Lulu’s Fashion Lounge (LVLU) halves net loss as margins rise despite revenue drop
Rhea-AI Filing Summary
Lulu’s Fashion Lounge Holdings, Inc. reported lower sales but improved profitability metrics for the twenty-six weeks ended June 28, 2026. Net revenue was $125.3 million versus $145.7 million a year earlier, while gross margin rose to 47.0% from 43.1%, reflecting more efficient merchandising and fulfillment.
The company narrowed its loss, with net loss at $5.6 million compared with $11.0 million in the prior-year period and Adjusted EBITDA improving to a loss of $0.5 million from a loss of $4.2 million. Operating cash flow strengthened to $7.5 million, helping increase cash to $4.1 million. However, higher payables and returns reserves and a stored-value card liability of $17.7 million contribute to a stockholders’ equity deficit of $1.5 million.
As of June 28, 2026, Lulu’s had $10.1 million outstanding under its 2025 asset-based revolving credit facility, with $1.6 million of unused availability and a weighted-average borrowing rate of 10.4%. Management expects existing cash, cash from operations, and availability under the facility to cover obligations for at least 12 months. Subsequent actions include effectiveness of a $7.5 million Form S-3 shelf, a $4.5 million equity line of credit, amendments providing more flexible inventory-based borrowing, and confirmation from Nasdaq that the company regained listing compliance under the market value standard.
Positive
- Net loss halved year over year: net loss and comprehensive loss improved to $5.6 million from $11.0 million for the twenty-six weeks, reflecting better cost control and higher gross margin.
- Adjusted EBITDA sharply improved: Adjusted EBITDA for the twenty-six weeks was a loss of $0.5 million versus a loss of $4.2 million, indicating a significantly better underlying earnings profile.
- Operating cash flow strengthened: net cash provided by operating activities rose to $7.5 million from $7.0 million, supporting liquidity despite ongoing net losses.
- Gross margin expansion: gross margin increased to 47.0% from 43.1% for the twenty-six weeks, suggesting more efficient sourcing, pricing, or fulfillment.
- Nasdaq compliance regained: Nasdaq confirmed the company met the $35 million market value standard, removing an immediate listing-compliance overhang.
- Additional capital access arranged: a $7.5 million shelf registration and a $4.5 million equity line of credit provide incremental optionality to raise equity capital if needed.
Negative
- Revenue declined double digits: net revenue for the twenty-six weeks fell to $125.3 million from $145.7 million, reflecting weaker demand amid macroeconomic headwinds.
- Stockholders’ equity turned negative: total stockholders’ equity moved from $3.0 million at year-end 2025 to a $1.5 million deficit, pressuring balance-sheet strength and prior Nasdaq equity tests.
- High-cost borrowing environment: borrowings under the 2025 Credit Agreement carried a 10.4% weighted-average interest rate, raising financing costs and limiting margin expansion.
- Active customers contracted: Active Customers decreased from 2.46 million to 2.15 million, signaling customer base erosion that could weigh on future growth.
Filing Explained
Lulus has financing capacity, but no shelf securities sold; the equity line includes a stated share issuance that dilutes existing ownership.
Lulu’s Fashion Lounge Holdings, Inc.’s unaudited quarterly report says an independent special committee is evaluating strategic alternatives, including a possible transaction and continuing independently; its immediate structural effect is an active review, not a completed transaction.
The effective Form S-3 provides up to
The August 11 equity line gives the company the right, but not the obligation, to sell up to
Future filings will resolve whether the strategic review produces a transaction and whether the company uses the S-3 or equity-line capacity; any equity-line sales would be reported separately from the already stated commitment-fee issuance.
Key Figures
Key Terms
Adjusted EBITDA financial
asset-based revolving credit facility financial
stored-value card liability financial
Reverse Stock Split financial
equity line of credit financial
Active Customers market
Earnings Snapshot
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________________ to ___________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
☒ |
| Smaller reporting company | ||
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 7, 2026, there were
Table of Contents
TABLE OF CONTENTS
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| Page |
PART I | FINANCIAL INFORMATION | |
Item 1. | Financial Statements (unaudited) | |
Condensed Consolidated Balance Sheets | 5 | |
Condensed Consolidated Statements of Operations and Comprehensive Loss | 6 | |
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) | 7 | |
Condensed Consolidated Statements of Cash Flows | 8 | |
Notes to Condensed Consolidated Financial Statements | 10 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 42 |
Item 4. | Controls and Procedures | 42 |
PART II | OTHER INFORMATION | |
Item 1. | Legal Proceedings | 43 |
Item 1A. | Risk Factors | 43 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 44 |
Item 3. | Defaults Upon Senior Securities | 44 |
Item 4. | Mine Safety Disclosures | 45 |
Item 5. | Other Information | 45 |
Item 6. | Exhibits | 46 |
Signatures | 47 |
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, equity-based compensation expense, business strategy, plans, market growth and our objectives for future operations.
The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the risk factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 28, 2025, and our other filings with the Securities and Exchange Commission (the “SEC”). The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. 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.
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BASIS OF PRESENTATION
On August 28, 2017, we executed a reorganization of our corporate structure. Our original parent company was called Lulu’s Holdings, LLC. This entity was converted to Lulu’s Holdings, L.P. (the “LP”). We formed two new subsidiaries, Lulu’s Fashion Lounge Holdings, Inc. and Lulu’s Fashion Lounge Parent, LLC, to sit between the LP and our operating company. Our operating company, previously known as Lulu’s Fashion Lounge, Inc., was converted from a California corporation to a Delaware limited liability company, Lulu’s Fashion Lounge, LLC, an indirect wholly-owned subsidiary of Lulu’s Fashion Lounge Holdings, Inc. In connection with our initial public offering, the LP was liquidated. Unless otherwise indicated or the context otherwise requires, references in this Quarterly Report on Form 10-Q to the terms “Lulus,” “we,” “us,” “our,” or the “Company” refer to Lulu’s Fashion Lounge Holdings, Inc. and its consolidated subsidiaries.
Our fiscal year is a “52-53 week” year ending on the Sunday closest in proximity to December 31, such that each quarterly period will be 13 weeks in length, except during a 53-week year when the fourth quarter will be 14 weeks. References herein to “fiscal 2026” and/or “2026” relate to the year ending January 3, 2027 and “fiscal 2025” and/or “2025” relate to the year ended December 28, 2025. The fiscal year ending January 3, 2027 consists of 53 weeks, and the fiscal year ended December 28, 2025 consists of 52 weeks.
Throughout this Quarterly Report on Form 10-Q, we provide a number of key performance indicators used by management and typically used by our competitors in our industry. These and other key performance indicators are discussed in more detail in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating and Financial Metrics.” In this Quarterly Report on Form 10-Q, we also reference Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow which are non-GAAP (generally accepted accounting principles in the United States of America) financial measures. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a discussion of Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow, as well as a reconciliation of net loss and comprehensive loss to Adjusted EBITDA and a reconciliation to non-GAAP Free Cash Flow from net cash provided by operating activities. Net loss and comprehensive loss is the most directly comparable financial measure to Adjusted EBITDA and net cash provided by operating activities is the most directly comparable financial measure to Free Cash Flow, required by, or presented in accordance with GAAP.
