taxes, equity-based compensation and goodwill impairment. It is reasonable to expect that some of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal results of operations and results of operations of other companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the following reconciliation table help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. Adjusted EBITDA Margin is a non-GAAP financial measure that we calculate as Adjusted EBITDA (as defined above) as a percentage of our net revenue.

Free Cash Flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used for capitalized software development costs and purchases of property and equipment. We believeview freeFree Cash Flow as an important indicator of our liquidity because it measures the amount of cash we generate. Free Cash Flow does not represent the total residual cash flow isavailable anfor importantdiscretionary metricpurposes. becauseDue itto representssuch limitations, Free Cash Flow should not be considered as a measure of how muchdiscretionary cash fromavailable operationsto weus haveto availableinvest in the growth of our business. We compensate for discretionarythese limitations by relying primarily on our GAAP results and non-discretionaryusing itemsthese afternon-GAAP themeasures deductiononly of capital expenditures.supplementally.

We utilize a data-driven strategy that leverages our proprietary reorder algorithm to manage inventory as efficiently as possible. Our “test, learn, and reorder” approach consists of limited inventory purchases followed by the analysis of proprietary data including real-time transaction data and customer feedback, which then informs our selection and customization of popular merchandise prior to reordering in larger quantities. While our initial orders are limited in size and financial risk and our supplier partners are highly responsive, we nonetheless purchase inventory in anticipation of future demand and therefore are exposed to potential shifts in customer preferences and price sensitivity over time. As we continue to grow, weWe will adjust our inventory purchases to align with the current needs of the business.

We will continue to invest in our operations and infrastructure to facilitate further operational efficiencies and growth of our business, while managing expenses to align with our net revenue expectations and goals to return to profitability. We will continue to diligentlycarefully evaluate any new investments or capital spending initiatives as we believe that a disciplined approach to capital spending will enable us to generate positive returns on our investments over the long term.

Net revenue consists primarily of gross sales, net of merchandise returns, international duties and taxes,taxes and promotional discounts and markdowns, generated from the sale of apparel, footwear, and accessories. Net revenue excludes sales taxes assessed by governmental authorities. We recognize net revenue at the point in time when control of the ordered product is transferred to the customer, which we generally determine to have occurred upon shipment.

Gross profit is equal to our net revenue less cost of revenue. We calculate Gross Margin as gross profit as a percentage of our net revenue. Our Gross Margin varies across Lulus, exclusive to Lulus, and third-party branded products. Exclusive to Lulus consists of products that we develop with design partners and have exclusive rights to sell across our platform, but that do not bear the Lulus brand. Gross Margin on sales of Lulus and exclusive to Lulus merchandise is generally higher than Gross Margin on sales of third-party branded products, which we offer for customers to “round out” the shopping basket. As we continue to optimize our distribution capabilities and gain more negotiation leverage with suppliers as we scale,suppliers, our Gross Margin may fluctuate from period to period depending on the interplay of these factors.

General and administrative expenses consist primarily of fixed and variable labor payroll and benefits costs, including equity-based compensation for our employees involved in general corporate functions including finance, merchandising, marketing, and technology, as well as costs associated with the use by these functions of facilities and equipment, including depreciation,depreciation rent,and amortization, rent and other occupancy expenses. General and administrative expenses are primarily driven by increasesheadcount inrelated headcountcosts required to support our business growth and to meet our obligations as a public company.

Interest expense consists of interest expense related to the 2021prior Revolvingcredit Facility,agreement aswith amended.Bank of America (“Prior Credit Agreement”) and the 2025 Credit Agreement.

The benefit (provision) for income taxes represents federal, state, and local income taxes. The effective rate differs from the statutory rate primarily due to non-deductible equity-based compensation expenses, non-deductible officer compensation, valuation allowance and state taxes. Our effective tax rate will change from quarter to quarter based on recurring and nonrecurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, state and local income taxes, the impact of permanent tax adjustments, tax audit settlements, and the interaction of various tax strategies.

