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What changed in Lulu's Fashion Lounge Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Lulu's Fashion Lounge Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+537 added−482 removedSource: 10-K (2025-03-27) vs 10-K (2023-03-14)

Top changes in Lulu's Fashion Lounge Holdings, Inc.'s 2024 10-K

537 paragraphs added · 482 removed · 315 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe are focused on building authentic personal relationships with our customers and offering them coveted products they cannot purchase elsewhere. We incorporate the pulse of the consumer by engaging with her where she is: across the web, on social media and across our platform, through reviews, feedback and one-on-one interactions with our Style Advisors, Fit Experts and Bridal Concierge.
Biggest changeWe incorporate the pulse of the consumer by engaging with her through reviews, feedback and one-on-one interactions with our style advisors, fit experts and bridal concierge across the web, social media, and the Lulus’ mobile app. Customers express their love for our brand on social media and by word-of-mouth (both in-person and online).
Sales analyses across hundreds of product attributes and assortment architecture and trend analyses inform our buyers’ selection of new styles. Customer demand and return signal data, product profitability, seasonality, and product demand prediction are taken into consideration to advise our reorder buyers which products to reorder, when those reorders should arrive, and in what quantities.
Sales are analyzed across hundreds of product attributes and assortment architecture and trend analyses inform our buyers’ selection of new styles. Customer demand and return signal data, product profitability, seasonality, and product demand prediction are taken into consideration to advise our reorder buyers which products to reorder, when those reorders should arrive, and in what quantities.
Our culture is defined by our core values: “All Voices, All In, Always Evolving.” ● “All Voices” means every voice, at every level, is valued and encouraged. We are a team made up of individuals, and diversity and self-expression are welcome. We treat each other with respect.
Our culture is defined by our core values: “All Voices, All In, Always Evolving.” ● “All Voices” means every voice, at every level, is valued and encouraged. We are a team made up of individuals, and self-expression is welcome. We treat each other with respect.
Unlike traditional retailers, we leverage a “test, learn, and reorder” strategy to bring hundreds of new products to market every week; we test them in small batches, learn about customer demand and then quickly reorder winning products in higher volume to optimize profitability.
Unlike traditional retailers, we leverage a “test, learn, and reorder” strategy to bring hundreds of new products to market almost every week; we test them in small batches, learn about customer demand and then quickly reorder winning products in higher volume to optimize profitability.
Millions of customers have interacted with us, leaving detailed reviews, interacting with our on-demand Style Advisors, Fit Experts, and Bridal Concierge, and completing checkout surveys. Across Facebook, Instagram, Pinterest, Snapchat, TikTok, Twitter and YouTube, our over 8.1 million followers engage with us through their comments, feedback, photographs, and support of our brand with their digital followers.
Millions of customers have interacted with us, leaving detailed reviews, interacting with our on-demand Style Advisors, Fit Experts, and Bridal Concierge, and completing checkout surveys. Across Facebook, Instagram, Pinterest, Snapchat, TikTok, Twitter and YouTube, our over 8.8 million followers engage with us through their comments, feedback, photographs, and support of our brand.
We pitch in to support our team members and get the job done. ● “Always Evolving” means we are digital natives, changing and evolving along with our customers and technology. We are never satisfied with the status quo. We constantly seek to improve ourselves, our product, and our Company.
We pitch in to support our team members and get the job done. ● “Always Evolving” means we are digital-native, changing and evolving along with our customers and technology. We are never satisfied with the status quo. We constantly seek to improve ourselves, our product, and our Company.
Under applicable federal and state laws, we also are required to adhere to a number of requirements when sending commercial email to consumers, including identifying advertising and promotional emails as such, ensuring that subject lines are not deceptive, giving consumers an opportunity to opt-out of further communications and clearly disclosing our name and physical address in each commercial email.
Under applicable federal and state laws, we also are required to adhere to a number of requirements when sending commercial email, SMS and other messages to consumers, including identifying advertising and promotional emails as such, ensuring that subject lines are not deceptive, giving consumers an opportunity to opt-out of further communications and clearly disclosing our name and physical address in each commercial email.
Further, any actual or alleged failure to comply with any of these laws or regulations by us, our suppliers or our network of influencers could hurt our reputation, brand and business, force us to incur significant expenses in defending against proceedings or investigations, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties.
Further, any actual or alleged failure to comply with any of these laws or regulations by us, our suppliers or our network of influencers 12 Table of Contents could hurt our reputation, brand and business, force us to incur significant expenses in defending against proceedings or investigations, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties.
From payment card industry compliant checkout to the software running on handheld barcode scanners in order fulfillment, these key software processes are developed, maintained, and enhanced by our in-house engineering and data teams to meet and exceed our customers’ expectations in a scalable way. Data-driven insights are core to what we do at Lulus.
From payment card industry compliant checkout to the software running on handheld barcode scanners in order fulfillment, these key software processes are developed, maintained, and enhanced by our in-house engineering and data teams with the objective to exceed our customers’ expectations in a scalable way. Data-driven insights are core to what we do at Lulus.
These regulations impact the use of cookies, tracking technologies and other e-marketing efforts, and there has been significant recent European court and regulatory decisions in this area, including through privacy activists.
These regulations impact the use of cookies, tracking technologies and other e-marketing efforts, and there have been significant recent European court and regulatory decisions in this area, including through privacy activists.
We will look for opportunities to play a constructive role in addressing the environmental, social, and governance (“ESG”) challenges of the fashion industry while working towards creating long-term value for our Company and our stakeholders. Governance. Lulus’ ESG efforts are overseen by our Board of Directors through our Nominating and Corporate Governance Committee.
We will look for opportunities to play a constructive role in addressing the ESG challenges of the fashion industry while working towards creating long-term value for our Company and our stakeholders. Governance. Lulus’ ESG efforts are overseen by our Board of Directors through our Nominating and Corporate Governance Committee.
Whether she is browsing social media or providing feedback on a recent purchase, we engage with our customer across a multitude of touchpoints throughout the discovery and purchase journey. ​ ​ 8 Table of Contents Our Growth Strategies Due to the mass market appeal of our brand, we believe there is a significant opportunity to bring new customers into the Lulus community through increased brand awareness.
Whether they are browsing social media or providing feedback on a recent purchase, we engage with our customers across a multitude of touchpoints throughout the discovery and purchase journey. ​ ​ 8 Table of Contents Our Growth Strategies Due to the mass market appeal of our brand, we believe there is a significant opportunity to bring new customers into the Lulus community through increased brand awareness.
Our customer insights, predictive capabilities, product recommendations, and custom-built website work seamlessly together to offer each customer a personalized experience across web, mobile, our mobile app, email, and SMS. These strategies work in unison to help drive order conversion.
Our customer insights, predictive capabilities, product recommendations, and custom-built website work seamlessly together to offer customers a personalized experience across desktop, mobile web, our mobile app, email, and SMS. These strategies work in unison to help drive order conversion.
However, future changes to environmental laws or regulations may impact our operations and could result in increased costs. 12 Table of Contents In many jurisdictions, there is great uncertainty whether or how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the internet and e-commerce.
However, future changes to environmental laws or regulations may impact our operations and could result in increased costs. In many jurisdictions, there is great uncertainty whether or how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the internet and e-commerce.
We have built our own proprietary, integrated e-commerce backend system to minimize cost and maximize customer satisfaction. 10 Table of Contents We have built our software development and deployment cycles such that software changes can be deployed daily after being verified by fully automated testing, as well as by human functional testing.
We have built our own proprietary, integrated e-commerce backend system to minimize cost and maximize customer satisfaction. We have built our software development and deployment cycles such that software changes can be deployed daily after being verified by fully automated testing, as well as by human functional testing.
Additionally, we continually develop and evaluate new tools and programs designed to improve the key customer metrics that drive our business, such as frequency of purchase and Average Order Value (“AOV”) through the following strategies: ● Optimization of our website and mobile experience through continued A/B and multivariate testing; ● Improvement of customer segmentation and personalization features; ● Leveraging our expanded multi-region distribution facilities to offer faster order delivery and developing new shipping options; ● Development of our loyalty program, including through the launch of our revamped loyalty program in February 2022, to engender even deeper brand engagement, drive repeat purchase behavior and increase wallet share; ● Enhancement of our customer service through the expansion of our Style Advisors, Fit Experts, and Bridal Concierge dedicated to creating a truly personalized digital boutique experience; ● Continued development of our affordable luxury brand positioning and content; and ● Incorporating new technology that enhances our customers’ experience.
Additionally, we continually develop and evaluate new tools and programs designed to improve the key customer metrics that drive our business, such as frequency of purchase and Average Order Value (“AOV”) through the following strategies: ● Optimization of our website and mobile experience through continued A/B and multivariate testing; ● Improvement of customer segmentation and personalization features; ● Leveraging our multi-region distribution facilities to offer faster order delivery and developing new shipping options; ● Enhancement of our loyalty program, to engender even deeper brand engagement, drive repeat purchase behavior and increase wallet share; ● Enhancement of our customer service through the expansion of our style advisors, fit experts, and bridal concierge dedicated to creating a truly personalized boutique experience; ● Continued development of our attainable luxury brand positioning and content; and ● Incorporating new technology that enhances our customers’ experience.
For example, the United States and China and the United States and Mexico, where certain of our products are manufactured, have recently engaged in an escalating trade war, which has led to each side threatening tariffs that could adversely affect our business and results of operations or cause us to relocate manufacturing to other countries and territories, which could disrupt our operations.
For example, the United States and China, where certain of our products are manufactured, have recently engaged in an escalating trade war, which has led to each side imposing tariffs that could adversely affect our business, financial condition and results of operations or cause us to relocate manufacturing to other countries and territories, which could disrupt our operations.