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
LULU’S FASHION LOUNGE HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
| June 28, | | December 28, | |||
2026 | 2025 | |||||
Assets | ||||||
Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable |
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Inventory, net |
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Assets for recovery |
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Income tax refund receivable, net |
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Prepaids and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Tradename |
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Intangible assets, net |
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Lease right-of-use assets | | | ||||
Other noncurrent assets |
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Total assets | $ | | $ | | ||
Liabilities and Stockholders' Equity (Deficit) |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued expenses and other current liabilities |
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Returns reserve |
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Stored-value card liability |
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Asset Based Revolving Credit Facility – current | |
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Lease liabilities, current | | | ||||
Total current liabilities |
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Lease liabilities, noncurrent | | | ||||
Other noncurrent liabilities |
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Total liabilities |
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Commitments and Contingencies (Note 7) |
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Stockholders' equity (deficit): |
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Preferred stock: $ |
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Common stock: $ |
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Additional paid-in capital |
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Accumulated deficit |
| ( |
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Treasury stock, at cost, | ( | ( | ||||
Total stockholders' equity (deficit) |
| ( |
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Total liabilities and stockholders' equity (deficit) | $ | | $ | | ||
| (1) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||
June 28, | | June 29, | June 28, | | June 29, | |||||||
2026 | 2025 | 2026 | 2025 | |||||||||
Net revenue |
| $ | |
| $ | | $ | |
| $ | | |
Cost of revenue |
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Gross profit |
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Selling and marketing expenses |
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General and administrative expenses |
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Loss from operations |
| ( |
| ( | ( |
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Interest expense |
| ( | ( | ( |
| ( | ||||||
Other income, net |
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Loss before benefit (provision) for income taxes |
| ( |
| ( | ( |
| ( | |||||
Income tax benefit (provision) |
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Net loss and comprehensive loss |
| ( |
| ( | ( |
| ( | |||||
Basic loss per share(1) | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Diluted loss per share(1) | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Basic weighted-average shares outstanding(1) |
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Diluted weighted-average shares outstanding(1) |
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| (1) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
(unaudited)
For the Twenty-Six Weeks Ended June 28, 2026 | |||||||||||||||||||
Additional | Total | ||||||||||||||||||
Common Stock | Paid-In | Accumulated | Treasury Stock | Stockholders' | |||||||||||||||
| Shares(1) | | Amount | | Capital | | Deficit | | Shares(1) | | Amount | | Deficit | ||||||
Balance as of December 28, 2025 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Issuance of common stock for vesting of restricted stock units ("RSUs") | | — | — | — | — | — | — | ||||||||||||
Issuance of common stock for employee stock purchase plan ("ESPP") | | — | | — | — | — | | ||||||||||||
Shares withheld for withholding tax on RSUs | ( | ( | — | — | — | ( | |||||||||||||
Equity-based compensation | — | — | | — | — | — | | ||||||||||||
Net loss and comprehensive loss | — | — | — | ( | — | — | ( | ||||||||||||
Balance as of March 29, 2026 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | ( | ||||||
Issuance of common stock for vesting of RSUs | | — | — | — | — | — | — | ||||||||||||
Shares withheld for withholding tax on RSUs | ( | — | ( | — | — | — | ( | ||||||||||||
Equity-based compensation | — | — | | — | — | — | | ||||||||||||
Net loss and comprehensive loss | — | — | — | ( | — | — |
| ( | |||||||||||
Balance as of June 28, 2026 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | ( | ||||||
For the Twenty-Six Weeks Ended June 29, 2025 | |||||||||||||||||||
Additional | Total | ||||||||||||||||||
Common Stock | Paid-In | Accumulated | Treasury Stock | Stockholders' | |||||||||||||||
| Shares(1) | | Amount | | Capital | | Deficit | | Shares(1) | | Amount | | Equity | ||||||
Balance as of December 29, 2024 | | $ | | $ | | $ | ( | ( | $ | ( | $ | | |||||||
Issuance of common stock for vesting of RSUs | | | — | — | — | — | | ||||||||||||
Issuance of common stock for ESPP | | — | | — | — | — | | ||||||||||||
Shares withheld for withholding tax on RSUs | ( | — | ( | — | — | — | ( | ||||||||||||
Equity-based compensation | — | — | | — | — | — | | ||||||||||||
Repurchase of common stock | — | — | — | — | ( | ( | ( | ||||||||||||
Net loss and comprehensive loss | — | — | — | ( | — | — | ( | ||||||||||||
Balance as of March 30, 2025 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Issuance of common stock for vesting of RSUs | | — | — | — | — | — | — | ||||||||||||
Shares withheld for withholding tax on RSUs | ( | — | ( | — | — | — | ( | ||||||||||||
Equity-based compensation | — | — | | — | — | — | | ||||||||||||
Repurchase of common stock | — | — | — | — | ( | ( | ( | ||||||||||||
Net loss and comprehensive loss | — | — | — | ( | — | — |
| ( | |||||||||||
Balance as of June 29, 2025 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
| (1) | Amounts have been adjusted to reflect the -for-15 reverse stock split that became effective as of the opening of business on July 7, 2025. Refer to Note 8, Stockholders’ Equity (Deficit) in the accompanying Notes to the Condensed Consolidated Financial Statements for additional details. |
The accompanying notes are an integral part of the condensed consolidated financial statements.
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Twenty-Six Weeks Ended | |||||
June 28, | June 29, | |||||
2026 | | 2025 | ||||
Cash Flows from Operating Activities |
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Net loss and comprehensive loss | $ | ( |
| $ | ( | |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Noncash lease expense | | | ||||
Gain on lease modification | — | ( | ||||
Gain on lease termination | — | ( | ||||
Amortization of debt discount and debt issuance costs |
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Loss on disposal of property and equipment |
| — |
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Equity-based compensation expense |
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Changes in operating assets and liabilities: |
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Accounts receivable |
| ( |
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Inventories |
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| ( | ||
Assets for recovery |
| ( |
| ( | ||
Income tax payable |
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Prepaid and other current assets |
| ( |
| ( | ||
Accounts payable |
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| ( | ||
Accrued expenses and other current liabilities |
| ( |
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Operating lease liabilities | ( | ( | ||||
Other noncurrent liabilities |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities |
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Capitalized software development costs |
| ( |
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Purchases of property and equipment |
| ( |
| ( | ||
Other |
| — |
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Net cash used in investing activities |
| ( |
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Cash Flows from Financing Activities |
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Repayments on Prior Credit Agreement |
| — |
| ( | ||
Proceeds from borrowings on Asset Based Revolving Credit Facility | | — | ||||
Repayments on Asset Based Revolving Credit Facility | ( | — | ||||
Proceeds from issuance of common stock under ESPP | | | ||||
Principal payments on finance lease obligations | ( | ( | ||||
Withholding tax payments related to vesting of RSUs | ( | ( | ||||
Repurchase of common stock | — | ( | ||||
Net cash used in financing activities |
| ( |
| ( | ||
Net increase in cash and cash equivalents |
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| ( | ||
Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period | $ | | $ | | ||
(Continued) | ||||||
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Twenty-Six Weeks Ended | |||||
June 28, | June 29, | |||||
2026 | | 2025 | ||||
Supplemental Disclosure | ||||||
Cash paid (refunded) during the period for: | ||||||
Income taxes, net | $ | ( | $ | ( | ||
Interest | $ | | $ | | ||
Operating leases | $ | | $ | | ||
Finance leases | $ | | $ | | ||
Supplemental Disclosure of Non-Cash Investing and Financing Activities |
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Purchases of property and equipment included in accounts payable and accrued expenses | $ | | $ | | ||
Capitalized software development costs included in accrued expenses | $ | | $ | | ||
Remeasurement of operating lease right-of-use assets for lease modification | $ | | $ | | ||
Operating right-of-use assets obtained in exchange for new operating lease liabilities | $ | | $ | — | ||
Derecognition of operating lease liabilities and right-of-use assets upon lease termination | $ | — | $ | | ||
The accompanying notes are an integral part of the condensed consolidated financial statements.
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1.Description of Business, Organization and Liquidity
Organization and Business
Lulu’s Fashion Lounge Holdings, Inc., a Delaware Corporation (“Lulus”, “we”, “our”, or the “Company”), was formed on August 25, 2017 as a holding company and its primary asset is an indirect membership interest in Lulu’s Fashion Lounge, LLC, the operating company. Prior to the Company’s initial public offering, the Company was majority-owned by Lulu’s Holdings, L.P. (the “LP”), the prior parent company. In connection with the Company’s initial public offering, the LP was liquidated.
Lulu’s Fashion Lounge, LLC was founded in 1996, starting as a vintage boutique in Chico, California that began selling online in 2005 and transitioned to a purely online business in 2008. The LP was formed in 2014 as a holding company and purchased
Impact of Macroeconomic Trends on Business
Changing macroeconomic factors, including inflation, interest rates, tariffs or bans, world events, wars and domestic and international conflicts, existing and future laws, regulations, directives and executive orders, and overall consumer confidence with respect to current and future economic conditions have directly impacted our sales 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.
Liquidity
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, LLC, 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.
2.Significant Accounting Policies
Basis of Presentation and Fiscal Year
The Company’s fiscal year consists of a 52 week or 53 week period ending on the Sunday nearest to December 31. The fiscal year ending January 3, 2027 consists of 53 weeks, and the fiscal year ended December 28, 2025 consists of 52 weeks.
The condensed consolidated financial statements and accompanying notes include the accounts of the Company and its wholly owned subsidiaries, after elimination of all intercompany balances and transactions. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of the SEC for interim reporting. As permitted under these rules, certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. The interim condensed consolidated financial statements are unaudited.
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As discussed in the “Reverse Stock Split” section within Note 8, Stockholders’ Equity (Deficit), all per share amounts and common stock amounts have been adjusted on a retroactive basis to reflect the Reverse Stock Split (as defined below). The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position as of June 28, 2026 and its results of operations for the thirteen and twenty-six weeks ended June 28, 2026 and June 29, 2025 and its cash flows for the twenty-six weeks ended June 28, 2026 and June 29, 2025. The results of operations for the twenty-six weeks ended June 28, 2026 are not necessarily indicative of the results to be expected for the fiscal year ending January 3, 2027 or for any other future annual or interim period.
The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K as filed with the SEC on March 30, 2026.
Significant Accounting Policies
The significant accounting policies used in preparation of these condensed consolidated financial statements are consistent with those discussed in Note 2 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 28, 2025, except as noted below and within the "Recently Issued Accounting Pronouncements" section.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The significant estimates and assumptions made by management relate to sales return reserves and related assets for recovery, store credit breakage, lease right-of-use assets and related lease liabilities, income tax valuation allowance and fair value of equity awards. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjusts such estimates and assumptions when facts and circumstances dictate. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the condensed consolidated financial statements in future periods. As future events and their effects cannot be determined with precision, actual results could materially differ from those estimates and assumptions.
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents. Such amounts may exceed federally insured limits. The Company reduces credit risk by depositing its cash with major credit-worthy financial institutions within the United States. To date, the Company has not experienced any losses on its cash deposits. As of June 28, 2026,
Revenue Recognition
The Company generates revenue primarily from the sale of merchandise products directly to end customers. The sale of products is a distinct performance obligation, and revenue is recognized at a point in time when control of the promised product is transferred to customers, which the Company determined occurs upon shipment based on its evaluation of the related shipping terms. Revenue is recognized in an amount that reflects the transaction price consideration that the
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Company expects to receive in exchange for those products. The Company’s payment terms are typically at the time of order processing and shipment.
The Company elected to exclude from revenue taxes assessed by governmental authorities, including value-added and other sales-related taxes, that are imposed on and concurrent with revenue-producing activities. The Company has elected to apply the practical expedient, relative to e-commerce sales, which allows an entity to account for shipping and handling as fulfillment activities, and not a separate performance obligation. Accordingly, the Company recognizes revenue for only
Revenue from merchandise product sales is reported net of sales returns, which includes an estimate of future returns based on historical return rates, with a corresponding reduction to cost of sales. There is judgment in utilizing historical trends for estimating future returns. The Company’s refund liability for sales returns is included in the returns reserve on its condensed consolidated balance sheets and represents the expected value of the refund that will be due to the Company’s customers. The Company’s returns reserve may fluctuate period over period due to seasonal trends, including fluctuation in sales volumes, merchandise mix and the timing of associated customer returns. The Company also has corresponding assets for recovery that represent the expected net realizable value of the merchandise inventory to be returned.