We regularly assess the realizability of deferred tax assets (“DTAs”) and record a valuation allowance to reduce the DTAs to the amount that is more likely than not to be realized. In assessing the realizability of our DTAs, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Due to the weight of objectively verifiable negative evidence, we established a valuation allowance as of December 29, 2024 of $14.9 million and increased the allowance to $16.7 million as of December 29,28, 2024. The significant piece of objectively verifiable negative evidence evaluated was the recent cumulative losses. Our ability to use our DTAs depends on the amount of taxable income in future periods.2025.

Net revenue decreased in 20242025 by $39.3$33.6 million, or 11%, compared to 2023.2024. The decrease was primarily due to a decline of 12%15% in Total Orders Placed, along with slightly higher return rates partially offset by higher AOV compared to 2023.2024.

Cost of revenue decreased in 20242025 by $21.3$25.4 million, or 10%14% compared to 2023,2024, which was primarily driven by the impact of lower revenue.shipping costs and product cost due to favorable shipping rates and reduced sales volume.

Gross profit decreased in 20242025 by $18.0$8.2 million or 12%6% compared to 20232024 which was primarily driven by the impact of the lower volume of sales.sales, partially offset by improvements in merchandise margins and logistics costs.

Selling and marketing expenses decreased in 20242025 by $3.4$6.3 million, or 4%9% compared to 2023,2024, due to lower performance and awarenessonline marketing spendcosts of $3.1$4.9 million andmillion, lower merchant processing fees of $0.7 million, partly due to the lower volume of sales. This was partially offset by $0.4$0.9 million higheralong with reduced marketing software spend and other marketing costs.costs of $0.5 million.

General and administrative expenses decreased in 20242025 by $10.8$13.3 million, or 12%,16%, compared to 2023.2024. The decrease was primarily due to a $9.6$4.9 million decrease in fixed labor and benefits costs driven by reduced fixed headcount, a $3.7 million decrease in equity-based compensation,compensation expense, a $2.7$2.0 million decrease in wagesvariable labor and payroll taxes, primarily driven by lower variable headcountbenefits associated with lower sales volume and operationalincreased efficienciesprocess as well as reduced fixed headcount resulting from our cost reductions. There was alsoefficiency, a $1.5$1.2 million decrease in directors and officers liability insurance and legal and professional fees,fees and a $0.1$1.5 million decrease in state taxes. This was partially offset by increased employee benefits of $1.4 million driven by higher medical claims costs, accrued bonuses of $0.6 million for eligible non-leadership employees and a $1.2 million increase in software, occupancy, depreciation and amortization.

Interest expense decreasedincreased in 20242025 by $0.5$1.2 million, or 26%,94%, compared to 2023.2024. The decreaseincrease is primarily attributable to lowerhigher average borrowings,borrowings partiallyand offsetwrite-off byof higherloan interestamendment rates.fees related to the Prior Credit Agreement of $0.9 million.

Income Tax Benefit (Provision)

We experience moderate seasonal fluctuations in aggregate sales volume during the year. Seasonality in our business does not follow that of traditional retailers, such as a typical concentration of revenue in the holiday quarter. Our net revenue is typically highest in the second and third quarters due to the highestincreased demand for event dresses in the spring and summer. Net revenue is typically the lowest in the first and fourth quarters when event dresses are less in demand. The seasonality of our business has resulted in variability in our total net revenue quarter-to-quarter. We believe that this seasonality has affected and will continue to affect our results of operations. We recognized 25%,23%, 29%, 25%26%, and 21%22% of our annual net revenue during the first, second, thirdthird, and fourth quarters of 2024,2025, respectively.

OurWhile our quarterly gross profit generally fluctuates primarilyin line with our net revenue, it is also based on how we manage our inventory and merchandise mix and hascan typicallybe beenfurther in line with fluctuations in net revenue. When quarterly gross profit fluctuations have deviated relative to the fluctuations in sales, these situations have been drivenaffected by non-recurring, external factors, such as theglobal COVID-19pandemics pandemic.or trade wars.