We accomplish this by continuously improving the boutique experience on our platform through features such as our product recommendation engine and targeted messaging and with our in-house team of customer service associates who maintain deep expertise of our brand, products, and systems. ● Personalized and Optimized Shopping Experience : We customize and personalize our interactions with each Lulus customer by monitoring information such as how she arrives on our site, her on-site behavior, and what she buys.
We accomplish this by continuously improving the boutique experience on our platform through features such as our product recommendation engine, targeted messaging, and with our in-house team of customer service associates who maintain deep expertise of our brand, products, and systems. ● Personalized and Optimized Shopping Experience : We customize and personalize our interactions with each Lulus customer by monitoring information such as how they arrive on our site, on-site behavior, and what they buy.
Our Executive Chairman and General Counsel work with internal stakeholders, including a cross-functional ESG Steering Committee, as well as with outside specialists, to set and implement the Company’s ESG strategy. Our ESG strategy and initiatives are discussed regularly at the Board level. Approach. In 2022, we engaged a third-party ESG consultant to conduct a materiality assessment.
Our General Counsel works with internal stakeholders, including a cross-functional ESG Steering Committee, as well as with outside specialists, to set and implement our ESG strategy. Our ESG strategy and initiatives are discussed regularly at the Board of Directors level. Approach. In 2022, we engaged a third-party ESG consultant to conduct a materiality assessment.
We use contingent labor in varying levels throughout the year to augment our workforce. None of our employees are represented by a labor union, and we have had no labor-related work stoppages. We believe that we have good relationships with our employees.
We use contingent labor in varying levels throughout the year to augment our workforce. None of our employees are represented by a labor union, and we have had no labor-related work stoppages. We believe that we have good relationships with our employees. Company Culture and Values. We are proud of our strong culture, which is embodied by our workforce.
We monitor changes in these laws and believe that we are in material compliance with applicable laws. We are also subject to a number of domestic and foreign laws and regulations that affect companies conducting business on the internet, many of which are still evolving and could be interpreted in ways that could harm our business.
We are also subject to a number of domestic and foreign laws and regulations that affect companies conducting business on the internet, many of which are still evolving and could be interpreted in ways that could harm our business.
We work with reputable cloud services providers across multiple data centers, with fully redundant infrastructure within each data center, as well as with full failover capability between data centers, which allows us to serve our customers at virtually any time. Our infrastructure is flexible and scalable to provide our customers with the best possible shopping experience.
We work with reputable cloud services providers across multiple data centers, with fully redundant infrastructure within each data center, as well as with full failover capability between data centers, which allows us to serve our customers at virtually any time.
We take pride in the growth of our teams, promoting top performers and infusing our Company with new and fresh ideas from outside hires. We strive to embody these core values in our connections with our customers as well as our employees. We strive to embody these core values in our connections with our customers as well as our employees.
We take pride in the growth of our teams, promoting top performers and infusing our Company with new and fresh ideas from outside hires. 13 Table of Contents We strive to embody these core values in our connections with our customers as well as our employees. Our core values form an integral part of our employee experience and expectations.
These laws and regulations include federal and state consumer protection laws and regulations, which address, among other things, the privacy and security of consumer information, sending of commercial email, and unfair and deceptive trade practices.
These laws and regulations include federal and state consumer protection laws and regulations, which address, among other things, the privacy and security of 11 Table of Contents consumer information, sending of commercial email, usage of SMS, push notifications, and other messaging, and unfair and deceptive trade practices.
In support of our employees’ mental health, we have an Employee Assistance Program that provides all employees up to three visits per year with a licensed professional counselor.
In support of our employees’ mental health, we have an Employee Assistance Program that provides all employees up to three visits per year with a licensed professional counselor. Available Information Our investor relations website is investors.lulus.com .
In aggregate, this dataset gives us a deep understanding of our customers’ preferences. Marketing and Engagement Strategy: We engage with our customer where she is, in authentic and personalized ways: through our website, mobile app, email, SMS, and on social media. This strategy helps drive brand awareness while fostering deep connections with our customers.
In aggregate, this data set gives us the ability to understand our customers’ preferences. Marketing and Engagement Strategy: We strive to engage with our customer where she is, in authentic and personalized ways: through our website, mobile app, email, SMS, social media and in-person connections. This strategy helps drive brand awareness while fostering deep connections with our customers.
Our website and information included in or linked to our website are not part of this Annual Report on Form 10-K.
In addition to the information about us contained in this Annual Report on Form 10-K, information about us can be found on our website. Our website and information included in or linked to our website are not part of this Annual Report on Form 10-K.
We have learned that enhancing our existing customers’ experience drives increased word-of-mouth (in-person and online) recommendations, which in turn helps grow brand awareness. ​ ​ 9 Table of Contents Pursue Category Expansion We believe there is tremendous potential to continue to drive growth in our underpenetrated categories.
We have learned that enhancing our existing customers’ experience drives increased word-of-mouth (in-person and online) recommendations, which in turn helps grow brand awareness. 9 Table of Contents Pursue Customer Expansion We believe there is great potential to expand our customer base and drive growth within our existing core categories by focusing on, among other things, product size, fit, and construction.
Traditional merchandising approaches are risk and capital intensive, characterized by extended in-house design cycles, seasonal assortment decisions, deep buys, limited customer feedback, and high markdowns.
Nowhere is this more pronounced than in our product creation and curation cycle. Traditional merchandising approaches are risky and capital intensive, characterized by extended in-house design cycles, seasonal assortment decisions, deep buys, limited customer feedback, and high markdowns.
Seasonality in our business does not follow that of traditional retailers, such as a typical concentration of revenue in the holiday quarter. Historically, our net revenue is highest in our second and third fiscal quarters compared to the rest of the year due to higher demand for special event dresses and spring and summer fashion.
Seasonality in our business does not follow that of traditional retailers, such as a typical concentration of revenue in the holiday quarter. In 2024, consistent with most years, our net revenue was the highest during the second quarter due to the typically higher demand for event dresses in the spring and summer.
Security and Data Protection We are committed to the security of our customers’ data and personal information. We aggregate and analyze data in order to optimize the customer experience internally, and do not monetize the information we collect by selling it to third parties for money for their own external purposes.
We aggregate and analyze data in order to optimize the customer experience internally, and do not monetize the information we collect by selling it to third parties for money for their own external purposes. We utilize both on-premise and cloud-based technologies and undertake technical and other administrative measures to ensure the protection of our systems and customer data.
The resulting proposed regulation, once it is formally adopted, is expected to require that certain commodities including cattle, cocoa, coffee, oil palm, soya, wood, and rubber, and certain products derived therefrom, that are placed on the EU market, or exported from the EU market, no longer contribute to deforestation or forest degradation.
The regulation requires that certain commodities such as cattle, cocoa, coffee, oil palm, soya, wood, and rubber, and certain products derived therefrom, that are placed on the EU market, or exported from the EU market, no longer contribute to deforestation or forest degradation or do not originate from recently deforested land.
We do not know of any existing environmental law, regulation nor condition that reasonably would be expected to have a material adverse effect on our business, capital expenditures, or operating results.
The EU regulation contains requirements including due diligence and traceability obligations necessitating the linking of certain commodities and certain derived products to their place of production. We do not know of any existing environmental law, regulation nor condition that reasonably would be expected to have a material adverse effect on our business, capital expenditures, or operating results.
We have registrations in Canada, the European Union (the “EU”), the United Kingdom, Australia, Mexico, China, and several other countries, as well as additional pending international applications.
We believe Lulus’ trademarks have significant value in the marketing of our merchandise. We also have registrations in Canada, the European Union (the “EU”), the United Kingdom, Australia, Mexico, China, and several other countries, as well as additional pending international applications. We vigorously protect our intellectual property rights.
Central to our “Always Evolving” core value is a dedication to developing our LuCrew members by providing them with skills and development opportunities. We have a dedicated Manager of Culture and Learning, and new in 2022, a Talent Engagement and Development Specialist, both of whom are dedicated to employee learning and development, including our BDJJ program.
Central to our “Always Evolving” core value is a dedication to developing our LuCrew members by providing them with skills and development opportunities. We have internal resources dedicated to employee learning and development.
See “Risk Factors—Risks Related to Our Business and Industry—A failure to comply with current laws, rules and regulations, or changes to such laws, may adversely affect our business, financial performance, results of operations, or business growth.” Environmental, Social, and Governance (ESG) At Lulus, we believe in being responsible business stewards and strive to understand the impact that our business has on our employees, customers, and the planet.
See “Risk Factors—Risks Related to Regulation, Taxation and Litigation — Unfavorable changes or failure by us to comply with evolving internet and e-commerce regulations could substantially harm our business and results of operations.” Environmental, Social, and Governance (“ESG”) At Lulus, we believe in being responsible business stewards and strive to understand the impact that our business has on our employees, customers, and the planet.
Our ability to leverage our existing categories to introduce and grow new ones has resulted in customer repeat orders with strong product diversification. Pursue International Expansion While we expect the majority of our near-term growth to continue to come from the United States, we believe that serving international customers represents a long-term growth opportunity.
Pursue International Expansion While we expect the majority of our near-term customer demand to continue to come from the United States, we believe that serving international customers represents a long-term growth opportunity.
Our business model is characterized by high SKU velocity, low to no SKU affinity, quick order-to-to-ship requirements, short return-to-refund timelines, and fast inventory turnover.
We have implemented, and will continue to implement, robotics and other automation to support various processes and increase efficiency within our distribution facilities. Our business model is characterized by high SKU velocity, low to no SKU affinity, quick order-to-ship requirements, short return-to-refund timelines, and fast inventory turnover.