The Company sells stored-value gift cards to customers and offers online store credit for certain returns and promotions. The stored-value gift cards and store credits do not have an expiration date. The Company recognizes revenue from stored-value gift cards and store credits when the card or credit is redeemed by the customer. The Company has determined that sufficient evidence exists to support an estimate for stored-value gift card and store credit breakage. The Company estimates breakage related to store credits using historical redemption rates for each store credit issuance year, which reflects customer redemption patterns. The Company evaluates redemption patterns and may record adjustments to its breakage estimate from time to time. Subject to requirements to remit balances to governmental agencies, breakage is recognized as revenue in proportion to the pattern of rights exercised by the customer, which is substantially within
The Company has
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table summarizes the significant changes in the contract liabilities balances during the thirteen and twenty-six weeks ended June 28, 2026 and June 29, 2025 (in thousands):
| Stored-Value | ||
| Cards | ||
Balance as of December 28, 2025 | $ | | |
Revenue recognized that was included in contract liability balance at the beginning of the period |
| ( | |
Increase due to cash received, other revenue recognized including breakage, and other activity during the period |
| | |
Balance as of March 29, 2026 | $ | | |
Revenue recognized that was included in contract liability balance at the beginning of the period | ( | ||
Increase due to cash received, other revenue recognized including breakage, and other activity during the period | | ||
Balance as of June 28, 2026 | $ | | |
| Stored-Value | ||
| Cards | ||
Balance as of December 29, 2024 | $ | | |
Revenue recognized that was included in contract liability balance at the beginning of the period |
| ( | |
Increase due to cash received, other revenue recognized including breakage, and other activity during the period |
| | |
Balance as of March 30, 2025 | $ | | |
Revenue recognized that was included in contract liability balance at the beginning of the period |
| ( | |
Increase due to cash received, other revenue recognized including breakage, and other activity during the period |
| | |
Balance as of June 29, 2025 | $ | | |
Selling and Marketing Expenses
Advertising costs included in selling and marketing expenses were $
Net Loss Per Share Attributable to Common Stockholders
Basic net loss per share attributable to common stockholders is computed using net loss attributable to common stockholders divided by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to common stockholders represents net loss attributable to common stockholders divided by the weighted average number of shares of common stock outstanding during the period, including the effects of any dilutive securities outstanding. Due to the net loss for all periods presented, no potentially dilutive securities had an impact on diluted loss per share for any period.
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (on an as-converted basis):
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||
| June 28, 2026 | June 29, 2025 | June 28, 2026 | June 29, 2025 | ||||
Stock options |
| | | | | |||
RSUs | | | | | ||||
PSUs | | | | | ||||
ESPP | | | | | ||||
Total |
| | | | | |||
Goodwill, Tradename and Intangible Assets
The Company tests for goodwill impairment at the reporting unit level on the first day of the fourth quarter of each year and between annual tests if significant indicators exist that would suggest the Company's goodwill and intangible assets could potentially be impaired. The Company monitors macroeconomic conditions, industry, competitive environment conditions, overall financial performance, reporting unit specific events and market considerations, among others, for events which could trigger the need for an interim impairment analysis.
The Company performed a qualitative assessment of its goodwill, tradename and intangible assets as of June 28, 2026 and determined that no events or changes in circumstances were identified that would indicate potential impairment related to the goodwill, tradename, and intangible assets recorded during the thirteen and twenty-six weeks ended June 28, 2026.
Recently Adopted Accounting Pronouncements
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will no longer qualify as an emerging growth company as of the end of fiscal 2026.
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides all entities with practical expedient of developing reasonable and supportable forecasts as part of estimating expected credit losses, that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025 (and interim reporting periods within those annual reporting periods). Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company adopted this guidance for fiscal year 2026, and it did not have a material impact on our condensed consolidated financial statements or related disclosures.
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), to disclose specific information about certain income statement expense line items in the notes to its financial statements for interim and annual reporting periods. In January 2025, the FASB
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, to clarify that ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. We are currently evaluating this pronouncement to determine its impact on our condensed consolidated financial statements and related disclosures.
In September 2025, FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal Use Software (Topic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to amend certain aspects of the accounting for and disclosure of software costs under ASC 350-40. ASU 2025-06 is effective for all entities for annual reporting periods beginning after December 15, 2027 (and interim reporting periods within those annual reporting periods). Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. We are currently evaluating this pronouncement to determine its impact on our condensed consolidated financial statements and related disclosures.
In December 2025, FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating this pronouncement to determine its impact on our condensed consolidated financial statements and related disclosures.
In December 2025, FASB issued ASU 2025-12, Codification Improvements as part of its standing project to correct, clarify, and make narrow improvements to U.S. GAAP across a broad range of topics. This guidance is effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating this pronouncement to determine its impact on our condensed consolidated financial statements and related disclosures.
3.Fair Value Measurements
The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued expenses, other current liabilities and borrowings under the 2025 Credit Agreement. As of June 28, 2026 and June 29, 2025, the carrying values of cash and cash equivalents, accounts payable, accrued expenses and other current liabilities approximate fair value due to their short-term maturities.
Borrowings under the 2025 Credit Agreement bear interest at a rate equal to the 30-day rate plus
The Company performs the annual goodwill, tradename and intangible assets impairment assessment on the first day of the fourth quarter of each fiscal year. During the Company’s most recent annual impairment assessment for fiscal year 2025, the Company determined that no events or changes in circumstances were identified that would indicate potential impairment related to the goodwill, tradename, and intangible assets recorded during the fifty-two weeks ended December 28, 2025.
The Company does not have any financial instruments that were determined to be Level 3. There were no transfers in or out of Level 1, Level 2, or Level 3 assets or liabilities.
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
4.Balance Sheet Components
Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
| Estimated Useful Lives | | June 28, | | December 28, | |||
in Years | 2026 | 2025 | ||||||
Leasehold improvements | $ | | $ | | ||||
Equipment |
| |
| | ||||
Furniture and fixtures |
| |
| | ||||
Total property and equipment |
| |
| | ||||
Less: accumulated depreciation and amortization |
| ( | ( | |||||
Property and equipment, net | $ | | $ | | ||||
Depreciation and amortization of property and equipment was $
Amortization of right-of-use assets was $
Intangible Assets, net
Intangible assets, net consists of capitalized internal-use software development, which is amortized over a
The gross carrying amount of capitalized software was $
As of June 28, 2026, estimated future amortization expense related to capitalized software is expected to be approximately $
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| June 28, | December 28, | ||||
2026 | 2025 | |||||
Accrued compensation and benefits | $ | | $ | | ||
Accrued marketing |
| |
| | ||
Accrued inventory |
| |
| | ||
Accrued freight | | | ||||
Other |
| |
| | ||
Accrued expenses and other current liabilities | $ | | $ | | ||
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
5.Debt
Credit Facility
On November 15, 2021, the Company entered into a credit agreement with Bank of America (the “Prior Credit Agreement”) for a revolving facility that provided for borrowings up to $
On August 14, 2025, the Company and its subsidiaries (collectively, the “Borrowers”) entered into the 2025 Credit Agreement for an asset-based revolving credit facility with a $
On October 28, 2025, the Company entered into an amendment to the 2025 Credit Agreement, which included some clarifying and non-material changes to certain terms in the 2025 Credit Agreement.
On July 27, 2026, the Company entered into a Second Amendment to the 2025 Credit Agreement (the “Second Amendment”), which changes the earliest date the Borrowers can include an increased inventory formula into the revolver borrowing base from August 14, 2026 to July 21, 2026 (the “July 2026 Increased Inventory Availability Period”), provides that, on a going-forward basis after giving effect to the July 2026 Increased Inventory Availability Period, the increased inventory formula may be used once before June 30, 2027 and twice after June 30, 2027 through the third anniversary of the revolver closing date, and provides that during the July 2026 Increased Inventory Availability Period only, for purposes of determining increased reporting requirements, the excess revolver availability requirement is decreased from $
The initial funding of the 2025 Credit Agreement occurred on August 14, 2025, and the proceeds were used in part to repay approximately $
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of June 28, 2026, the outstanding borrowing under the 2025 Credit Agreement was $
Debt Discounts and Issuance Costs
Debt discounts and issuance costs are deferred and amortized over the life of the related loan. The associated expense is included in interest expense in the condensed consolidated statements of operations and comprehensive loss. Debt issuance costs related to the 2025 Credit Agreement are included in prepaids and other current assets in the condensed consolidated balance sheets. As of June 28, 2026 and December 28, 2025, unamortized debt issuance costs recorded within prepaids and other current assets were $
6.Leases
The Company primarily leases its distribution facilities, corporate offices and retail stores under operating lease agreements expiring on various dates through January 2029, most of which contain options to extend. In addition to payment of base rent, the Company is also required to pay property taxes, insurance, and variable common area maintenance expenses. The Company records lease expense on a straight-line basis over the term of the lease. Effective May 15, 2026, the Company’s new corporate headquarters relocated to a leased facility in Chico, California. In connection with the new lease, the Company recognized an operating lease right-of-use asset of $
The Company also leases equipment under finance lease agreements expiring on various dates through April 2029. During the twenty-six weeks ended June 28, 2026, the Company executed a renewal to extend the lease term of certain finance leases related to equipment by
In early 2025, the Company consolidated two of its distribution facilities by moving operations from its former distribution facility in Chico, California to its existing distribution facility in Ontario, California. During the twenty-six weeks ended June 29, 2025, the Company modified the terms and discount rate of two of its operating leases. As a result of the modification, the Company derecognized the related right-of-use asset and lease liability of $
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of June 28, 2026, the future minimum lease payments for the Company’s operating and finance leases for each of the fiscal years were as follows (in thousands):
Fiscal Year: | | Operating Leases | Finance Leases | Total | |||||
2026 remaining 6 months | $ | | $ | | $ | | |||
2027 |
| | | | |||||
2028 |
| | | | |||||
2029 |
| | | | |||||
2030 |
| | — | | |||||
Total undiscounted lease payments | | | | ||||||
Present value adjustment | ( | ( | ( | ||||||
Total lease liabilities | | | | ||||||
( | ( | ( | |||||||
$ | | | $ | | |||||
Under the terms of the remaining lease agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability, including non-lease components such as common area maintenance fees, taxes, and insurance.