Our primary sources of liquidity and capital resources are cash generated from operating activities and borrowings under our 20212025 RevolvingCredit Facility, as amended.Agreement. Our primary requirements for liquidity and capital are inventory purchases, payroll and general operating expenses, capital expenditures associated with our distribution facilities, capitalized software and debt service requirements.

As of December 29,28, 2024,2025, we had cash and cash equivalents of $4.5$2.7 million and no restricted cash.million. During the year ended December 29,28, 2024,2025, we took certain cost reduction and cash conservation measures, including headcount reductions, adjustments to marketing spend, and other fixed, variable, and capital spend. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The primary sources of funds for our business activities are cash flows from operations and our 2025 Credit Agreement. We willbelieve continuethe tocash takeon certainhand, costcash reductionprovided by operations and cash conservationavailable measuresunder the 2025 Credit Agreement will enable us to meet our obligations asfor needed.at Asleast the abilitynext to12 raisemonths. additionalFor debtfurther financinginformation is outside of our control, we cannot conclude that our plans will be effectively implemented within twelve months fromon the date2025 theCredit consolidatedAgreement, financialsee statementsNote are5, issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not reflect any adjustments relating to the outcome of this uncertainty.Debt. Actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in Part I, “Item 1A. Risk Factors” included elsewhere in this Annual Report on Form 10-K.

On May 3, 2024, our Board of Directors authorized a stock repurchase program to repurchase up to $2.5 million of our common stock (the “2024 Repurchase Program”). During 2024,2025, we repurchased 339,321123,934 shares of common stock in open market transactions pursuant to 10b5-1 purchase plans.plans entered into by the Company for a total cost of $0.9 million. As of December 29,28, 2024,2025, there was $2.0$1.1 million available under the 2024 Repurchase Program authorization.

The actual timing, number, and value of shares repurchased in the future will be determined at our discretion and will continue to depend on a number of factors, including market conditions, applicable legal requirements, our capital needs, and whether there is a better alternative use of capital. Repurchases will continue to be funded from our existing cash and cash equivalents, or future cash flow. The 2024 Repurchase Program may be modified, suspended, or terminated at any time. For further information on the 2024 Repurchase Program, see Note 2,8, SignificantStockholder’s Accounting Policies,Equity, of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Net cash provided by operating activities consists primarily of net income (loss) adjusted for certain non-cash items, including depreciation, amortization, noncash lease expense, equity-based compensation, amortization of debt discount and debt issuance costs, and the effect of changes in working capital and other activities.

Our primary investing activities have consisted of purchases of equipment to support our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure. Purchases of property and equipment may vary from period to period due to the timing of the expansion or contraction of our operations. We have no material commitments for capital expenditures.

For detailed information about certain risk factors that could materially affect our business, financial condition or future results see “Risk Factors” in Part I, Item 1A of our 2025 10-K. There have been no material changes to the risk factors previously disclosed in the 2025 10-K, except for the following risk factors that have been modified from the risk factors presented in the 2025 10-K.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025, filed with the Securities and Exchange Commission (“SEC”) on March 30, 2026 (the “2025 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in ItemPart I, PartItem 1A, “Risk Factors” in our 2025 10-K. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The primary sources of funds for our business activities are cash flows from operations and cash available under the Loan and Security Agreement with White Oak Commercial Finance, LLCLLC, as amended (the “2025 Credit Agreement”). We believe the cash on hand, cash provided by operations and cash available under the 2025 Credit Agreement will enable us to meet our obligations for at least the next 12 months. For further information on the 2025 Credit Agreement, see Note 5, Debt.

A reconciliation to non-GAAP Free Cash Flow from net cash provided by operating activities for the thirteen and twenty-six weeks ended MarchJune 29,28, 2026 and MarchJune 30,29, 2025 is as follows:

Our continued success depends in part on our ability to retain and drive repeat purchases from our existing customers. We monitor retention across our entire customer base. Our goal is to attract and convert visitors into Active Customers and foster relationships that drive repeat purchases. During the trailing 12 months ended MarchJune 29,28, 2026, we served 2.32.2 million Active Customers compared to 2.62.5 million for the trailing 12 months ended MarchJune 30,29, 2025.