Item 1. Business. Our Business Lulus is a customer-driven, digitally-native fashion brand primarily serving a large, diverse community of Millennial and Gen Z women, who typically meet us in their 20s and stay with us through their 30s and beyond. We focus relentlessly on giving our customers what they want.
Lulus primarily serves a large, diverse community of Millennial and Gen Z women, who typically meet us in their 20s and stay with us through their 30s and beyond. We focus relentlessly on giving our customers what they want by using direct consumer feedback and insights to refine product offerings and elevate the customer experience.
We take great effort to ensure that all suppliers share our commitment to quality and ethics, including through adherence to our Vendor and Supplier Code of Conduct. Technology The www.lulus.com website, mobile app, merchandising, customer, order, and warehouse management systems are proprietary, purpose-built solutions with the goal of delivering the best possible customer experience and operational efficiency.
Technology The www.lulus.com website, mobile app, merchandising, customer, order, and warehouse management systems are proprietary, purpose-built solutions with the goal of delivering the best possible customer experience and operational efficiency.
These Affinity Groups create opportunities for employees to share their diverse perspectives and connect with each other on a deeper level and are intended to foster a culture that is open, inclusive and respectful.
The ERGs create opportunities for employees to share their perspectives, connect with each other on a deeper level, and are intended to promote a culture that is open, inclusive and respectful. These groups have also contributed to greater understanding Companywide of different perspectives, with meetings, celebrations, and learning experiences open to the entire Company.
Many of these laws may require disclosure to and consent from consumers for the use of data for various purposes, including marketing, which may reduce our ability to market our products. In addition, in December 2022, a provisional political agreement was reached between the European Parliament and the Council of the EU regarding deforestation-free supply chains.
Many of these laws may require disclosure to and consent from consumers for the use of data for various purposes, including marketing, which may reduce our ability to market our products.
We continue to leverage data-driven customer insights to develop strong customer relationships and become a one-stop shop for Gen Z and Millennial women.
Enhance and Retain Existing Customer Relationships We have a large Lulus community of 2.6 million Active Customers as of December 29, 2024. We continue to leverage data-driven customer insights to develop strong customer relationships and become a one-stop shop for Gen Z and Millennial women.
We vigorously protect our intellectual property rights. ​ 11 Table of Contents Regulation and Legislation We are subject to labor and employment laws, laws governing advertising and promotions, privacy laws, safety regulations, customer protection regulations and other laws that regulate retailers and govern the promotion and sale of merchandise and warehouse facilities.
Regulation and Legislation We are subject to laws and regulations governing labor and employment, advertising and promotions, privacy, safety, customer protection, retailers and the promotion and sale of merchandise, and warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with applicable laws.
As a result, we focus on offering the best possible assortment of Lulus products for our customers. ● Product Reviews: One of the most important aspects of our digital shopping experience is our extensive database of proprietary customer product reviews, which we first enabled in 2012 and now amounts to over one million reviews.
Our frequently updated catalog further enhances this experience, enabling customers to discover products that align with their needs, including our exclusive Lulus products. ● Product Reviews: One of the most important aspects of our digital shopping experience is our extensive database of proprietary customer product reviews, which we first enabled in 2012 and now amounts to over one million reviews.
We also offer competitive employee benefits including life and health insurance (medical, dental, and vision), paid time off, paid sick leave, and 401(k) plan with Company match. In 2022 we implemented an Employee Stock Purchase Program, and in 2023 we implemented paid parental leave and doubled the paid time off offered to entry level employees.
We regularly evaluate wages and salary bands to be competitive with the market. We also offer competitive employee benefits including life and health insurance (medical, dental, and vision), paid time off, paid sick leave, and 401(k) plan with a Company match.
Suppliers We collaborate with a network of more than 300 suppliers, who serve as our design and manufacturing partners. These suppliers often give us priority access and exclusivity to designs, given the strong relationships we have built over the last two decades. We do not have any long-term commitments requiring us to purchase minimum volumes from any supplier.
We believe that providing a localized shopping experience will significantly enhance our ability to serve customers in international markets. Suppliers We collaborate with a network of around 300 suppliers, who serve as our design and manufacturing partners. These suppliers often give us priority access and exclusivity to designs, given the strong relationships we have built over the last two decades.
Our authentic partnerships with brand ambassadors span the full spectrum of followership and engagement levels, from nano- and micro-influencers, to college ambassadors and celebrities, all of whom wear and genuinely love our brand.
Our authentic partnerships with brand ambassadors span the full spectrum of followership and engagement levels, from nano- and micro-influencers, to college ambassadors and celebrities, all of whom wear and genuinely love our brand. 7 Table of Contents Data-Driven Product Creation Strategy: Our innovative product creation strategy leverages the power of our proprietary data and our “test, learn, and reorder” approach to bring new styles online almost every weekday.
Trademarks and Intellectual Property Our trademarks, including LULUS® and ®, are registered with the United States Patent and Trademark Office. We also own the registrations for LULU’S®, LOVELULUS®, and COVETED CURATED COLLECTED®. We own the domain name www.lulus.com. We believe the Lulus® trademark has significant value in the marketing of our merchandise.
We recognized 25%, 29%, 25% and 21% of our annual net revenue during the first, second, third and fourth quarters of 2024, respectively. Trademarks and Intellectual Property Our trademarks, including LULUS® and ®, are registered with the United States Patent and Trademark Office. We own additional registrations, including LULU’S®, LOVELULUS®, and COVETED CURATED COLLECTED®. We own the domain name www.lulus.com.
We have engaged an outside supply chain risk management and audit company to evaluate our supply chain risks and develop an oversight and auditing program, which we will be starting in 2023.
We also provide training to our vendors and employees on responsible sourcing and production practices. In 2022, we engaged an outside supply chain risk management and audit company to evaluate our supply chain risks and develop an oversight and auditing program, which started conducting third-party audits in 2023.
We utilize both on-premise and cloud-based technologies and undertake technical and other administrative measures to ensure the protection of our systems and customer data. We use various in-house and third-party tools to support our security policies and procedures including user access controls, server monitoring, (web) firewalls, security content policies, and data encryption.
We use various in-house and third-party tools to support our security policies and procedures including multi-factor authentication, user access controls, server monitoring, network firewalls, web application firewalls, security content policies, security training, and data encryption.
We recognize employee birthdays and milestone anniversaries both in our newsletter and with individual gifts. Almost all of our corporate and customer service employees have the option of working remotely or on a hybrid basis, and our offices are pet-friendly. ​ Health and Safety. The health and safety of our employees is core to our Lulus values.
Almost all of our corporate and customer service employees have the option of working on a hybrid basis, and some of our locations are pet-friendly. ​ Health and Safety. The health and safety of our employees is core to our Lulus values. Each of our Distribution Centers has a safety team and safety captains dedicated to maintaining a safe workplace.
Smith, reflecting her role as Chief Financial Officer, which became effective on the Effective Date. ​ Human Capital Resources Employees and Demographics. Our employees, also known as the “LuCrew” are integral to the success of the Company, and we strive to prioritize our employees’ development, growth, and wellbeing. As of January 1, 2023, we had 805 full-time and part-time employees.
Black to the Board’s Compensation Committee and Nominating and Corporate Governance Committee, effective March 31, 2025. ​ Human Capital Resources ​ Employees and Demographics. Our employees, also known as the “LuCrew” are integral to our success, and we strive to prioritize our employees’ development, growth, and wellbeing. As of December 29, 2024, we had 580 full-time and part-time employees.
Our deep and personal engagement with our customers through product reviews, exit surveys and social media feedback helps us understand the product categories they are most interested in shopping and will continue to inform the breadth and depth of the categories we offer.
Our engagement with potential and existing customers through product reviews, exit surveys, social media, and in-person feedback helps us understand the products they are most interested in shopping for, as well as those that could be improved.
We also engaged a third-party greenhouse gas (“GHG”) consulting firm to assess our 2021 Scope 1 and 2 GHG emissions and will be working with the same firm to assess our 2022 Scope 1 and 2 GHG emissions. This will enable us to set a baseline for our GHG Scope 1 and 2 emissions and create a plan for improvement.
Gathering this data will enable us to set a baseline for our GHG Scope 1 and 2 emissions and create a plan for improvement.
The seasonality of our business has resulted in variability in our total net revenue quarter-to-quarter. We believe that this seasonality has affected and will continue to affect our results of operations. We recognized 25%, 30%, 24% and 21% of our annual net revenue during the first, second, third and fourth quarters of 2022, respectively.
Net revenue was the lowest during the fourth quarter given we are not a holiday gifting destination and event dress demand is typically lower during that time of year. 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.
This efficient, data-driven process, coupled with human insight, allows us to respond to fashion trends with speed and precision while significantly reducing risk in our business. 7 Table of Contents Marketing Our marketing strategy leverages our strong visual brand presence to build awareness and drive engagement with our large, diverse community of loyal customers.
We are highly focused on optimization of inventory levels to meet customer demand and minimize markdowns. This efficient, data-driven process, coupled with human insight, allows us to respond to fashion trends with speed and precision while significantly reducing risk in our business.
We integrate the power of data across multiple channels to offer a singular brand voice that speaks to Millennial and Gen Z women. We meet the Lulus customer wherever she is, enabling her discovery of the brand and providing her numerous opportunities to interact with others in the Lulus community.
Marketing ​ Our marketing strategy leverages our strong visual brand presence to build awareness and drive engagement with our large, diverse community of loyal customers. We integrate the power of data across multiple channels to offer a singular brand voice that speaks to Millennial and Gen Z women.
We also encouraged our employees to obtain COVID-19 vaccinations once they became available. In addition, during 2022, we continued to offer paid COVID-19 leave for absences related to COVID-19. We provide several channels for employees to make suggestions or report concerns related to health and safety.