7.Commitments and Contingencies
Litigation and Other
From time to time, the Company may be a party to litigation and subject to claims incurred in the ordinary course of business, including personal injury and indemnification claims, labor and employment claims, threatened claims, breach of contract claims, and other matters. The Company accrues a liability when management believes information available prior to the issuance of the condensed consolidated financial statements indicates it is probable a loss has been incurred as of the date of the condensed consolidated financial statements and the amount of loss can be reasonably estimated. The Company adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Legal costs are expensed as incurred. Although the results of litigation and claims are inherently unpredictable, management concluded that it was not probable that it had incurred a material loss during the periods presented related to such loss contingencies.
During the normal course of business, the Company may be a party to claims that are not covered by insurance. While the ultimate liability, if any, arising from these claims cannot be predicted with certainty, management does not believe that the resolution of any such claims would have a material adverse effect on the Company’s condensed consolidated financial statements. As of June 28, 2026, the Company was not aware of any currently pending legal matters or claims, individually or in the aggregate, that are expected to have a material adverse impact on its condensed consolidated financial statements.
Indemnification
The Company also maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify the Company’s directors and officers. To date, the Company has not incurred any material costs and has not accrued any liabilities in the condensed consolidated financial statements as a result of these provisions.
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
8.Stockholders’ Equity (Deficit)
Common Stock
Pursuant to the Company’s amended and restated certificate of incorporation, the Company is authorized to issue
Preferred Stock
Pursuant to the Company’s Amended and Restated Certificate of Incorporation, the Company is authorized to issue
Equity-Based Compensation
Omnibus Equity Plan and Employee Stock Purchase Plan
Under the Company’s Omnibus Equity Plan, incentive awards may be granted to employees, directors, and consultants of the Company. The Company initially reserved
Under the ESPP, the Company initially reserved
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of June 28, 2026, the Company had
The Company’s initial ESPP offering period commenced on August 26, 2022. The ESPP consists of consecutive, overlapping
The Company recognizes equity-based compensation expense related to shares issued pursuant to the ESPP on a graded vesting approach over each offering period. For the thirteen and twenty-six weeks ended June 28, 2026 and June 29, 2025, equity-based compensation expense related to our ESPP was immaterial. During the twenty-six weeks ended June 28, 2026 and June 29, 2025, the Company issued
The Company used the Black-Scholes model to estimate the fair value of the purchase rights under the ESPP. For the thirteen weeks ended June 28, 2026, the Company utilized the following assumptions:
Expected term (in years) | ||||
Expected volatility | % | |||
Risk-free interest rate | % | |||
Dividend yield | - | |||
Weighted-average fair value per share of ESPP awards granted | $ |
Equity-based compensation expense is included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
2024 Stock Repurchase Program
On May 8, 2024, the Company announced that its Board of Directors authorized a stock repurchase program allowing the Company to repurchase up to an aggregate amount of $
As of June 28, 2026, $
Reverse Stock Split
On June 11, 2025, the Company’s Board of Directors approved a -for-15 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock, par value $
2021 Equity Plan
During April 2021, the Company’s Board of Directors adopted the 2021 Equity Plan. The 2021 Equity Plan provided for the issuance of incentive stock options, restricted stock, restricted stock units and other equity-based and cash-based awards to the Company’s employees, directors, and consultants. The maximum aggregate number of shares reserved for issuance under the 2021 Equity Plan was
Stock Options
A summary of stock option activity, is as follows (in thousands, except per share amounts and years):
Weighted- | Weighted- | |||||||||
Average | Average | |||||||||
| Exercise | | Remaining | | Aggregate | |||||
| Options | Price per | Contractual | Intrinsic | ||||||
Outstanding | Option | Life (years) | Value | |||||||
Balance as of December 28, 2025 | | $ | | |||||||
Granted |
| — | — |
| — | |||||
Forfeited | — | — | — | |||||||
Outstanding as of June 28, 2026 |
| | $ | |
| |||||
Exercisable as of June 28, 2026 |
| | $ | |
| $ | — | |||
Vested and expected to vest as of June 28, 2026 |
| | $ | |
| $ | — | |||
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company had
Restricted Stock Units (“RSUs”)
The Company recognized equity-based compensation expense of $
The following table summarizes the roll forward of unvested RSUs during the thirteen weeks ended June 28, 2026:
Weighted- | |||||
Unvested | Average Fair | ||||
RSUs | Value per Share | ||||
Balance at December 28, 2025 | | $ | | ||
RSUs granted | | | |||
RSUs vested | ( | | |||
RSUs forfeited | ( |
| | ||
Balance at June 28, 2026 | | $ | | ||
Performance Stock Units (“PSUs”)
The Company recognized equity-based compensation expense of less than $
The following table summarizes the roll forward of unvested PSUs during the twenty-six weeks ended June 28, 2026:
Weighted- | |||||
Unvested | Average Fair | ||||
PSUs | Value per Share | ||||
Balance at December 28, 2025 | | $ | | ||
PSUs granted | — | — | |||
PSUs vested | — | — | |||
PSUs forfeited | — |
| — | ||
Balance at June 28, 2026 | | $ | | ||
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
9.Income Taxes
All of the Company’s loss before income taxes is from the United States. The following table presents the components of the income tax benefit (provision) for income taxes (in thousands):
Thirteen Weeks Ended | |||||||
June 28, | June 29, |
| |||||
| 2026 | | 2025 |
| |||
Loss before benefit (provision) for income taxes | $ | ( | $ | ( | |||
Benefit (provision) for income taxes |
| |
| ( | |||
Effective tax rate |
| ( | % |
| | % | |
Twenty-Six Weeks Ended | |||||||
June 28, | June 29, | ||||||
| 2026 | 2025 | |||||
Loss before provision for income taxes | $ | ( | $ | ( | |||
(Provision) benefit for income taxes |
| ( |
| | |||
Effective tax rate |
| | % |
| ( | % | |
The Company’s benefit (provision) for income taxes during interim reporting periods has historically been calculated by applying an estimate of the annual effective tax rate for the full year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. However, for fiscal 2025, due to the uncertain and evolving impacts related to tariffs, the Company believed that using the year-to-date actual operating result was more reasonable. As such, beginning with the thirteen weeks ended March 30, 2025, the Company’s tax benefit for interim periods was determined using a discrete effective tax rate method, as allowed by ASC Topic 740-270, Income Taxes, Interim Reporting.
For fiscal 2026, the Company was able to provide a reasonable annual forecast. As such, beginning with the thirteen weeks ended June 28, 2026, the Company's tax provision for the interim period was determined using an estimated annual effective tax rate method, as the primary method for ASC Topic 740-270, Income Tax, Interim Reporting.
For the thirteen and twenty-six weeks ended June 28, 2026 and June 29, 2025, the Company's effective tax rate differed from the federal income tax rate of
The Company regularly assesses the realizability of DTAs and records 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, the Company maintained a valuation allowance of $
10.Related Party Transactions
Significant Shareholder Relationships
The Company identified
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
11.Segment Reporting
The Company identifies operating segments based on whether the Company’s Chief Executive Officer, who is the Chief Operating Decision Maker (“CODM”), regularly reviews operating results of particular components of the Company’s activities and allocates resources and assesses performance based on those results.
The Company has
The measurement of segment assets is reported on the condensed consolidated balance sheet as total condensed consolidated assets. All assets, liabilities, cash flows, revenue and expenses are reported in the Company’s
The table below is a summary of the segment profit or loss, including significant segment expenses (in thousands):
Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||||||||
June 28, | | June 29, | June 28, | | June 29, | ||||||
2026 | 2025 | 2026 | 2025 | ||||||||
Net revenue | $ | | $ | | $ | | $ | | |||
Less: | |||||||||||
Cost of revenue | | | | | |||||||
Employee expenses (excluding equity-based compensation expense) | | | | | |||||||
Equity-based compensation expense | | | | | |||||||
Advertising expenses | | | | | |||||||
Other net costs (1) | | | | | |||||||
Depreciation and amortization (2) | | | | | |||||||
Interest expense | | | | | |||||||
Income tax provision (benefit) | ( | | | ( | |||||||
Segment net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||
| (1) |
| (2) | Excludes depreciation expense related to distribution facilities recorded in cost of revenue. |
12.Subsequent Events
Registration Statement on Form S-3
On July 2, 2026, the Company filed a Form S-3 universal shelf registration statement (the “Shelf Registration Statement”) with the SEC, which was declared effective on July 14, 2026. The Shelf Registration Statement permits the Company to sell, in one or more public offerings, shares of its common stock, shares of its preferred stock, warrants, and units in an aggregate amount of up to $
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
market value of its common stock held by non-affiliates is less than $75.0 million. The Company has not yet sold any securities under the Shelf Registration Statement. The Shelf Registration Statement will expire on July 14, 2029.