Cost of revenue consists of the product costs of merchandise sold to customers; shipping and handling costs, including all inbound, outbound, and return shipping expenses; rent, insurance, business property tax, utilities, depreciation and amortization, and repairs and maintenance related to our distribution facilities; and charges related to inventory shrinkage, damages, and our allowance for excess or obsolete inventory. Cost of revenue is primarily driven by growth inthe orders placed by customers, the mix of the product available for sale on our site, and transportation costs related to inventory receipts from our suppliers. We expect our cost of revenue to fluctuate as a percentage of net revenue primarily due to how we manage our inventory and merchandise mix.

We regularly assess the realizability of deferred tax assets (“DTAs”) and record a valuation allowance to reduce the DTAs to the amount that is more likely than not to be realized. In assessing the realizability of our DTAs, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Due to the weight of objectively verifiable negative evidence, we maintained a valuation allowance as of December 28, 2025 of $16.7 million and continued to maintain the same position as of MarchJune 29,28, 2026.

Comparisons for the Thirteen Weeks Endedended MarchJune 29,28, 2026 and MarchJune 30,29, 2025

Net revenue decreased in the thirteen weeks ended MarchJune 29,28, 2026 by $6.6$13.7 million, or 10%,17%, compared to the same period of the prior year, primarily due to a 15%17% decrease in Total Orders Placed partially offset by the impact of higher AOV and an increase in wholesale revenue.

Cost of revenue decreased in the thirteen weeks ended MarchJune 29,28, 2026 by $6.7$9.7 million, or 18%22%, compared to the same period of the prior year, primarily driven by reduced sales volume in addition to freight cost savings due to improved shipping rates.

Gross profit increased slightlydecreased in the thirteen weeks ended MarchJune 29,28, 2026 by $0.1$4.0 million, or 0.4%11%, compared to the same period of the prior year even though revenues declined by 10%,17%, reflecting the improvement in gross margins to 45%48.6% versus 40%45.3% in the prior year from a mix shift to higher margin products combined with freight cost savings due to improved shipping rates.

Selling and marketing expenses, which are correlated to sales, decreased in the thirteen weeks ended MarchJune 29,28, 2026 by $1.9$3.6 million, or 12%,16%, compared to the same period of the prior year, primarily due to lower online marketing costs of $1.7$3.3 million and merchant processing fees of $0.2$0.4 million.

General and administrative expenses decreased in the thirteen weeks ended MarchJune 29,28, 2026 by $2.6$1.7 million or 14%,10%, compared to the same period of the prior year. The decrease was primarily due to a $1.0$0.8 million decrease in variable labor and benefits associated with lower sales volume and enhanced productivity realized from our distribution center consolidation efforts,volume, a $0.8$0.7 million decrease in equity-based compensation expense, and a $0.4$0.6 million decrease in fixed labor and benefits costs driven by reduced fixed headcount, andpartially offset by a $0.4$0.5 million decreaseincrease in other general and administrative expenses.

Interest expense decreased in the thirteen weeks ended MarchJune 29,28, 2026, by $0.2$0.6 million, or 32%,65%, compared to the same period of the prior year. Interest expense in the prior year included $0.2$0.3 million in fees related to amendments to our Prior Credit Agreement. Excluding the impact of these non-recurring fees, interest expense increased modestly primarily due to higher average borrowings and higher interest rate.

Income tax provisionbenefit in the thirteen weeks ended MarchJune 29,28, 2026 increaseddecreased by $0.3$0.1 million to a provisionbenefit of $0.2$9 million,thousand, compared to a benefitprovision of $0.1 million in the thirteen weeks ended MarchJune 30,29, 2025. The increase was primarily due to state income taxes and deferred taxes relating to the annual tax amortization expense on certain indefinite-lived intangible assets.