We continue to take proactive and precautionary steps to protect the health and safety of our employees. In addition, we provide several channels for employees to make suggestions or report concerns related to health and safety.
Upon attracting a new or existing customer to our website or mobile experience, we seek to maximize conversion through a variety of strategies: ● Brand Strength and Exclusivity: As a digitally-native fashion brand, we benefit from the ability to focus our resources, as well as our customers’ attention, primarily on the Lulus brand, without the distraction or complexity of managing and marketing a large multi-brand portfolio.
We attract and engage customers through a combination of owned, earned and paid media. ​ Upon attracting a new or existing customer to our website or mobile experience, we seek to maximize conversion through a variety of strategies: ● Brand Strength and Exclusivity: Rooted in our primarily digital-first approach, our brand's strength thrives on a profound understanding of the Lulus customer.
Working with internal and external stakeholders, this process helped us to identify the priority material topics that our stakeholders care about. As part of our developing strategy, we plan to formalize a framework for our efforts and reporting around these topics and look forward to sharing our continued progress on ESG matters.
Working with internal and external stakeholders, this process helped us to identify the priority material topics that our stakeholders care about. These priority material topics inform our efforts around ESG matters. We have also worked with a third-party greenhouse gas (“GHG”) consulting firm to assess our annual Scope 1 and 2 GHG emissions for each year since 2021.
Our core values form an integral part of our employee experience and expectations. Employees are introduced to these core values during orientation, and they 14 Table of Contents are a component of employees’ performance evaluation.
Employees are introduced to these core values during orientation, and they are a component of employees’ performance evaluation. We also honor “Core Values Champions” in our monthly company newsletter and in our “All Voices” company meetings. All Voices.
To date, we have shipped our merchandise to over 100 countries, while spending minimal dollars on marketing outside of the United States, demonstrating our global appeal and broader market opportunity.
To date, we have shipped our merchandise to around 150 countries, with only limited marketing spend outside of the United States, demonstrating our global appeal and broader market opportunity. We continue to focus on our platform and distribution process for international customers, allowing for a more optimized shopping experience, including more flexibility across languages and currencies.
Through this engagement with our customers, we strive to build personal connections that are authentic and durable. We attract and engage customers through a combination of owned, earned and paid media.
We seek to meet the Lulus customer wherever she is, enabling her discovery of the brand and providing her opportunities to interact with others in the Lulus community. Through this engagement with our customers, we strive to build personal connections that are authentic and durable.
We also use our technology to optimize our operational efficiency as e-commerce fulfillment and reverse logistics are critical to profitability. We have implemented, and will continue to implement, robotics and other automation to support various processes and increase efficiency within our distribution facilities.
We utilize predictive analytics and artificial intelligence to optimize our assortment and personalize the website experience through advanced search and product recommendations. We also use our technology to optimize our operational efficiency as e-commerce fulfillment and reverse logistics are critical to profitability.
Due to our customer data-driven product creation strategy, we have the ability to test new categories with minimal upfront investment and risk. New categories are opened with a controlled assortment of branded and partner products through which we learn to understand customer demand via our reorder algorithms.
Our customer data-driven product development strategy enables us to test our assortment with minimal upfront investment and risk and gives us the ability to leverage our existing categories to attract new customers and drive repeat orders.
Laying the groundwork for a greater oversight of our suppliers and supporting the health and wellbeing of all the people who make our products, we formalized our Vendor and Supplier Code of Conduct which sets forth our expectations for working conditions in all factories producing Lulus products.
As socially responsible sourcing is a priority topic of interest to our stakeholders, we have established a Vendor and Supplier Code of Conduct which sets forth our expectations for working conditions in all factories producing Lulus products. Our Vendor and Supplier Code of Conduct can be accessed on our investor relations website, which is located at https://investors.lulus.com .
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We do this by using data coupled with human insight to deliver a curated and continuously evolving broad assortment of on-trend, affordable luxury fashion for many of life’s moments. Our customer obsession sets the tone for everything we do, from our personalized online shopping experience to our exceptional customer service.
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Item 1. Business. Our Business Lulus is a customer-driven, primarily online, digitally-native attainable luxury fashion brand for women, offering modern, unapologetically feminine designs at attainable prices for all of life’s fashionable moments. Our goal is to become the most trusted and number one destination for dresses, helping every woman feel confident and celebrated, supporting her for all of life's occasions.
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Customers express their love for our brand on social media and by word-of-mouth (both in-person and online). A key differentiator of our business model from traditional fashion retail is our use of data to optimize almost all elements of our business. Nowhere is this more pronounced than in our product creation and curation cycle.
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Lulus’ world class personal stylists, bridal concierge, and customer care team share an unwavering commitment to elevating style and quality and bring exceptional customer service and personalized shopping to customers around the world. We are focused on building authentic personal relationships with our customers and offering them coveted products they cannot purchase elsewhere.
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Data-Driven Product Creation Strategy: Our innovative product creation strategy leverages the power of data and our “test, learn, and reorder” approach to bring new styles online almost every weekday. We are highly focused on optimization of inventory levels to meet customer demand and minimize markdowns.
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We strive to provide opportunities for the customer to have an in-person connection with our products and the brand, through wholesale accounts with department stores and other brick and mortar retailers, in-person events, and at our showroom in Los Angeles, California. ​ A key differentiator of our business model from traditional fashion retail is our use of data to optimize almost all elements of our business.
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We intend to grow awareness of the Lulus brand and attract new customers through the following strategies: ● Further investment in performance digital marketing strategies; ● Exploration and expansion of new marketing channels; ● Continued expansion of our brand ambassador program at all engagement tiers, including celebrity, micro- and nano-influencers, and college ambassadors to introduce Lulus to new audiences; ● Expansion of marketing programs that leverage word-of-mouth referral; ● Further development and testing of physical retail opportunities to expand on brand awareness, such as in-store partnerships with third-party retailers and small-format pop-ups and showrooms; and ● Continued development of brand partnerships, with a clear focus on brands with strong customer affinity and crossover potential.
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This focus empowers us to curate exclusive collections perfectly suited for all of her life's moments.
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This includes collaborations with apparel brands and influencers, as well as adjacent category opportunities such as beauty, home, and lifestyle. Enhance and Retain Existing Customer Relationships We have a large and growing Lulus community and 3.2 million Active Customers as of January 1, 2023.
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We intend to grow awareness of the Lulus brand and attract new customers through the following strategies: ● Increase investment in top-of-funnel marketing to boost brand visibility and attract new audiences. ● Enhance performance-driven digital marketing strategies to maximize reach and efficiency. ● Create engaging on-site experiences to improve customer interaction and drive conversions. ● Expand into new marketing channels to reach untapped audiences. ● Grow our brand ambassador program to deepen engagement and amplify brand stories. ● Drive organic growth through loyalty programs, customer reviews, and social content. ● Expand influencer partnerships across all tiers to reach diverse audiences. ● Host activations and events around key cultural moments to increase awareness and engagement. ● Deepen engagement through key wholesale collaborations, introducing Lulus to new customers, showcasing our product and expanding our retail presence. ● Forge strategic brand partnerships to capture new audiences, engage partner communities, and create memorable customer experiences.
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We have a significant opportunity to grow our share of total apparel budget with expansion into these underdeveloped areas. For example, our success in apparel beyond our core dress categories demonstrates our ability to successfully launch and grow share in new categories.
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We do not have any long-term commitments requiring us to purchase minimum volumes from any supplier. We believe that continuing to enhance our localized shopping experience will improve our ability to serve customers in international markets.
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Our long-term strategy is to increase our focus on our platform and distribution process for international customers, allowing for a more optimized shopping experience, including more flexibility across languages and currencies. We believe that providing a localized shopping experience will significantly enhance our ability to serve customers in international markets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWithout stronger disaster recovery, business continuity and document retention plans, if we encounter difficulties or disasters with our distribution facilities or corporate offices, our critical systems, operations and information may not be restored in a timely manner, or at all, and this could have a material adverse effect on our business, financial condition, and results of operations. 32 Table of Contents We rely on third-party suppliers, manufacturers, distributors, and other suppliers, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.
Biggest changeIf we encounter difficulties or disasters with our distribution facilities or corporate offices, our disaster recovery, business continuity and document retention plans may be inadequate or insufficient and our critical systems, operations and information may not be restored in a timely manner, or at all, and this could have a material adverse effect on our business, financial condition, and results of operations.
From time to time, emails service providers or other third parties may block bulk email transmissions or otherwise experience technical difficulties that could result in our inability to successfully deliver emails or other messages to customers.
From time to time, email service providers or other third parties may block bulk email transmissions or otherwise experience technical difficulties that could result in our inability to successfully deliver emails or other messages to customers.
We are subject to numerous regulations, including labor and employment, truth-in-advertising, California’s Proposition 65 and other environmental laws and regulations, customer protection and zoning and occupancy laws and ordinances that regulate retailers generally or govern the promotion and sale of merchandise and the operation of warehouse facilities.
We are subject to numerous laws and regulations, including labor and employment, truth-in-advertising, California’s Proposition 65 and other environmental laws and regulations, customer protection and zoning and occupancy laws and ordinances that regulate retailers generally or govern the promotion and sale of merchandise and the operation of warehouse facilities.