Nasdaq Listing Compliance Update
On July 6, 2026, the Company submitted a compliance plan (the “Compliance Plan”) to the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) to address its deficiency with the minimum amount of $2.5 million of stockholders’ equity required for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(b)(1). Subsequently, on August 5, 2026, the Company received notice from Nasdaq confirming the Company had regained compliance with the Nasdaq continued listing requirements by satisfying the alternative market value of listed securities standard of at least $35 million set forth in Nasdaq Listing Rule 5550(b)(2) for ten consecutive business days. The Company’s common stock continues to trade on the Nasdaq Capital Market under the symbol “LVLU”.
Second Amendment to the 2025 Credit Agreement
On July 27, 2026, the Company entered into a Second Amendment to the 2025 Credit Agreement, which changes the earliest date the Borrowers can include an increased inventory formula into the revolver borrowing base from August 14, 2026 to July 21, 2026 (the “July 2026 Increased Inventory Availability Period”), provides that, on a going-forward basis after giving effect to the July 2026 Increased Inventory Availability Period, the increased inventory formula may be used once before June 30, 2027 and twice after June 30, 2027 through the third anniversary of the revolver closing date, and provides that during the July 2026 Increased Inventory Availability Period only, for purposes of determining increased reporting requirements, the excess revolver availability requirement is decreased from $
Equity Line of Credit
On August 11, 2026, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with ARC Group International Ltd. (the “Investor”), pursuant to which the Company has the right to sell to the Investor up to $
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LULU’S FASHION LOUNGE HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Approval of Cash Payment in lieu of the 2026 Annual RSU Awards
On June 3, 2026, the Compensation Committee of the Board of Directors (the “Compensation Committee”) approved a suspension of the 2026 annual awards of RSUs (the “2026 Annual RSU Awards”) to the Company’s independent directors valued at $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 Part I, Item 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.
Overview
Lulu’s Fashion Lounge Holdings, Inc., a Delaware Corporation (“Lulus”, “we”, “our”, or the “Company”) is a women’s clothing brand offering modern, feminine styles at accessible prices for every occasion. Our goal is to make every customer feel their most confident and beautiful for the moments that matter most. Lulus primarily serves a large, diverse community of Gen Z and Millennial women, who typically meet us in their 20s and stay with us through their 30s and beyond. We use direct customer feedback and insights to refine product offerings and elevate the customer experience. Lulus’ world-class personal stylists, bridal concierge, and customer care team provide thoughtful, personalized service to shoppers around the world.
Recent Developments
New Corporate Headquarters Lease
Effective May 15, 2026, our new corporate headquarters relocated to a leased facility in Chico, California. Our prior corporate headquarters were also located in a different leased facility in Chico, California, and the lease agreement for that facility was terminated on May 31, 2026.
Amendments to our Certificate of Incorporation
On June 9, 2026, upon obtaining stockholder approval at the 2026 Annual Meeting, we filed with the Secretary of State of Delaware an amendment to our Certificate of Incorporation to decrease the number of authorized shares of our common stock from 250,000,000 to 15,000,000 and to decrease the number of authorized shares of our preferred stock from 10,000,000 to 500,000.
Additionally, on June 9, 2026, upon obtaining stockholder approval at the 2026 Annual Meeting, we filed with the Secretary of State of Delaware an amendment to our Certificate of Incorporation to provide exculpation to certain officers as permitted by amendments to the Delaware General Corporation Law.
Approval of Suspension of 2026 Annual RSU Awards and Cash Payment in Lieu Thereof
On June 3, 2026, the Compensation Committee approved suspending the 2026 Annual RSU Awards to the Company’s independent directors valued at $100,000 pursuant to the Company’s Non-Employee Director Compensation Program, in order to avoid the potential dilutive impact to the Company’s outstanding shares of common stock.
On July 30, 2026, after consulting with and receiving the recommendations of its independent compensation consultant, the Compensation Committee recommended and the Board of Directors approved a cash payment totaling $125,000 to each of the Company’s independent directors as an alternative form of compensation in lieu of receiving the 2026 Annual RSU Awards. This cash payment will be payable in monthly installments retroactive to the date of the 2026 annual meeting of stockholders and paid through the date of the 2027 annual meeting of stockholders, subject to each independent director’s continued service on the Board of Directors through each payment date.
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Registration Statement on Form S-3
On July 2, 2026, we filed a Shelf Registration Statement with the SEC, which was declared effective on July 14, 2026. The Shelf Registration Statement permits us to sell, in one or more public offerings, shares of our common stock, shares of preferred stock, warrants, and units in an aggregate amount of up to $7.5 million, subject to limitations in accordance with General Instruction I.B.6 of Form S-3. In no event will we sell shares pursuant to this prospectus with a value of more than one-third of the aggregate market value of our common stock held by non-affiliates in any 12-month period, so long as the aggregate market value of our common stock held by non-affiliates is less than $75.0 million. We have not yet sold any securities under the Shelf Registration Statement. The Shelf Registration Statement will expire on July 14, 2029.
Nasdaq Listing Compliance Update
On July 6, 2026, the Company submitted a compliance plan (the “Compliance Plan”) to the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) to address its deficiency with the minimum amount of $2.5 million of stockholders’ equity required for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(b)(1). Subsequently, on August 5, 2026, the Company received notice from Nasdaq confirming the Company had regained compliance with the Nasdaq continued listing requirements by satisfying the alternative market value of listed securities standard of at least $35 million set forth in Nasdaq Listing Rule 5550(b)(2) for ten consecutive business days. The Company’s common stock continues to trade on the Nasdaq Capital Market under the symbol “LVLU”.
Special Committee of the Board of Directors
On July 13, 2026, we announced that the Board of Directors had formed a special committee of independent directors (“Special Committee”) to evaluate strategic alternatives available to us to maximize stockholder value. These alternatives include a possible transaction involving the Company and continued execution of our standalone strategic plan. The Special Committee has retained Solomon Partners as its financial advisor and Willkie Farr & Gallagher LLP as its legal advisor to assist in connection with the strategic review process.
Second Amendment to the 2025 Credit Agreement
On July 27, 2026, the Company entered into a Second Amendment to the 2025 Credit Agreement, which changes the earliest date the Borrowers can include an increased inventory formula into the revolver borrowing base from August 14, 2026 to July 21, 2026 (the “July 2026 Increased Inventory Availability Period”), provides that, on a going-forward basis after giving effect to the July 2026 Increased Inventory Availability Period, the increased inventory formula may be used once before June 30, 2027 and twice after June 30, 2027 through the third anniversary of the revolver closing date, and provides that during the July 2026 Increased Inventory Availability Period only, for purposes of determining increased reporting requirements, the excess revolver availability requirement is decreased from $5.0 million to $4.0 million. This Second Amendment gives the Borrowers increased flexibility in accessing borrowings and managing inventory levels. In connection with entering into the Second Amendment, the Borrowers paid an amendment fee of $10,000, as specified in the Second Amendment.
Equity Line of Credit
On August 11, 2026, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with ARC Group International Ltd. (the “Investor”), pursuant to which the Company has the right to sell to the Investor up to $4.5 million of shares of the Company’s common stock subject to the terms and conditions set forth in the Purchase Agreement during a commitment period that will terminate on the earlier of the 36-month anniversary of the Purchase Agreement or the date the Investor has purchased shares equal to the full commitment amount. The purchase price per share will be based on a discount to the volume-weighted average price of the Company’s common stock over specified pricing periods, and sales under the Purchase Agreement are subject to certain limitations as described in the Purchase Agreement. The Company retains full discretion over the timing and amount of any sales under the Purchase Agreement and there is no requirement that the Company sell any shares thereunder. Actual sales of shares of common stock to the Investor from time to time will depend on a variety of factors, including, without limitation, market conditions, the trading price of the common stock
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and determinations by the Company as to the appropriate sources of funding for the Company and its operations. In connection with entering into the Purchase Agreement, the Company will issue to the Investor shares of common stock valued at $200,000 as a commitment fee. The Company intends to use any net proceeds from sales under the Purchase Agreement for working capital and other general corporate purposes. The Purchase Agreement also provides the Company with the option, following the termination of the Purchase Agreement upon either the conclusion of the commitment period or the Investor’s purchase of shares equal to the full commitment amount, to enter into a subsequent purchase agreement with the Investor for up to an additional $5.5 million on substantially the same terms as the Purchase Agreement, provided that no commitment fee would be payable by the Company to the Investor under any such subsequent purchase agreement.
Impact of Macroeconomic Trends on Business
Changing macroeconomic factors, including inflation, interest rates, tariffs or bans, world events, wars and domestic and international conflicts, existing and future laws, regulations and directives and executive orders, and overall consumer confidence with respect to current and future economic conditions have directly impacted our sales 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.
Liquidity
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, LLC, 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.
Key Operating and Financial Metrics
We collect and analyze operating and financial data to assess the performance of our business and optimize resource allocation. The following table sets forth our key performance indicators for the periods presented (in thousands, except for percentages) and Average Order Value (defined below).
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
June 28, | June 29, | June 28, | June 29, | |||||||||||||
2026 | 2025 | 2026 | 2025 | |||||||||||||
(in thousands, except percentages and Average Order Value) | ||||||||||||||||
Gross Margin |
| 48.6 | % |
|
| 45.3 | % |
| 47.0 | % |
| 43.1 | % | |||
Net loss and comprehensive loss | $ | (1,483) | $ | (2,995) | $ | (5,573) | $ | (10,993) | ||||||||
Adjusted EBITDA (1) | $ | 984 | $ | 482 | $ | (541) | $ | (4,188) | ||||||||
Adjusted EBITDA Margin (1) |
| 1.5 | % |
| 0.6 | % |
| (0.4) | % |
| (2.9) | % | ||||
Active Customers | | 2,153 | | 2,460 | | 2,153 | | 2,460 | | |||||||
Average Order Value | $ | 147 | $ | 145 | $ | 142 | $ | 141 | ||||||||
(1) | For a reconciliation of net loss and net loss margin to non-GAAP Adjusted EBITDA and Adjusted EBITDA Margin for the thirteen and twenty-six weeks ended June 28, 2026 and June 29, 2025, and why we consider non-GAAP financial measures useful, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” |
Gross Margin
We define Gross Margin as gross profit as a percentage of our net revenue. Gross profit is equal to our net revenue less cost of revenue. Certain of our competitors and other retailers may report cost of revenue differently than we do. As a result, the reporting of our gross profit and Gross Margin may not be comparable to other companies.