General and administrative expenses consist primarily of payroll and benefit costs and vary quarter to quarter dueas we manage distribution center labor to meet the demand based on our seasonality and the changes in the number of seasonalshort term workers to meet demand based on our seasonality.

On November 15, 2021, we entered into the Priora Credit Agreement with Bank of America (the “lender”) for a revolving facility that provided for borrowings up to $50.0 million with a maturity date of November 15, 2024. The Prior Credit Agreement was amended subsequently by five amendments which modified a number of terms, including extending the maturity date to August 22, 2025, reducing and ultimately prohibiting further borrowings, revising the applicable interest rates, revising or providing limited waivers of compliance with certain financial covenants, and adding covenants related to achieving a refinancing transaction. The Prior Credit Agreement was satisfied in full and terminated upon entry into the 2025 Credit Agreement described below.

On August 14, 2025, we entered into the 2025 Credit Agreement for an asset-based revolving credit facility with a $20.0 million commitment, a $5.0 million uncommitted accordion and a $1.0 million sublimit for letters of credit. The amount that the Borrowers may borrow under the 2025 Credit Agreement is basedtied onto aour borrowing base calculated based on advance rates for various assets serving as collateral for the 2025 Credit Agreement. The 2025 Credit Agreement provides that at two times during each year (counted from the anniversary date of the Credit Agreement), the borrowers may elect to include an increased inventory formula into the borrowing base, giving them access to more loan availability than under the standard borrowing base calculation. As originally executed, the 2025 Credit Agreement provided for an initial increased inventory availability period beginning in November 2025 and ending in February 2026 and permitted the Borrowers to elect up to two additional 60-day periods during each of the second and third 12-month periods following the closing date. Borrowings under the 2025 Credit Agreement bear interest at a rate equal to the 30-day SOFR rate plus 3.95%. The 2025 Credit Agreement is secured by a first-priority security interest in and lien upon all tangible and intangible personal property of the Borrowers now owned or acquired in the future. The 2025 Credit Agreement includes covenants that limit the Borrowers’ ability to incur indebtedness, to create liens or other encumbrances, to make certain payments and investments, to engage in transactions with affiliates, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities. The 2025 Credit Agreement also includes a financial covenant forof the greater of $4 million or 20% of the total commitment in minimum excess availability under the 2025 Credit Agreement.Agreement, and additional reporting requirements when excess availability is less than $5 million. It also requires us to maintain lockbox accounts and cash management arrangements under the control of the Administrative Agent, who has full dominion and control over each Collection Account and all Deposit Accounts (except Excluded Accounts). Outstanding borrowings are classified as current liabilities, however, the 2025 Credit Agreement does not mature until August 14, 2028.

As of MarchJune 29,28, 2026, the outstanding borrowing under the 2025 Credit Agreement was $13.3$10.1 million in addition to a $0.3 million letter of credit outstanding. After giving effect to the Second Amendment, the excess availability covenant and the outstanding letter of credit, the unused availability was $2.4$1.6 million. During the thirteentwenty-six weeks ended MarchJune 29,28, 2026, we borrowed $60.7$125.8 million and repaid $61.8$130.1 million under the 2025 Credit Agreement and borrowings had a weighted average interest rate of 10.1%10.4% inclusive of amortization of debt issuance cost.

As of MarchJune 29,28, 2026, we had cash and cash equivalents of $7.4$4.1 million. During the thirteen and twenty-six weeks ended MarchJune 29,28, 2026, we benefited from cost reduction and cash conservation measures, including headcount reductions, reduced inventory purchases, adjustments to marketing spend and other fixed, variable, and capital spend. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The primary sources of funds for our business activities are cash flows from operations and our 2025 Credit Agreement. We believe the cash on hand, cash provided by operations and cash available under the 2025 Credit Agreement will enable us to meet our obligations for at least the next 12 months. For further information on the 2025 Credit Agreement, see Note 5, Debt. Actual results of operations will depend on numerous factors, many of which are beyond our control, as further discussed in Part I, Item 1A, “Risk Factors” included in our 2025 10-K.