The trading price of our common stock is likely to be volatile and subject to significant price fluctuations, as observed in 2022, in response to many factors, including: ● market conditions or trends in our industry or the economy as a whole and, in particular, in the retail sales environment; ● changes in our merchandise mix and supplier base; ● timing of promotional events; ● changes in key personnel; ● entry into new markets; 43 Table of Contents ● changes in customer preferences and fashion trends; ● announcements by us or our competitors of new product offerings or significant acquisitions, divestitures, strategic partnerships, joint ventures, or capital commitments; ● actions by competitors; ● inventory shrinkage beyond our historical average rates; ● changes in operating performance and stock market valuations of other retail companies; ● investors’ perceptions of our prospects and the prospects of the retail industry; ● fluctuations in quarterly results of operations, as well as differences between our actual financial results and results of operations and those expected by investors; ● the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC and/or negative earnings or other announcements by us or other retail apparel companies; ● announcements, media reports, or other public forum comments related to litigation, claims, or reputational charges against us; ● guidance, if any, that we provide to the public, any changes in this guidance, or our failure to meet this guidance; ● changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates, or the failure of those analysts to initiate or maintain coverage of our common stock; ● the development and sustainability of an active trading market for our common stock; ● downgrades in our credit ratings or the credit ratings of our competitors; ● investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives; ● future sales of our common stock by our officers, directors, and significant stockholders; ● global macroeconomic conditions, including inflation, labor shortages, supply chain shortages, or other economic, political or legal uncertainties or adverse developments; ​ ● political unrest, terrorism and wars, such as the current situation with Ukraine and Russia and increased tensions between Taiwan and China, which could delay or disrupt our business, and if such political unrest escalates or spills over to or otherwise impacts additional regions it could heighten many of the other risk factors included in this Item 1A; ● other events or factors, including those resulting from system failures and disruptions, earthquakes, hurricanes, other natural disasters, pandemics, or responses to these events; and ● changes in accounting principles.
The trading price of our common stock is likely to be volatile and subject to significant price fluctuations, as observed in the last few years, in response to many factors, including: ● market conditions or trends in our industry or the economy as a whole and, in particular, in the retail sales environment; ● changes in our merchandise mix and supplier base; ● timing of promotional events; ● changes in key personnel; ● entry into new markets; ● changes in customer preferences and fashion trends; ● announcements by us or our competitors of new product offerings or significant acquisitions, divestitures, strategic partnerships, joint ventures, or capital commitments; ● actions by competitors; ● inventory shrinkage beyond our historical average rates; ● changes in operating performance and stock market valuations of other retail companies; ● investors’ perceptions of our prospects and the prospects of the retail industry; ● fluctuations in quarterly results of operations, as well as differences between our actual financial results and results of operations and those expected by investors; ● the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC and/or negative earnings or other announcements by us or other retail apparel companies; ● announcements, media reports, or other public forum comments related to litigation, claims, or reputational charges against us; ● guidance, if any, that we provide to the public, any changes in this guidance, or our failure to meet this guidance; ● changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates, or the failure of those analysts to initiate or maintain coverage of our common stock; ● the development and sustainability of an active trading market for our common stock; ● downgrades in our credit ratings or the credit ratings of our competitors; ● investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives; ● future sales of our common stock by our officers, directors, and significant stockholders; ● global macroeconomic conditions, including inflation, labor shortages, supply chain shortages, or other economic, political or legal uncertainties or adverse developments; 43 Table of Contents ​ ● political unrest, terrorism and wars, such as the current situation with Ukraine and Russia and increased tensions between Taiwan and China, which could delay or disrupt our business, and if such political unrest escalates or spills over to or otherwise impacts additional regions it could heighten many of the other risk factors included in this Item 1A; ● other events or factors, including those resulting from system failures and disruptions, earthquakes, hurricanes, other natural disasters, pandemics, or responses to these events; and ● changes in accounting principles.
We have in the past incurred and may in the future incur losses from various types of fraud, including stolen credit card numbers, claims that a customer did not authorize a purchase, merchant fraud, and customers who have closed bank accounts or have insufficient funds in open bank accounts to satisfy payments, and any such losses may be significant.
We have in the past incurred and may in the future incur losses from various types of fraud and theft, including stolen credit card numbers, claims that a customer did not authorize a purchase, merchant fraud, and customers who have closed bank accounts or have insufficient funds in open bank accounts to satisfy payments, and any such losses may be significant.
However, our amended and restated certificate of incorporation contain a provision that provides us with protections similar to Section 203 of the DGCL and prevent us from engaging in a business combination with a person who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or stockholder approval is obtained prior to the acquisition, except that it provides that H.I.G. or any affiliate thereof, or any person or entity to which any of the foregoing stockholders transfers shares of our voting stock (subject to specified exceptions), in each case regardless of the total percentage of our voting stock owned by such stockholder or such person or entity, shall not be deemed an “interested stockholder” for purposes of this provision of our amended and restated certificate of incorporation and therefore not subject to the restrictions set forth in this provision.
However, our amended and restated certificate of incorporation contains a provision that provides us with protections similar to Section 203 of the DGCL and prevent us from engaging in a business combination with a person who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or stockholder approval is obtained prior to the acquisition, except that it provides that H.I.G. or any affiliate thereof, or any person or entity to which any of the foregoing stockholders transfers shares of our voting stock (subject to specified exceptions), in each case regardless of the total percentage of our voting stock owned by such stockholder or such person or entity, shall not be deemed an “interested stockholder” for purposes of this provision of our amended and restated certificate of incorporation and therefore not subject to the restrictions set forth in this provision.
In addition, we will incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of minerals that may be used or necessary to the production of our products and, if applicable, potential changes to products, processes, or sources of supply as a consequence of such due diligence activities.
In addition, we incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of minerals that may be used or necessary to the production of our products and, if applicable, potential changes to products, processes, or sources of supply as a consequence of such due diligence activities.
The domestic bank deposit balances may exceed the FDIC insurance limits. These balances could be impacted if one or more of the financial institutions in which we deposit monies fails or is subject to other adverse conditions in the financial or credit markets. ​ We may incur significant losses from customer and or credit card fraud.
The domestic bank deposit balances may exceed the FDIC insurance limits. These balances could be impacted if one or more of the financial institutions in which we deposit monies fails or is subject to other adverse conditions in the financial or credit markets. ​ We may incur significant losses from customer and or credit card fraud and theft.
We cannot anticipate all of the demands that our expanding operations will impose on our business, and our failure to appropriately address these demands could have an adverse effect on business, financial condition, and results of operations. We may not be able to manage our growth effectively, and such rapid growth may adversely affect our corporate culture.
We cannot anticipate all of the demands that our expanding operations will impose on our business, and our failure to appropriately address these demands could have an adverse effect on business, financial condition, and results of operations. We may not be able to manage our growth effectively, and such growth may adversely affect our corporate culture.
Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could materially adversely affect our business, financial condition, and results of operations. Our business is highly dependent upon email and other messaging services for promoting our brand and platform.
Our business relies heavily on email, SMS and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could materially adversely affect our business, financial condition, and results of operations. Our business is highly dependent upon email, SMS and other messaging services for promoting our brand and platform.
International sales and increased international operations may be subject to risks such as: ● difficulties in staffing and managing foreign operations; ● burdens of complying with a wide variety of laws and regulations, including more stringent regulations relating to data privacy and security, particularly in the EU; ● adverse tax effects and foreign exchange controls making it difficult to repatriate earnings and cash; ● political, economic instability, terrorism and wars, such as the current situation with Ukraine and Russia and increased tensions between Taiwan and China; ● global macroeconomic conditions, including inflation, labor shortages, supply chain shortages, or other economic, political or legal uncertainties or adverse developments; ● natural disasters; ● trade restrictions; ● differing employment practices and laws and labor disruptions; ● differing consumer protection and product laws; ● the imposition of government controls; ● an inability to use or to obtain adequate intellectual property protection for our key brands and products; ● tariffs and customs duties and the classifications of our goods by applicable governmental bodies; ● a legal system subject to undue influence or corruption; ● a business culture in which illegal sales practices may be prevalent; ● logistics and sourcing; ● military conflicts; and ● acts of terrorism.
International sales and increased international operations may be subject to risks such as: ● difficulties in staffing and managing foreign operations; ● burdens of complying with a wide variety of laws and regulations, including more stringent regulations relating to data privacy and security, particularly in the EU; ● adverse tax effects and foreign exchange controls making it difficult to repatriate earnings and cash; ● political, economic instability, terrorism and wars, such as the current situation with Ukraine and Russia and increased tensions between Taiwan and China; 23 Table of Contents ● global macroeconomic conditions, including inflation, labor shortages, supply chain shortages, or other economic, political or legal uncertainties or adverse developments; ● natural disasters; ● trade restrictions; ● differing employment practices and laws and labor disruptions; ● differing consumer protection and product laws; ● the imposition of government controls; ● an inability to use or to obtain adequate intellectual property protection for our key brands and products; ● tariffs and customs duties and the classifications of our goods by applicable governmental bodies; ● a legal system subject to undue influence or corruption; ● a business culture in which illegal sales practices may be prevalent; ● logistics and sourcing; ● military conflicts; and ● acts of terrorism.
While our standard terms and conditions require our suppliers to indemnify us against third-party intellectual property claims, certain agreements with our suppliers may not indemnify us from intellectual property claims for a particular supplier’s merchandise or our suppliers may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.
While our standard vendor terms and conditions require our suppliers to indemnify us against third-party intellectual property claims, certain agreements with our suppliers may not indemnify us from intellectual property claims for a particular supplier’s merchandise or our suppliers may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.
In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on ESG matters. If, as a result of their assessment of our ESG practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our company.
In addition, in recent years, investor advocacy groups and certain institutional investors have placed importance on ESG matters. If, as a result of their assessment of our ESG practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in our company.
For example, in 2017 we implemented a data warehouse solution that in near real-time integrates data from our proprietary software applications and third-party software applications to unlock the various data silos and allow for holistic business intelligence analysis and reporting.
For example, we implemented a data warehouse solution that in near real-time integrates data from our proprietary software applications and third-party software applications to unlock the various data silos and allow for holistic business intelligence analysis and reporting.
