Lulu’s Fashion Lounge (NASDAQ:LVLU) executives on the company’s fourth quarter and fiscal 2025 earnings call emphasized progress on profitability and cost structure, continued strength in event-driven categories, and accelerating wholesale expansion, while acknowledging ongoing work to reposition casual apparel and footwear.
Management highlights “transformational” year focused on efficiency and margins
CEO Crystal Landsem said 2025 was a “transformational year” marked by efforts to strengthen the company’s financial foundation, drive operational efficiencies, and lean into “event dressing.” She pointed to gross margin expansion, “a significant reduction in operating expenses,” and “three consecutive quarters of positive Adjusted EBITDA performance.”
In the fourth quarter, Landsem described “encouraging momentum” as special occasion and event wear outperformed, and said the company posted “our most meaningful sequential quarterly improvement in net revenue comparisons” with an approximately 5% decline in net revenue, improving from a 17% decline in the first quarter of 2025. She also highlighted product margin improvement for the fifth consecutive quarter and gross margin expansion.
Fourth-quarter results: revenue down 5% as margins and adjusted EBITDA improved
CFO Heidi Crane reported fourth-quarter net revenue of $63 million, down 5% year-over-year, driven by an 11% decrease in total orders placed, partially offset by a 6% increase in average order value. For the full year, net revenue totaled $282.3 million, down 11% versus 2024, reflecting a 15% decline in total orders placed and a 2% increase in average order value.
Gross margin in the quarter was 44.3%, up 640 basis points year-over-year. Crane attributed the increase to “a higher mix of full price sales and higher margin product categories,” along with improved outbound shipping costs that produced “over $700,000 of cost savings.” Full-year gross margin increased 200 basis points to 43.2% compared to 2024.
On profitability, Crane said fourth-quarter net loss improved to $0.4 million from a $31.9 million loss in the prior-year quarter. Excluding a non-cash goodwill impairment charge of $28.4 million recorded in the year-ago period, she said net loss in that period was $3.5 million. Full-year net loss was $13.7 million versus $55.3 million in 2024; excluding the impairment charge, she said full-year net loss was $26.9 million.
Adjusted EBITDA was positive $2.6 million in the fourth quarter, compared to a $3.3 million loss in the prior-year period, and the adjusted EBITDA margin was 4.2% versus -5% a year earlier. Full-year adjusted EBITDA was negative $1.2 million, improving from negative $9.7 million in 2024.
Crane also noted that during the fourth quarter the company refined its methodology for estimating breakage related to store credits “to better reflect changes in customer redemption patterns,” which increased breakage reported for the quarter and year “beyond historical levels.”
Cost reductions and return-rate initiatives remain central
Landsem said operating expenses declined 12% year-over-year in the fourth quarter, including a 13% reduction in fixed costs, as the company continued cost reduction initiatives. Crane provided additional detail, reporting selling and marketing expense of $11.8 million in Q4, down $0.9 million year-over-year, and general and administrative expense of $16.1 million, down $2.8 million, or 15%.
Crane said the general and administrative decline was driven by cost control initiatives including lower fixed labor and benefit costs, decreased equity-based compensation, lower variable labor costs due to “lower sales volume and increased productivity,” and reductions in liability insurance, legal and professional fees, and software, occupancy, depreciation, and amortization.
On returns, Landsem said return rates improved 80 basis points from the third quarter, marking “another quarter of sequential declines,” and credited improvements in fit and quality as well as adjustments to the return policy and “customer abuse prevention strategies.” President and CIO Mark Vos added that while event wear has become a larger portion of revenue, the company’s “core return rate within event wear” (measured on non-markdown sales and adjusted for volume) decreased by more than 5% year-over-year in 2025 due to investments in product quality and anti-buy-and-wear measures.
Wholesale growth accelerates; Amazon storefront launches
Landsem and Vos both highlighted strong wholesale momentum. Landsem said wholesale delivered “triple-digit year-over-year growth” and that the company added “several major retailers” in the fourth quarter, expanding to nine major retail partners. She said this translated into “triple-digit, seven-figure growth in wholesale revenue.”
Vos provided additional metrics, stating that in 2024 the company shipped to four major accounts and expanded to nine in 2025, with expectations to add “several more” in 2026. He said overall wholesale revenue increased 143% in 2025, and “same major revenue” was up 62% compared to 2024.
Landsem also pointed to specific distribution expansions, including an announcement in February of expansion into all Nordstrom stores nationwide. She said the company also launched an Amazon storefront earlier in the month of the call, describing it as offering “a curated, primarily exclusive assortment” while maintaining control of brand storytelling. She added that the company expected to expand into Victoria’s Secret in the first quarter of 2026.
Casual and footwear reset: fewer launches now, growth expectations later in 2026
Management said casual and footwear have pressured top-line performance and remain a key focus area. Landsem said the company is narrowing assortment, tightening inventory receipts, and shifting to “more elevated event adjacent and dress-forward styles.” She said the pressure on top-line contribution from these categories is expected to ease toward the end of the second quarter, supporting “a healthier revenue trajectory in the back half of the year.”
Vos said the company trimmed new casual and footwear assortment buys, with new product introductions in those categories 28% lower in Q4 2025 versus Q4 2024 and tracking to 50% lower in Q1 2026 compared with Q1 2025. He said the company expects event wear mix to continue increasing in the first half of 2026, meaning “no immediate improvement in return rate percentage is anticipated” in the first half. However, he said the company expects casual and footwear launches to “normalize and begin to return to growth” in Q3 and Q4 2026, which could translate to favorable return-rate comparisons and improved order economics later in the year.
Vos cited early indicators, including units transacted per new product launched increasing 21% year-over-year in Q4 2025, and tracking toward a 50% improvement in Q1 2026 versus Q1 2025.
Additional updates included Crane’s appointment as permanent CFO in February after serving as fractional CFO beginning in the third quarter, according to Landsem. Landsem also said the board approved an amendment to the certificate of incorporation to decrease authorized common shares from 250 million to 15 million and preferred shares from 10 million to 500,000, contingent on stockholder approval at the 2026 annual meeting.
Looking ahead, Crane said the company expects Adjusted EBITDA to be negative in the first quarter due to seasonal factors, efforts to work through slower-moving inventory, the timing of a clearance sale, annual audit fees, and increased performance marketing spend in March, but “significantly improved year-over-year.” For fiscal 2026, she said the company expects Adjusted EBITDA to “inflect to positive” compared to negative $1.2 million in 2025 and said the net revenue growth trend is expected to improve year-over-year versus 2025’s 11% decline. Capital expenditures are expected to be $2 million to $2.5 million, inclusive of capitalized software.
About Lulu’s Fashion Lounge (NASDAQ:LVLU)
Lulu’s Fashion Lounge, Inc is a publicly traded e-commerce apparel retailer that specializes in women’s fashion. Headquartered in Chico, California, the company operates under the “Lulus” brand, offering a curated selection of apparel, footwear and accessories designed to meet the trends and needs of a diverse female audience. Since completing its initial public offering and listing on the NASDAQ under the ticker symbol LVLU, Lulu’s has focused on expanding its direct-to-consumer business model and enhancing its online platform to drive global reach.
The company’s core product portfolio includes dresses, tops, denim, swimwear, jumpsuits and outerwear, complemented by a range of shoes, jewelry and handbags.