On May 8, 2024, we announced that our Board of Directors authorized a stock repurchase program to repurchase up to $2.5 million of our common stock (the “2024 Repurchase Program”). During the thirteen and twenty-six weeks ended MarchJune 29,28, 2026, no shares were repurchased pursuant to the Company’s 2024 Repurchase Program. As of MarchJune 29,28, 2026, there was $1.1 million available under the 2024 Repurchase Program authorization.

During the thirteentwenty-six weeks ended MarchJune 29,28, 2026, net cash provided by operating activities was $6.9$7.5 million, which consisted of a net loss of $4.1$5.6 million, partially offset by non-cash charges of $3.0$5.8 million and a net change of $8.0$7.3 million in operating assets and liabilities. The non-cash charges were primarily comprised of $1.1$2.1 million of depreciation and amortization, $1.1$2.3 million of non-cash lease expense and $0.7$1.3 million of equity-based compensation expense. The net change in operating assets and liabilities was primarily driven by $16.7a $9.1 million increase in accruedaccounts expensespayable due to timing of payments and other current liabilities which was mostly from a $10.0 million increase in accrued inventory, a $5.5 million increase in returns reserve,purchases and a $1.2$3.8 million increasedecrease in freightinventories andprimarily marketingdue accruals.to inventory optimization plan. These increases were partially offset by a $4.6$2.4 million decrease in lease liabilities, a $1.6 million decrease in accrued expenses and other current liabilities, a $1.4 million increase in assets for recovery, and a $1.0 million increase in accounts receivable pertaining to timing-related increase in higher credit card receivables, a $2.2 million increase in assets for recovery, and a $1.9 million net change in other operating assets and liabilities.receivables.

During the thirteentwenty-six weeks ended MarchJune 30,29, 2025, net cash provided by operating activities was $8.3$7.0 million, which consisted of a net loss of $8.0$11.0 million, partially offset by non-cash charges of $4.1$7.7 million and a net change of $12.2$10.3 million in operating assets and liabilities. The non-cash charges were primarily comprised of $1.5$2.8 million of equity-based compensation expense, $1.4$2.6 million of depreciation and amortization, and $1.3$2.3 million of non-cash lease expense. The net change in operating assets and liabilities was primarily driven by a $21.2$20.5 million increase in accrued expenses,expenses mostlydriven fromby an increase of a $7.9 million in the return reserve, a $6.1 million increase in marketing accruals,costs, a $4.9 million increase inaccrued inventory accruals,and returns reserve; and a $1.1$3.0 million increasedecrease in storedincome valuetax liabilities.receivable due to the receipt of state income tax refunds. These increases were partially offset by a $5.6$4.6 million decrease in accounts payable related to the timing of payments, a $3.3 million increase in inventoryinventory, and a $3.4$2.3 million increasedecrease in assets for recovery and net change in other operating assets andlease liabilities.

Our primary investing activities have consisted of purchases of equipment to support our overall business growthoperations and internally developed software for the continued development of our proprietary technology infrastructure. Purchases of property and equipment may vary from period to period due to the timing of the expansion or contraction of our operations. We have no material commitments for capital expenditures.

During the thirteentwenty-six weeks ended MarchJune 29,28, 2026, net cash used in investing activities related to the purchase of capitalized software and property and equipment was $0.4$0.8 million, as compared to $0.6$1.1 million during the thirteentwenty-six weeks ended MarchJune 30,29, 2025.

During the thirteentwenty-six weeks ended MarchJune 29,28, 2026, cash used in financing activities was $1.7$5.2 million, primarily due to $61.8$130.1 million of repayments under our 2025 Credit Agreement, and $0.5$0.6 million of principal payments on finance lease obligations,obligations and $0.3 million for withholding tax payments related to vesting of RSUs, partially offset by $60.7$125.8 million proceeds from borrowings under our 2025 Credit Agreement.