Many of our third-party suppliers and manufacturers are based in China, which exposes us to risks inherent in doing business there. We use third-party suppliers and manufacturers based in China. This sourcing concentration increases our dependence of these suppliers and exposes us to the risks of doing business in China.
Many of our third-party suppliers and manufacturers are based in China, which exposes us to risks inherent in doing business there. We primarily use third-party suppliers and manufacturers based in China. This sourcing concentration increases our dependence of these suppliers and exposes us to the risks of doing business in China.
Further, our third-party manufacturers, suppliers, and distributors may: ● have economic or business interests or goals that are inconsistent with ours; ● take actions contrary to our instructions, requests, policies or objectives; ● be unable or unwilling to fulfill their obligations under relevant purchase orders, including obligations to meet our production deadlines, quality standards, pricing guidelines and product specifications, and to comply with applicable regulations, including those regarding the safety and quality of products; ● have financial difficulties; ● encounter raw material or labor shortages; ● encounter increases in raw material or labor costs which may affect our procurement costs; ● disclose our confidential information or intellectual property to competitors or third parties; ● engage in activities or employ practices that may harm our reputation; and ● work with, be acquired by, or come under control of, our competitors.
Further, our third-party manufacturers, suppliers, and distributors may: ● have economic or business interests or goals that are inconsistent with ours; ● take actions contrary to our instructions, requests, policies or objectives; ● be unable or unwilling to fulfill their obligations under relevant purchase orders, including obligations to meet our production deadlines, quality standards, pricing guidelines and product specifications, and to comply with applicable regulations, including those regarding the safety and quality of products; ● have financial difficulties; ● encounter raw material or labor shortages; 33 Table of Contents ● encounter increases in raw material or labor costs which may affect our procurement costs; ● disclose our confidential information or intellectual property to competitors or third parties; ● engage in activities or employ practices that may harm our reputation; and ● work with, be acquired by, or come under control of, our competitors.
Such failures or breaches in our information systems could also result in the disclosure, misappropriation or misuse of or unauthorized access to our confidential, proprietary, or personal information, disruption of our operations or damage to our networks and systems.
Such failures or breaches in our information systems could also result in the disclosure, misappropriation, modification or misuse of or unauthorized access to our confidential, proprietary, or personal information, disruption of our operations or damage to our networks and systems.
An increasing number of websites, including several large internet companies, have recently disclosed breaches of their security, some of which have involved increasingly sophisticated and highly targeted attacks on portions of their sites.
An increasing number of websites, including several large internet companies, have disclosed breaches of their security, some of which have involved increasingly sophisticated and highly targeted attacks on portions of their sites.
Merchandise returns could harm our business. We allow our customers to return merchandise, subject to our return policy. If merchandise return economics become more costly, our business, financial condition, and results of operations could be harmed.
Merchandise returns and damages could harm our business. We allow our customers to return merchandise, subject to our return policy. If merchandise return economics become more costly, our business, financial condition, and results of operations could be harmed.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: ● authorize our Board of Directors (the “Board of Directors”) to issue, without further action by the stockholders, up to 10,000,000 shares of undesignated preferred stock; ● subject to certain exceptions, including that entities affiliated with H.I.G Capital, LLC (“H.I.G.”), Institutional Venture Partners (“IVP”) and the Canada Pension Plan Investment Board (“CPPIB”) hold at least 50% of our common stock, require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; ● specify that special meetings of our stockholders can be called only by a majority of our Board of Directors, the Chair of our Board of Directors or our Chief Executive Officer; ● establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our Board of Directors; ● establish that our Board of Directors is divided into three classes, with each class serving three-year staggered terms; ● prohibit cumulative voting in the election of directors; and ● provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: 40 Table of Contents ● authorize our Board of Directors to issue, without further action by the stockholders, up to 10,000,000 shares of undesignated preferred stock; ● subject to certain exceptions, including that entities affiliated with H.I.G Capital, LLC (“H.I.G.”), Institutional Venture Partners (“IVP”) and the Canada Pension Plan Investment Board (“CPPIB”) hold at least 50% of our common stock, require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; ● specify that special meetings of our stockholders can be called only by a majority of our Board of Directors, the Chair of our Board of Directors or our Chief Executive Officer; ● establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our Board of Directors; ● establish that our Board of Directors is divided into three classes, with each class serving three-year staggered terms; ● prohibit cumulative voting in the election of directors; and ● provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum.
We rely on these relationships to provide significant traffic to our website. In particular, we rely on digital platforms, such as Google and Facebook, as important marketing channels.
We rely on these relationships to provide significant traffic to our website. In particular, we rely primarily on digital platforms, such as Google and Facebook, as important marketing channels.
Our amended and restated certificate of incorporation provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (1) derivative action or proceeding brought on behalf of the Company, (2) action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to the Company or our stockholders, (3) action asserting a claim against the Company or any director or 42 Table of Contents officer of the Company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our amended and restated bylaws, or (4) action asserting a claim against us or any director or officer of the Company governed by the internal affairs doctrine.
Our amended and restated certificate of incorporation provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (1) derivative action or proceeding brought on behalf of the Company, (2) action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to the Company or our stockholders, (3) action asserting a claim against the Company or any director or officer of the Company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our amended and restated bylaws, or (4) action asserting a claim against us or any director or officer of the Company governed by the internal affairs doctrine.
If we are unable to conclude that we have effective internal control over financial reporting, investors may lose confidence in our reported financial information, which could have a material adverse effect on the trading price of our common stock, and we could become subject to litigation or investigations by Nasdaq, the SEC, or other regulatory authorities, which could require additional financial and management resources. ​ The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.
If we are unable to conclude that we have effective internal control over financial reporting, investors may lose confidence in our reported financial information, which 48 Table of Contents could have a material adverse effect on the trading price of our common stock, and we could become subject to litigation or investigations by Nasdaq, the SEC, or other regulatory authorities, which could require additional financial and management resources. ​ The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.
We may incur additional expenses and our reputation could be harmed if customers and potential customers believe that our merchandise is not of sufficiently high quality or may be damaged. We have three distribution facilities and disruptions to the operations at these locations could have a material adverse effect on our business, financial condition, and results of operations.
We may incur additional expenses and our reputation could be harmed if customers and potential customers believe that our merchandise is not of sufficiently high quality or may be damaged. We have two distribution facilities and disruptions to the operations at these locations could have a material adverse effect on our business, financial condition, and results of operations.
Our success depends on our ability to attract customers cost effectively. With respect to our marketing channels, we rely heavily on relationships with providers of online services, search engines, social media, directories, and other websites and e-commerce businesses to provide content, advertising banners, and other links that direct customers to our websites.
Our success depends on our ability to attract customers cost effectively. With respect to our marketing channels, we rely heavily on relationships with providers of online services, search engines, social media, directories, and other websites and e-commerce businesses to provide content, advertising banners, and other links that direct customers to our websites and retail store.
Our use of email and other messaging services to send communications to customers may also result in legal claims against us, which may cause us increased expense, and if successful might result in fines or orders with costly reporting and compliance obligations or might limit or prohibit our ability to send emails or other messages.
Our use of email, SMS and other messaging services to send communications to customers may also result in legal claims against us, which may cause us increased expense, and if successful, might result in fines or orders with costly reporting and compliance obligations or might limit or prohibit our ability to send email, SMS or other messages.
The changes necessitated by becoming a public company require a significant commitment of resources and management oversight that has increased and may continue to increase our costs and might place a strain on our systems and resources. As a result, our management’s attention might be diverted from other business concerns.
The changes necessitated by becoming a public company has required a significant commitment of resources and management oversight that has increased and may continue to increase our costs and might place a strain on our systems and resources. As a result, our management’s attention might be diverted from other business concerns.
In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our results of operations on a timely and accurate basis could be impaired and we could suffer adverse regulatory consequences or violate Nasdaq listing standards.
In addition, if we fail to comply with the requirements with respect to our internal accounting and audit functions, our ability to report our results of operations on a timely and accurate basis could be impaired and we could suffer adverse regulatory consequences or violate Nasdaq listing standards.
The implementation of these requirements could adversely affect the sourcing, availability, and pricing of the materials used in the manufacture of components used in our products.
These requirements could adversely affect the sourcing, availability, and pricing of the materials used in the manufacture of components used in our products.
If we undercount or overcount performance due to the internal data analytics tools we use or issues with the data received from third parties, or if our internal data analytics tools contain algorithmic or other technical errors, the data we report may not be accurate or comparable with prior periods.
If we undercount or overcount performance due to the internal data analytics tools we use, issues with the data received from third parties, errors or unintended mistakes, or if our internal data analytics tools contain algorithmic or other technical errors, the data we report may not be accurate or comparable with prior periods.
Our sales may be particularly susceptible to economic and other conditions in certain regions or states.
Our sales may be particularly susceptible to economic and other conditions in certain regions, states or countries.
If digital platforms change or penalize us with their algorithms, terms of service, display and featuring of search results, or if competition increases for advertisements, we may be unable to cost-effectively attract customers. 18 Table of Contents Our relationships with digital platforms are not covered by long-term contractual agreements and do not require any specific performance commitments.
If digital platforms change or penalize us with their algorithms, terms of service, display and featuring of search results, or if competition increases for advertisements, we may be unable to cost-effectively attract customers. Our relationships with digital platforms are not covered by long-term contractual agreements and do not require any specific performance commitments.
Our data centers may be subject to cyber-attacks or other technology-related incidents, and also break-ins, sabotage and intentional acts of vandalism that could cause disruptions in our ability to serve our customers and protect data. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities.
