[Management View]
Lulus management emphasized strategic priorities focused on refining product assortments, enhancing direct sourcing, and strengthening brand equity. Key metrics included a net revenue of $81.5 million, a gross margin of 45.3%, and a net loss reduction to $3 million. The company is actively negotiating a new asset-based revolving credit facility to support liquidity.

[Outlook]
Management provided guidance for positive adjusted EBITDA in Q3 2025 and plans to continue refining product assortments and expanding direct sourcing. Capital expenditures for fiscal 2025 are expected to be at the low end of the previously guided range, supporting margin expansion and risk mitigation against tariffs.

[Financial Performance]
Lulus reported an 11% YoY decline in net revenue for Q2 2025, driven by a 16% decrease in total orders placed. However, adjusted EBITDA improved to $500,000 from a $200,000 loss in the prior year. Operating expenses decreased by 15% YoY, reflecting cost-saving initiatives.

[Q&A Highlights]
Question 1: How is Lulus addressing the decline in casualwear and footwear sales?
Answer: Lulus is refining its merchandising strategy, launching more curated collections, and aligning offerings with its core brand identity. Early signs of improvement are visible in casual and separates categories, with elevated styles launched during Q2.

Question 2: What steps are being taken to manage potential tariff impacts?
Answer: The company is collaborating with vendors, diversifying sourcing, and implementing strategic pricing and assortment optimization. The direct sourcing strategy is expected to mitigate tariff costs and benefit the business in the second half of the year.

Question 3: Can you elaborate on the progress of the Love Rewards loyalty program?
Answer: The program achieved double-digit membership growth YoY in Q2 2025, driving an overall increase in total membership. Positive reactivation rates of lapsed customers and improved average order values were noted.

Question 4: What are the key drivers behind the improved product margins?
Answer: Product margins improved due to a shift to higher-margin categories and successful margin initiatives. The company is making ongoing refinements to its reorder funnel and merchandising strategy.

[Sentiment Analysis]
Analysts and management maintained a cautiously optimistic tone, acknowledging challenges in certain product categories while highlighting strategic initiatives and financial improvements. The sentiment was positive regarding the company's ability to navigate macroeconomic uncertainties.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
|-------------------------|---------------|---------------|
| Net Revenue | $81.5 million | $91.6 million |
| Gross Margin | 45.3% | 45.5% |
| Net Loss | $3 million | $10.8 million |
| Adjusted EBITDA | $500,000 | ($200,000) |
| Operating Expenses | $39.5 million | $46.5 million |

[Risks and Concerns]
Risks include continued softness in casualwear and footwear sales, potential tariff impacts, and executive team transitions. Interest expenses rose significantly due to credit agreement amendments, and net cash used in operating activities increased.

[Final Takeaway]
Lulus is navigating a challenging retail environment with strategic refinements in product assortments and sourcing strategies. Despite a decline in net revenue, the company achieved positive adjusted EBITDA and reduced its net loss, reflecting improved cost management and operational efficiency. Management remains focused on long-term growth objectives, supported by brand equity enhancements and wholesale channel expansion. Investors should monitor the company's progress in addressing product category challenges and managing macroeconomic risks.