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Active Customers
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 deduplication logic using customer account and guest checkout name, address, and email information.
Average Order Value
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 Lulus’ merchandise and as a result of our promotional discount activity.
Total Orders Placed
We define Total Orders Placed as the number of customer orders placed across our platform during a particular period. An order is counted on the day the customer places the order. We do not adjust the number of Total Orders Placed for any cancellation or return that may have occurred subsequent to a customer placing an order. Total Orders Placed, together with AOV, is an indicator of the net revenue we expect to generate in a particular period.
Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting principles in the U.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 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 and Adjusted EBITDA Margin
Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss) before interest expense, income taxes or benefit, depreciation and amortization adjusted to exclude the effects of equity-based compensation expense and other 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. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of equity-based compensation, excludes items that we do not consider to be indicative of our core operating performance. 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”) 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:
| ● | Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; |
| ● | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
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| ● | Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt; |
| ● | Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes; |
| ● | Adjusted EBITDA does not reflect certain non-routine expenses that may represent a reduction in cash available to us; |
| ● | Adjusted EBITDA excludes equity-based compensation which has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of our compensation strategy. |
| ● | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and |
| ● | Other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures. |
Due to these limitations, Adjusted EBITDA and Adjusted EBITDA Margin 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.
The following table provides a reconciliation for Adjusted EBITDA and Adjusted EBITDA Margin:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
June 28, | June 29, | June 28, | June 29, | |||||||||||||
2026 | 2025 | 2026 | 2025 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net loss and comprehensive loss | | $ | (1,483) | $ | (2,995) | | $ | (5,573) | $ | (10,993) | | |||||
Depreciation and amortization |
| 1,012 |
| 1,277 |
| 2,125 |
| 2,628 | ||||||||
Interest expense |
| 302 |
| 856 |
| 696 |
| 1,433 | ||||||||
Income tax provision (benefit) |
| (9) |
| 62 |
| 184 |
| (12) | ||||||||
Equity-based compensation expense (1) |
| 628 |
| 1,282 |
| 1,345 |
| 2,756 | ||||||||
Other non-routine expense (2) | 534 | — | 682 | — | ||||||||||||
Adjusted EBITDA | $ | 984 | $ | 482 | $ | (541) | $ | (4,188) | ||||||||
Net loss margin | (2.2) | % | (3.7) | % | (4.4) | % | (7.5) | % | ||||||||
Adjusted EBITDA Margin |
| 1.5 | % |
| 0.6 | % |
| (0.4) | % |
| (2.9) | % | ||||
| (1) | The thirteen and twenty-six weeks ended June 28, 2026 include equity-based compensation expense for performance stock units (“PSUs”) granted during prior periods and restricted stock units (“RSUs”) granted during the period and prior periods. The thirteen and twenty-six weeks ended June 29, 2025 include equity-based compensation expense for PSUs and RSUs granted during the period and prior periods. |
| (2) | The thirteen and twenty-six weeks ended June 28, 2026 include primarily fees related to the Special Committee. |
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Free Cash Flow
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 view Free Cash Flow as an important indicator of our liquidity because it measures the amount of cash we generate.
A reconciliation to non-GAAP Free Cash Flow from net cash provided by operating activities for the thirteen and twenty-six weeks ended June 28, 2026 and June 29, 2025 is as follows:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||
June 28, 2026 | June 29, 2025 | June 28, 2026 | June 29, 2025 | |||||||||
(in thousands) | ||||||||||||
Net cash provided by (used in) operating activities | $ | 586 | $ | (1,356) | $ | 7,486 | $ | 6,966 | ||||
Capitalized software development costs | (357) | (383) | (711) | (810) | ||||||||
Purchases of property and equipment | (86) | (136) | (132) | (276) | ||||||||
Free Cash Flow | $ | 143 | $ | (1,875) | $ | 6,643 | $ | 5,880 | ||||
Factors Affecting Our Performance
Our financial condition and results of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including what is discussed below. See Part I, Item 1A, “Risk Factors” in our 2025 10-K.
Customer Acquisition
Our business performance depends in part on our continued ability to cost-effectively acquire new customers. We define customer acquisition cost (“CAC”) as our brand and performance marketing expenses attributable to acquiring new customers, including, but not limited to, agency costs and marketing team costs but excluding any applicable equity-based compensation, divided by the number of customers who placed their first order with us in a given period. As a primarily digital brand, our marketing strategy is primarily focused on brand awareness marketing and digital advertising in channels like search, social, and programmatic – platforms that enable us to engage our customer where she spends her time, and in many cases also quickly track the success of our marketing, which allows us to adjust and optimize our marketing spend.
Customer Retention
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 June 28, 2026, we served 2.2 million Active Customers compared to 2.5 million for the trailing 12 months ended June 29, 2025.
Inventory Management
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. We will continue to adjust our inventory purchases to align with the current needs of the business.
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Investment in Our Operations and Infrastructure
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 carefully 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.
Components of Our Results of Operations
Net Revenue
Net revenue consists primarily of gross sales, net of merchandise returns, international duties and 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.
Cost of Revenue and Gross Profit
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 the 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.
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, our Gross Margin may fluctuate from period to period depending on the interplay of these factors.
Selling and Marketing Expenses
Our selling and marketing expenses consist primarily of payment processing fees, advertising, targeted online performance marketing and customer order courtesy adjustments. Selling and marketing expenses also include our spend on brand marketing channels, including compensation and free products to social media influencers, events, and other forms of online and offline marketing related to growing and retaining the customer base. As discussed in “Net Revenue” above, in any given period, the amount of our selling and marketing expense can be affected by the use of promotional discounts in such period.
General and Administrative Expenses
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 and amortization, rent and other occupancy expenses. General and administrative expenses are primarily driven by headcount related costs required to support our business and meet our obligations as a public company.
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Interest Expense
Interest expense consists of interest expense related to the prior credit agreement with Bank of America (the “Prior Credit Agreement”) and the 2025 Credit Agreement.
Benefit (Provision) for Income Taxes
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 maintained a valuation allowance as of December 28, 2025 of $16.7 million and continued to maintain the same position as of June 28, 2026.
Our Results of Operations
The following tables set forth our condensed consolidated results of operations for the periods presented and as a percentage of net revenue:
Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||
June 28, | June 29, | June 28, | June 29, | |||||||||
2026 | 2025 | 2026 | 2025 | |||||||||
(in thousands) | ||||||||||||
Net revenue | | $ | 67,807 | $ | 81,520 | | $ | 125,338 | $ | 145,675 | ||
Cost of revenue |
| 34,852 |
| 44,588 |
| 66,435 |
| 82,902 | ||||
Gross profit |
| 32,955 |
| 36,932 |
| 58,903 |
| 62,773 | ||||
Selling and marketing expenses |
| 18,381 |
| 21,993 |
| 32,418 |
| 37,908 | ||||
General and administrative expenses |
| 15,818 |
| 17,562 |
| 31,276 |
| 35,606 | ||||
Loss from operations |
| (1,244) |
| (2,623) |
| (4,791) |
| (10,741) | ||||
Interest expense |
| (302) |
| (856) |
| (696) |
| (1,433) | ||||
Other income, net |
| 54 |
| 546 |
| 98 |
| 1,169 | ||||
Loss before benefit (provision) for income taxes |
| (1,492) |
| (2,933) |
| (5,389) |
| (11,005) | ||||
Income tax benefit (provision) |
| 9 |
| (62) |
| (184) |
| 12 | ||||
Net loss and comprehensive loss | $ | (1,483) | $ | (2,995) | $ | (5,573) | $ | (10,993) | ||||
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Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||
June 28, | June 29, | June 28, | June 29, | |||||||||
2026 | 2025 | 2026 | 2025 | |||||||||
Net revenue | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
Cost of revenue | 51 | | 55 | | 53 | | 57 | | ||||
Gross profit | 49 | 45 | 47 | 43 | ||||||||
Selling and marketing expenses | 27 | 26 | 26 | 26 | ||||||||
General and administrative expenses | 23 | 22 | 25 | 24 | ||||||||
Loss from operations | (2) | (3) | (4) | (7) | ||||||||
Interest expense | — | (1) | (1) | (1) | ||||||||
Other income, net | — | 1 | 1 | 1 | ||||||||
Loss before benefit (provision) for income taxes | (2) | (3) | (4) | (7) | ||||||||
Income tax benefit (provision) | — | — | — | — | ||||||||
Net loss and comprehensive loss | (2) | % | (3) | % | (4) | % | (7) | % | ||||
Comparisons for the Thirteen Weeks ended June 28, 2026 and June 29, 2025
Net Revenue
Net revenue decreased in the thirteen weeks ended June 28, 2026 by $13.7 million, or 17%, compared to the same period of the prior year, primarily due to a 17% decrease in Total Orders Placed partially offset by the impact of higher AOV and an increase in wholesale revenue.
Cost of Revenue
Cost of revenue decreased in the thirteen weeks ended June 28, 2026 by $9.7 million, or 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
Gross profit decreased in the thirteen weeks ended June 28, 2026 by $4.0 million, or 11%, compared to the same period of the prior year even though revenues declined by 17%, reflecting the improvement in gross margins to 48.6% versus 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
Selling and marketing expenses, which are correlated to sales, decreased in the thirteen weeks ended June 28, 2026 by $3.6 million, or 16%, compared to the same period of the prior year, primarily due to lower marketing costs of $3.3 million and merchant processing fees of $0.4 million.