Our data centers may be subject to cyber-attacks or other technology-related incidents, and also break-ins, sabotage and intentional acts of vandalism that could cause disruptions in our ability to serve our customers and protect data. Some of our systems are not fully redundant, and our disaster recovery planning cannot account 29 Table of Contents for all eventualities.
If we are unable to cost-effectively drive traffic to our website or mobile app, our ability to acquire new customers and our financial condition would suffer. We may be unable to maintain a high level of engagement with our customers and increase their spending with us, which could harm our business, financial condition, cash flows, or results of operations.
If we are unable to cost-effectively drive traffic to our website or mobile app, our ability to acquire new customers and our financial condition would suffer. 15 Table of Contents We may be unable to maintain a high level of engagement with our customers and increase their spending with us, which could harm our business, financial condition, cash flows, or results of operations.
Any payment of cash dividends will be at the discretion of our Board of Directors and will depend on our financial condition, capital requirements, legal requirements, earnings, and other factors. Consequently, investors in our common stock should not rely on dividends in order to receive a return on their investment.
Any payment of 44 Table of Contents cash dividends will be at the discretion of our Board of Directors and will depend on our financial condition, capital requirements, legal requirements, earnings, and other factors. Consequently, investors in our common stock should not rely on dividends in order to receive a return on their investment.
As of the date of this Annual Report on Form 10-K, our executive officers, directors, and principal stockholders own, in the aggregate, approximately 85% of our outstanding common stock.
As of the date of this Annual Report on Form 10-K, our executive officers, directors, and principal stockholders own, in the aggregate, approximately 74% of our outstanding common stock.
If any of these events were to occur, our business, financial condition, and results of operations could be adversely affected. Our cash could be adversely affected if the financial institutions in which we hold our cash fail. The Company maintains domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks.
If any of these events were to occur, our business, financial condition, and results of operations could be adversely affected. Our cash could be adversely affected if the financial institutions in which we hold our cash fail. We maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks.
Companies across all industries are facing increasing scrutiny related to their environmental, social and governance (“ESG”) practices and reporting. Investors, customers, employees and other stakeholders have focused increasingly on ESG practices and placed increasing importance on the implications and social cost of their investments, purchases and other interactions with companies.
Companies across industries are facing increasing scrutiny related to their environmental, social and governance (“ESG”) practices and reporting. Certain investors, customers, employees and other stakeholders have focused on ESG practices and placed importance on the implications and social cost of their investments, purchases and other interactions with companies.
Our future success will depend in large part upon our ability to, among other things: ● cost-effectively acquire new customers and engage with and retain existing customers; ● overcome the impacts of the ongoing COVID-19 pandemic; ● adequately and effectively staff our distribution facilities; ● manage our inventory effectively; ● anticipate and respond to macroeconomic changes; ● increase our market share; ● increase consumer awareness of our brand and maintain our reputation; ● successfully expand our offering and geographic reach; ● offer an assortment of merchandise that is attractive to our customers; ● compete effectively; ● avoid interruptions in our business from information technology downtime, cybersecurity breaches, or labor stoppages; ● effectively manage our growth; ● hire, integrate, and retain talented people at all levels of our organization; ● maintain the quality of our technology infrastructure; ● expand internationally; ● develop new features to enhance the customer experience on our sites; and 22 Table of Contents ● add new suppliers and deepen our relationships with existing suppliers.
Our future success will depend in large part upon our ability to, among other things: ● cost-effectively acquire new customers and engage with and retain existing customers; ● adequately and effectively staff our distribution facilities; ● manage our inventory effectively; ● anticipate and respond to macroeconomic changes; ● increase our market share; ● increase consumer awareness of our brand and maintain our reputation; ● successfully expand our offering and geographic reach; ● offer an assortment of merchandise that is attractive to our customers; ● compete effectively; 21 Table of Contents ● avoid interruptions in our business from information technology downtime, cybersecurity breaches, or labor stoppages; ● effectively manage our growth; ● hire, integrate, and retain talented people at all levels of our organization; ● maintain the quality of our technology infrastructure; ● expand internationally; ● develop new features to enhance the customer experience on our sites; and ● add new suppliers and deepen our relationships with existing suppliers.
The substantial up-front investment required, the lack of consumer awareness of our products in jurisdictions outside of the United States, differences in consumer preferences and trends between the United States and other jurisdictions, the risk of inadequate intellectual property protections and differences in packaging, labeling and related laws, rules and regulations are all substantial matters that need to be evaluated prior to doing business in new territories.
The substantial up-front investment required, the lack of consumer awareness of our products in jurisdictions outside of the United States, differences in consumer preferences and trends between the United States and other jurisdictions, the risk of inadequate intellectual property protections and differences in packaging, labeling, privacy, consumer protection, advertising, ESG and related laws, rules and regulations are all substantial matters that need to be evaluated prior to doing business in new territories.
We cannot assure investors that we will continue to be able to compete successfully against existing or future competitors. Our expansion into markets served by our competitors and entry of new competitors or expansion of 25 Table of Contents existing competitors into our markets could have a material adverse effect on us.
We cannot assure investors that we will continue to be able to compete successfully against existing or future competitors. Our expansion into markets served by our competitors and entry of new competitors or expansion of existing competitors into our markets could have a material adverse effect on us.
It is often difficult 38 Table of Contents for us to plan and prepare for potential changes to applicable laws, and future actions or increased costs related to these changes could have a material adverse effect on our business, financial condition, and results of operations.
It is often difficult for us to plan and prepare for potential changes to applicable laws, and future actions or increased costs related to these changes could have a material adverse effect on our business, financial condition, and results of operations.
Any such restatement could result in a loss of public confidence in the reliability of our consolidated financial statements and sanctions imposed on us by the SEC. 49 Table of Contents Short sellers of our stock may be manipulative and may drive down the market price of our common stock.
Any such restatement could result in a loss of public confidence in the reliability of our consolidated financial statements and sanctions imposed on us by the SEC. Short sellers of our stock may be manipulative and may drive down the market price of our common stock.
Our ability to operate in China may be adversely affected by changes in U.S. and Chinese laws and regulations such as those related to, among other things, taxation, 33 Table of Contents import and export tariffs, custom duties, environmental regulations, land use rights, intellectual property, currency controls, network security, sanctions, embargoes, employee benefits and other matters.
Our ability to operate in China may be adversely affected by changes in U.S. and Chinese laws and regulations such as those related to, among other things, taxation, import and export tariffs, custom duties, environmental regulations, land use rights, intellectual property, currency controls, network security, sanctions, embargoes, employee benefits and other matters.
Moreover, in the event of a significant disruption in the supply of the fabrics or raw materials used in the manufacture of the merchandise we offer, the suppliers we work with might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price.
Moreover, in the event of a significant disruption in the supply of the fabrics or raw materials used in the manufacture of the merchandise we offer, the suppliers we work with might not be able to locate alternative suppliers of materials 31 Table of Contents of comparable quality at an acceptable price.
Wayfair that a U.S. state may require an online retailer to collect sales taxes imposed by that state, even if the retailer has no physical presence in that state, thus permitting a wider enforcement of such sales tax collection requirements.
Wayfair that a U.S. state may require an online retailer to collect sales taxes imposed by that 38 Table of Contents state, even if the retailer has no physical presence in that state, thus permitting a wider enforcement of such sales tax collection requirements.
The price and availability of such raw materials may fluctuate significantly, depending on many factors which are outside of our control, including commodity prices, crop yields, and weather patterns. In addition, the costs of other inputs are also outside of our control.
The price and availability of such raw materials may fluctuate significantly, depending on many factors which are outside of our control, including commodity prices, crop yields, and weather patterns. 26 Table of Contents In addition, the costs of other inputs are also outside of our control.
Third parties have and may bring legal claims, or threaten to bring legal claims, against us that their intellectual property rights are being infringed or violated by our use of intellectual property if our suppliers or the manufacturers of our merchandise infringe upon the intellectual property rights of third parties.
Third parties have and may bring legal claims, or threaten 35 Table of Contents to bring legal claims, against us that their intellectual property rights are being infringed or violated by our use of intellectual property if our suppliers or the manufacturers of our merchandise infringe upon the intellectual property rights of third parties.
Imitation of our name, concept, website design or 35 Table of Contents merchandise in a manner that projects lesser quality or carries a negative connotation of our brand image could have a material adverse effect on our business, financial condition, and results of operations.
Imitation of our name, concept, website design or merchandise in a manner that projects lesser quality or carries a negative connotation of our brand image could have a material adverse effect on our business, financial condition, and results of operations.
Examples of such risks include: ● the availability and cost of low- or non-carbon-based energy sources; ● the evolving regulatory requirements affecting ESG standards or disclosures; ● the availability of suppliers that can meet our sustainability, diversity and other ESG standards; ● our ability to recruit, develop and retain diverse talent in our labor markets; and ● the success of our organic growth and acquisitions or dispositions of businesses or operations.
Examples of such risks include: ● the availability and cost of low- or non-carbon-based energy sources; ● the evolving regulatory requirements affecting ESG standards or disclosures; ● the availability of suppliers that can meet our ESG standards; ● our ability to recruit, develop and retain talent in our labor markets; and ● the success of our organic growth and acquisitions or dispositions of businesses or operations.
Data from both such sources may include information relating to fraudulent accounts and interactions with our sites or the social media accounts of our influencers (including as a result of the use of bots or other automated or manual mechanisms to generate false impressions that are delivered through our sites or their accounts).
Data from both such sources may include information subject to errors or unintended mistakes relating to fraudulent accounts and interactions with our sites or the social media accounts of our influencers (including as a result of the use of bots or other automated or manual mechanisms to generate false impressions that are delivered through our sites or their accounts).
The failure of our information systems and the third-party systems we rely on to perform as designed, or our failure to implement and operate them effectively, could disrupt our business or subject us to liability and thereby harm our profitability.