General and Administrative Expenses
General and administrative expenses decreased in the thirteen weeks ended June 28, 2026 by $1.7 million or 10%, compared to the same period of the prior year. The decrease was primarily due to a $0.8 million decrease in variable labor and benefits associated with lower sales volume, a $0.7 million decrease in equity-based compensation expense, and a $0.6 million decrease in fixed labor and benefits costs driven by reduced fixed headcount, partially offset by a $0.5 million increase in other general and administrative expenses.
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Interest Expense
Interest expense decreased in the thirteen weeks ended June 28, 2026, by $0.6 million, or 65%, compared to the same period of the prior year. Interest expense in the prior year included $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 Benefit (Provision)
Income tax benefit in the thirteen weeks ended June 28, 2026 decreased by $0.1 million to a benefit of $9 thousand, compared to a provision of $0.1 million in the thirteen weeks ended June 29, 2025.
Comparisons for the Twenty-Six Weeks ended June 28, 2026 and June 29, 2025
Net Revenue
Net revenue decreased in the twenty-six weeks ended June 28, 2026 by $20.3 million, or 14%, compared to the same period of the prior year, primarily due to a 16% decrease in Total Orders Placed partially offset by the impact of higher AOV and an increase in wholesale revenue.
Cost of Revenue
Cost of revenue decreased in the twenty-six weeks ended June 28, 2026 by $16.5 million, or 20% 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
Gross profit decreased in the twenty-six weeks ended June 28, 2026 by $3.9 million, or 6% compared to the same period of the prior year even though revenues declined by 14%, reflecting the improvement in gross margins to 47.0% versus 43.1% 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
Selling and marketing expenses, which are correlated to sales, decreased in the twenty-six weeks ended June 28, 2026 by $5.5 million, or 14%, compared to the same period of the prior year, primarily due to lower marketing costs of $5.3 million and merchant processing fees of $0.6 million, offset by $0.5 million of other selling expenses.
General and Administrative Expenses
General and administrative expenses decreased in the twenty-six weeks ended June 28, 2026 by $4.3 million or 12%, compared to the same period of the prior year. The decrease was primarily due to a $1.8 million decrease in variable labor and benefits associated with lower sales volume and productivity enhancements, a $1.4 million decrease in equity-based compensation expense, and a $1.2 million decrease in fixed labor and benefits costs driven by reduced fixed headcount, partially offset by a $0.1 million increase in other general and administrative expenses.
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Interest Expense
Interest expense decreased in the twenty-six weeks ended June 28, 2026, by $0.7 million, or 51%, compared to the same period of the prior year. Interest expense in the prior year included $0.6 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 Benefit (Provision)
Income tax provision in the twenty-six weeks ended June 28, 2026 increased by $0.2 million to a provision of $0.2 million, compared to a benefit of $12 thousand in the twenty-six weeks ended June 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.
Quarterly Trends and Seasonality
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 increased 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.
While our quarterly gross profit generally fluctuates in line with our net revenue, it is also based on how we manage our inventory and merchandise mix and can be further affected by non-recurring, external factors, such as global pandemics or trade wars.
Selling and marketing expenses generally fluctuate with net revenue. Further, in any given period, the amount of our selling and marketing expense can be affected by the use of promotional discounts in such period. In addition, we may increase or decrease marketing spend to assist with optimizing inventory mix and quantities.
General and administrative expenses consist primarily of payroll and benefit costs and vary quarter to quarter as we manage distribution center labor to meet the demand based on our seasonality and the changes in the number of short term workers to meet demand based on our seasonality.
Liquidity and Capital Resources
Our primary sources of liquidity and capital resources are cash generated from operating activities and borrowings under our 2025 Credit 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.
Credit Facility
On November 15, 2021, we entered into a 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
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amount that the Borrowers may borrow under the 2025 Credit Agreement is tied to our 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 of the greater of $4 million or 20% of the total commitment in minimum excess availability under the 2025 Credit 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.
On October 28, 2025, we entered into an amendment to the 2025 Credit Agreement, which clarified the terms related to the manner in which interest is calculated, provides us greater flexibility with respect to the location of our corporate headquarters and extends the amount of time to produce our borrowing base reports.
On July 27, 2026, the Company entered into the Second Amendment, which changes the earliest date the Borrowers can include an increased inventory formula into the revolver borrowing base from August 14, 2026 to July 21, 2026 (the “July 2026 Increased Inventory Availability Period”), provides that, on a going-forward basis after giving effect to the July 2026 Increased Inventory Availability Period, the increased inventory formula may be used once before June 30, 2027 and twice after June 30, 2027 through the third anniversary of the revolver closing date, and provides that during the July 2026 Increased Inventory Availability Period only, for purposes of determining increased reporting requirements, the excess revolver availability requirement is decreased from $5.0 million to $4.0 million. This Second Amendment gives the Borrowers increased flexibility in accessing borrowings and managing inventory levels. In connection with entering into the Second Amendment, the Borrowers paid an amendment fee of $10,000, as specified in the Second Amendment.
The initial funding of the 2025 Credit Agreement occurred on August 14, 2025, and the proceeds were used in part to repay approximately $6.0 million outstanding under the Prior Credit Agreement. In connection with entering into the 2025 Credit Agreement and the repayment in full of all outstanding obligations under the Prior Credit Agreement, the Prior Credit Agreement and the related forbearance agreement and amendments with Bank of America, were terminated.
As of June 28, 2026, the outstanding borrowing under the 2025 Credit Agreement was $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 $1.6 million. During the twenty-six weeks ended June 28, 2026, we borrowed $125.8 million and repaid $130.1 million under the 2025 Credit Agreement and borrowings had a weighted average interest rate of 10.4% inclusive of amortization of debt issuance cost.
Availability and Use of Cash
As of June 28, 2026, we had cash and cash equivalents of $4.1 million. During the thirteen and twenty-six weeks ended June 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
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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.
Repurchases Pursuant to the 2024 Repurchase Program
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 June 28, 2026, no shares were repurchased pursuant to the Company’s 2024 Repurchase Program. As of June 28, 2026, there was $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 8, Stockholders’ Equity (Deficit), of the accompanying notes to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Cash Flow Analysis
The following table summarizes our cash flows for the periods indicated:
Twenty-Six Weeks Ended | |||||||
June 28, | June 29, | ||||||
2026 | | 2025 | | ||||
(in thousands) | |||||||
Net cash provided by (used in): | |||||||
Operating activities | $ | 7,486 | $ | 6,966 | |||
Investing activities | (843) | (1,053) | |||||
Financing activities | (5,181) | (8,839) | |||||
Net increase in cash and cash equivalents | $ | 1,462 | $ | (2,926) | |||
Operating Activities
Net cash provided by operating activities consists primarily of net loss and comprehensive loss adjusted for certain non-cash items, including depreciation, amortization, equity-based compensation, the effect of changes in working capital and other activities.
During the twenty-six weeks ended June 28, 2026, net cash provided by operating activities was $7.5 million, which consisted of a net loss of $5.6 million, partially offset by non-cash charges of $5.8 million and a net change of $7.3 million in operating assets and liabilities. The non-cash charges were primarily comprised of $2.1 million of depreciation and amortization, $2.3 million of non-cash lease expense and $1.3 million of equity-based compensation expense. The net change in operating assets and liabilities was primarily driven by a $9.1 million increase in accounts payable due to timing of payments and purchases and a $3.8 million decrease in inventories primarily due to inventory optimization plan. These increases were partially offset by a $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.
During the twenty-six weeks ended June 29, 2025, net cash provided by operating activities was $7.0 million, which consisted of a net loss of $11.0 million, partially offset by non-cash charges of $7.7 million and a net change of $10.3 million in operating assets and liabilities. The non-cash charges were primarily comprised of $2.8 million of equity-based compensation expense, $2.6 million of depreciation and amortization, and $2.3 million of non-cash lease expense. The net change in operating assets and liabilities was primarily driven by a $20.5 million increase in accrued expenses driven by an increase in marketing costs, accrued inventory and returns reserve; and a $3.0 million decrease in income tax
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receivable due to the receipt of state income tax refunds. These increases were partially offset by a $4.6 million decrease in accounts payable related to the timing of payments, a $3.3 million increase in inventory, and a $2.3 million decrease in operating lease liabilities.
Investing Activities
Our primary investing activities have consisted of purchases of equipment to support our business operations 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 twenty-six weeks ended June 28, 2026, net cash used in investing activities related to the purchase of capitalized software and property and equipment was $0.8 million, as compared to $1.1 million during the twenty-six weeks ended June 29, 2025.
Financing Activities
Financing activities consist primarily of borrowings and repayments related to our revolving facility under our Prior Credit Agreement and 2025 Credit Agreement.
During the twenty-six weeks ended June 28, 2026, cash used in financing activities was $5.2 million, primarily due to $130.1 million of repayments under our 2025 Credit Agreement, $0.6 million of principal payments on finance lease obligations and $0.3 million for withholding tax payments related to vesting of RSUs, partially offset by $125.8 million proceeds from borrowings under our 2025 Credit Agreement.
During the twenty-six weeks ended June 29, 2025, cash used in financing activities was $8.8 million, primarily due to $7.3 million of repayments under our Prior Credit Agreement, $0.7 million used in the repurchase of our common stock, and $0.6 million of principal payments on finance lease obligations.
Contractual Obligations and Other Commitments
There have been no other material changes to our contractual obligations and commitments as disclosed in our 2025 10-K.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our 2025 10-K and the notes to the audited consolidated financial statements appearing elsewhere in our 2025 10-K. There have been no significant changes to our critical accounting policies and estimates as disclosed in our 2025 10-K.
Recent Accounting Pronouncements
See Note 2, Significant Accounting Policies - Recently Issued Accounting Pronouncements, in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for more
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information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial position and our results of operations.
JOBS Act Accounting Election
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There has been no material change in our exposure to market risk from that discussed in our 2025 10-K.
Item 4. Controls and Procedures.
Limitations on effectiveness of controls and procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and principal accounting officer), evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 28, 2026, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 28, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are from time to time subject to various legal proceedings and claims, including employment claims, wage and hour claims, intellectual property claims, contractual and commercial disputes and other matters that arise in the ordinary course of our business. While the outcome of these and other claims cannot be predicted with certainty, we do not believe that the outcome of these matters will have a material adverse effect on our business, financial condition, cash flows, or results of operations. We are not presently a party to any legal proceedings that we believe would, if determined adversely to us, materially and adversely affect our future business, financial condition, cash flows, or results of operations.
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Item 1A. Risk Factors.
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.
We are required to meet the Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules, or we may risk delisting. Delisting could negatively affect the price of our common stock, which could make it more difficult for us to sell securities in a future financing or for stockholders to sell our common stock.
We previously failed to meet the continued listing requirements of the Nasdaq Global Market under Nasdaq rules in 2025, but we subsequently moved to the Nasdaq Capital Market and regained compliance. Most recently, we received a deficiency letter from Nasdaq on May 21, 2026 identifying that we were not in compliance with the minimum $2.5 million of stockholders' equity requirement for continued listing on the Nasdaq Capital Market. On July 6, 2026, we submitted a Compliance Plan to Nasdaq to address such deficiency. Subsequently, on August 5, 2026, we received notice from Nasdaq confirming we had regained compliance with the Nasdaq continued listing requirements by satisfying the alternative market value of listed securities standard of at least $35 million set forth in Nasdaq Listing Rule 5550(b)(2) for ten consecutive business days.
While we are currently in compliance with the continued listing requirements of the Nasdaq Capital Market, there can be no guarantee that we will be able to maintain compliance with these requirements in the future. If we are unable to maintain compliance with the continued listing requirements of the Nasdaq Capital Market in the future, our common stock could be delisted.
If our common stock is delisted from Nasdaq, we and our stockholders could face significant material adverse consequences including:
●a limited availability of market quotations for our shares;
●reduced liquidity for our shares;
●a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our shares;
●a limited amount of news and analyst coverage; and
●a decreased ability to issue additional securities or obtain additional financing in the future.
We may require additional capital to support business growth and this capital might not be available or may be available only by diluting existing stockholders.
We may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms or at all. If we raise additional equity financing, stockholders may experience significant dilution of their ownership interests. If we raise additional debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions.
On August 11, 2026, we entered into the Purchase Agreement with the Investor pursuant to which we have the right but not the obligation to sell to the Investor up to $4.5 million of shares of the Company’s common stock subject to the terms and conditions set forth in the Purchase Agreement. The purchase price per share of our common stock that we elect to sell to the Investor, if any, will fluctuate based on the market prices of our common stock. Depending on market liquidity at the time, resales of our common stock by the Investor may cause the trading price of our common stock to decrease,
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and any such decrease could be substantial. If and when we elect to sell our common stock to the Investor, sales of newly issued common stock by us to the Investor will result in dilution to the interests of existing holders of our common stock, which dilution may be substantial. Additionally, the sale of a substantial number of shares of our common stock to the Investor, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. While it is our intention to use any net proceeds from sales under the Purchase Agreement for working capital and other general corporate purposes, their ultimate use may vary substantially from their currently intended use. The failure by us to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our common stock to decline. Additionally, we have agreed to issue to the Investor shares of common stock valued at $200,000 as a commitment fee irrespective of how many shares of common stock, if any, we elect to sell to the Investor pursuant to the terms of the Purchase Agreement. The Purchase Agreement provides us with the option, following the termination of the Purchase Agreement upon either the conclusion of the commitment period or the Investor’s purchase of shares equal to the full commitment amount, to enter into a subsequent purchase agreement with the Investor for up to an additional $5.5 million on substantially the same terms as the Purchase Agreement, provided that no commitment fee would be payable by us to the Investor under any such subsequent purchase agreement. If we need additional capital beyond that which can be provided under the terms of the Purchase Agreement and any subsequent purchase agreement in the future and we cannot raise it on acceptable terms, or at all, our ability to continue to support our business growth and to respond to business challenges could be significantly limited and our business and prospects could fail or be adversely affected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On May 8, 2024, the Company announced that its Board of Directors authorized a stock repurchase program allowing the Company to repurchase up to an aggregate amount of $2.5 million of its shares of common stock (the "2024 Repurchase Program"). The 2024 Repurchase Program may be modified, suspended or terminated by the Company’s Board of Directors at any time. During the thirteen weeks ended June 28, 2026, no shares were repurchased pursuant to the Company’s 2024 Repurchase Program. As of June 28, 2026, $1.1 million remained available under the 2024 Repurchase Program authorization.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Equity Line of Credit
On August 11, 2026, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with ARC Group International Ltd. (the “Investor”), pursuant to which the Company has the right to sell to the Investor up to $4.5 million of shares of the Company’s common stock subject to the terms and conditions set forth in the Purchase Agreement during a commitment period that will terminate on the earlier of the 36-month anniversary of the Purchase Agreement or the date the Investor has purchased shares equal to the full commitment amount. The purchase price per share will be based on a discount to the volume-weighted average price (“VWAP”) of the Company’s common stock over specified pricing periods (96% of the lowest VWAP where no other advance is then pending and 90% of the VWAP when there is a prior advance pending), and sales under the Purchase Agreement are subject to certain limitations as described in the Purchase Agreement. The Company retains full discretion over the timing and amount of any sales under the Purchase Agreement and there is no requirement that the Company sell any shares thereunder. Actual sales of shares of common stock to the Investor from time to time will depend on a variety of factors, including, without limitation, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. In connection with entering into the Purchase Agreement, the Company will issue to the Investor shares of common stock valued at $200,000 (determined by dividing $200,000 by the average VWAP of the Company’s common
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stock for the 10 trading days immediately preceding the date of the Purchase Agreement) as a commitment fee. The Company intends to use any net proceeds from sales under the Purchase Agreement for working capital and other general corporate purposes. The shares of the Company’s common stock to be issued pursuant to the Purchase Agreement will be sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated thereunder. The Purchase Agreement also provides the Company with the option, following the termination of the Purchase Agreement upon either the conclusion of the commitment period or the Investor’s purchase of shares equal to the full commitment amount, to enter into a subsequent purchase agreement with the Investor for up to an additional $5.5 million on substantially the same terms as the Purchase Agreement, provided that no commitment fee would be payable by the Company to the Investor under any such subsequent purchase agreement.
In addition, the Purchase Agreement provides that in no event shall the number of shares of Company common stock issuable to the Investor pursuant to an advance cause the Investor to beneficially own more than 4.99% of the then issued and outstanding shares of the Company's common stock (“Ownership Limitation”), and the Company may not issue shares of common stock under the Purchase Agreement in excess of 19.99% of the outstanding shares of common stock as of the date of the Purchase Agreement (the “Exchange Cap”), unless the Company obtains the requisite stockholder approval required under the rules of the Nasdaq Capital Market. The Company is also required to file a post-effective amendment to its registration statement on Form S-3 (File No. 333-297232) or a new registration statement covering the resale of shares issuable under the Purchase Agreement within 45 calendar days of the date the Purchase Agreement was entered into, subject to the Company’s ability to delay such filing in certain circumstances, and use its best efforts to have such post-effective amendment or new registration statement declared effective as soon as possible following the filing thereof.
Securities Trading Plans of Directors and Executive Officers
During the thirteen weeks ended June 28, 2026,
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Item 6. Exhibits.
Incorporated by Reference | Filed/ | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit Number | | Exhibit Description | | Form | | File No. | | Exhibit | | Filing Date | | Furnished Herewith | |||
10.1 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant, dated as of June 9, 2026. | S-3 | 333-297232 | 3.3 | 07/02/2026 |
| |||||||||
10.2 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant, dated as of June 9, 2026. | S-3 | 323-297232 | 3.4 | 07/02/2026 | ||||||||||
10.3 | Second Amendment to Loan and Security Agreement, dated as of July 27, 2026, among Lulu's Fashion Lounge Holdings, Inc., Lulu's Fashion Lounge Parent, LLC and Lulu's Fashion Lounge, LLC, as borrowers, White Oak Commercial Finance, LLC, as administrative agent, and the lenders party thereto. | 8-K | 001-41059 | 10.1 | 07/31/2026 | ||||||||||
10.4 | Purchase Agreement, dated as of August 11, 2026, by and between Lulu's Fashion Lounge Holdings, Inc. and ARC Group International Ltd. | * | |||||||||||||
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). | * | |||||||||||||
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). | * | |||||||||||||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. | ** | |||||||||||||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. | ** | |||||||||||||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document | * | |||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | * | |||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | * | |||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | * | |||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | * | |||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | * | |||||||||||||
104 | Cover Page Interactive Data File (as formatted as Inline XBRL and contained in Exhibit 101) | * | |||||||||||||
*Filed herewith.
**Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| LULU’S FASHION LOUNGE HOLDINGS, INC. | |
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Date: August 12, 2026 |
| By: | /s/ Crystal Landsem |
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| Crystal Landsem |
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| Chief Executive Officer |
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| (Principal Executive Officer) |
Date: August 12, 2026 |
| By: | /s/ Heidi Crane |
Heidi Crane | |||
Chief Financial Officer | |||
(Principal Financial and Accounting Officer) | |||
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