The failure of our information systems, open source software and the third-party systems we rely on to perform as designed, or our failure to implement and operate them effectively, could disrupt our business or subject us to liability and thereby harm our profitability.
The occurrence of any of these risks could negatively affect our international business and consequently our overall business, financial condition, and results of operations. 24 Table of Contents Risks Related to Our Industry The global apparel industry is subject to intense pricing pressure.
The occurrence of any of these risks could negatively affect our international business and consequently our overall business, financial condition, and results of operations. Risks Related to Our Industry The global apparel industry is subject to intense pricing pressure.
In Canada, the Personal Information Protection and Electronic Documents Act, or PIPEDA, and various provincial laws require that companies give detailed privacy notices to consumers; obtain consent to use personal information, with limited exceptions; allow individuals to access and correct their personal information; and report certain data breaches.
In Canada, the Personal Information Protection and Electronic Documents Act (“PIPEDA”), and various provincial laws require companies to give detailed privacy notices to consumers; obtain consent to use personal information, with limited exceptions; allow individuals to access and correct their personal information; and report certain data breaches.
In addition to the aforementioned employees, we have other employees in positions responsible for our merchandising, marketing, software development, accounting, finance, information technology, and operations departments, that, if vacant, could cause a temporary disruption in our operations until such positions are filled, which could have a material adverse effect on our business, financial condition, and results of operations.
In addition to our senior management and the Board of Directors, we have other employees in positions responsible for our merchandising, marketing, software development, accounting, finance, information technology, and operations departments, that, if vacant, could cause a temporary disruption in our operations until such positions are filled, which could have a material adverse effect on our business, financial condition, and results of operations.
We have rapidly and significantly expanded our operations and anticipate expanding further as we pursue our growth strategies. Such expansion increases the complexity of our business and places a significant strain on our management, operations, technical systems, financial resources, and internal control over financial reporting functions.
We have expanded our operations and anticipate expanding further in the future as we pursue our growth strategies. Such expansion increases the complexity of our business and places a significant strain on our management, operations, technical systems, financial resources, and internal control over financial reporting functions.
Any imposition of liability that is not covered by insurance or is in excess of insurance coverage would increase our operating expenses and reduce our net income, if any, or increase our net loss.
Any imposition of liability that is not covered 28 Table of Contents by insurance or is in excess of insurance coverage would increase our operating expenses and reduce our net income, if any, or increase our net loss.
Unfavorable changes or interpretations could severely damage our reputation and our relationship with our customers, associates and investors as well as decrease demand for our services, limit marketing methods and capabilities, affect our margins, increase costs or subject us to additional liabilities.
Unfavorable changes or interpretations could severely damage our reputation and our relationship with our customers, third party partners and investors as well as decrease demand for our services, limit marketing methods and capabilities, affect our margins, increase costs or subject us to additional liabilities.
Although we are actively selecting systems and vendors and implementing procedures to enable us to maintain the integrity 29 Table of Contents of our systems when we modify them, there are inherent risks associated with modifying or replacing systems, and with new or changed relationships, including accurately capturing and maintaining data, realizing the expected benefit of the change and managing the potential disruption of the operation of the systems as the changes are implemented.
Although we are actively selecting systems, open source software and vendors and implementing procedures to enable us to maintain the integrity of our systems when we modify them, there are inherent risks associated with modifying or replacing systems, and with new or changed relationships, including accurately capturing and maintaining data, realizing the expected benefit of the change and managing the potential disruption of the operation of the systems as the changes are implemented.
Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit our ability or our customers’ ability to send communications through their services, disruptions or downtime experienced by these social media platforms or decline in the use of or engagement with social media platforms by consumers could materially adversely affect our business, financial condition, and results of operations.
Changes to the terms of these social media platforms to limit promotional communications or our ability or our customers’ ability to send communications through their services, disruptions or downtime experienced by these social media platforms, or decline in the use of or engagement with social media platforms by consumers could materially adversely affect our business, financial condition, and results of operations.
For example, in California, we are subject to record keeping and wage guarantor obligations pursuant to SB 62 (the “Garment Worker Protection Act”), for certain items that we contract to manufacture, as well as AB 701, which requires us to ensure that quotas do not interfere with warehouse worker meal and rest periods under California’s wage orders.
For example, in California, we are subject to record keeping and wage guarantor obligations pursuant to SB 62 (the “Garment Worker Protection Act”), for certain 34 Table of Contents items that we contract to manufacture, as well as AB 701 (the “Warehouse Quotas Law”), which requires us to ensure that quotas do not interfere with warehouse worker meal and rest periods under California’s wage orders.
Actions by third parties to block, impose restrictions on or charge for the delivery of emails or other messages could also adversely impact our business.
Actions by third parties to block, impose restrictions on or charge for the delivery of email, SMS or other messages could also adversely impact our business.
For as long as we continue to be an emerging growth company, we may also take advantage of other exemptions from certain reporting requirements that are applicable to other public companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, exemption from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the report of independent registered public accounting firm, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute arrangements, and reduced financial reporting requirements.
We intend to take advantage of the extended transition period for adopting new or revised financial accounting standards under the JOBS Act as an emerging growth company. ​ For as long as we continue to be an emerging growth company and/or a smaller reporting company, we may also take advantage of other exemptions from certain reporting requirements that are applicable to other public companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, exemption from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the report of independent registered public accounting firm, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute arrangements, and reduced financial reporting requirements.
During 2021, our top 12 suppliers accounted for approximately 50% of our purchases, with no single supplier accounting for more than 9.7% of our purchases. Our business and financial performance depend in large part on our ability to evaluate merchandise quickly for style and then modify if needed or to improve the quality, look, and fit of the item.
During 2023, our top 11 suppliers accounted for approximately 50% of our purchases, with no single supplier accounting for more than 9.1% of our purchases. Our business and financial performance depend in large part on our ability to evaluate merchandise quickly for style and then modify if needed or to improve the quality, look, and fit of the item.
We also face the risk that governmental or non-governmental organizations may increase their focus on the fashion sector and implement greater environmental regulation on the fashion sector in the United States or the fashion sector in other markets.
We also face the risk that governmental or non-governmental organizations may increase their focus on the fashion sector and 46 Table of Contents implement greater environmental regulation on the fashion sector in the United States or the fashion sector in other markets.
If we fail, or are perceived to be failing, to meet the objectives, goals or standards included in any sustainability disclosure or the expectations of our various stakeholders or if we are perceived to have not responded appropriately, it could negatively impact our 47 Table of Contents reputation, customer acquisition and retention, access to capital and employee retention.
If we fail, or are perceived to be failing, to meet the objectives, goals or standards included in any sustainability disclosure or the expectations of our various stakeholders or if we are perceived to have not responded appropriately by certain parties, it could negatively impact our reputation, customer acquisition and retention, access to capital and employee retention.
See “Forward-Looking Statements.” Risks Related to Our Business Our business depends on our ability to maintain a strong community around the Lulus brand with engaged customers and influencers.
See “Forward-Looking Statements.” 14 Table of Contents Risks Related to Our Business Our business depends on our ability to maintain a strong community around the Lulus brand with engaged customers and influencers.
We send promotional emails to inform customers of new products, shipping specials and other offers, and transactional emails to communicate updates to customer orders and returns. We believe these messages are an important part of our customer experience.
We send promotional email and SMS messages to inform customers of new products, shipping specials and other offers, and transactional emails and SMS messages to communicate updates to customer orders and returns or to respond to customer outreach. We believe these messages are an important part of our customer experience.
If we are unable to hire and retain customer support personnel capable of consistently providing customer support at a high level, as demonstrated by their enthusiasm for our culture, understanding of our customers, and knowledge of the merchandise that we offer, our ability to expand our business may be impaired.
If we are unable to hire and retain customer support personnel capable of consistently providing customer support at a high level, as demonstrated by their enthusiasm for our culture, understanding of our customers, and knowledge of the merchandise that we offer, our ability to expand our business may be impaired. International trade disputes and tariffs imposed by the U.S.
As the nature, scope and complexity of ESG reporting, diligence and disclosure requirements expand, including the SEC’s recently proposed disclosure requirements regarding, among other matters, GHG emissions, we may have to undertake additional costs to control, assess and report on ESG metrics.
As the nature, scope and complexity of ESG reporting, diligence and disclosure requirements evolve, including California’s disclosure requirements regarding, among other matters, GHG emissions, we may have to undertake additional costs to control, assess and report on ESG metrics.
If actual results differ from our estimates, our net income in a given quarter may be lower than expected or our net loss in a given quarter may be higher than expected. Our business depends on the transportation of a large number of products.
These assumptions are partly based on historical results. If actual results differ from our estimates, our net income in a given quarter may be lower than expected or our net loss in a given quarter may be higher than expected. Our business depends on the transportation of a large number of products.
While we believe that we compete primarily with apparel retailers and internet businesses that specialize in women’s apparel, footwear, and accessories, we also face competition from national and regional department stores, specialty retailers, fast-fashion retailers, value retailers, and mass merchants.
While we believe that we compete primarily with national and international apparel retailers and e-commerce businesses that specialize in women’s apparel, footwear, and accessories, we also face competition from Chinese e-commerce platforms, national and regional department stores, specialty retailers, fast-fashion retailers, value retailers, and mass merchants.
If we fail to address the risks and challenges that we face, including those associated with the challenges listed above as well as those described elsewhere in this “Risk Factors” section, our business and our operating results will be adversely affected. We may not be able to successfully implement our growth strategy.
If we fail to address the risks and challenges that we face, including those associated with the challenges listed above as well as those described elsewhere in this “Risk Factors” section, our business and our operating results will be adversely affected.
In addition, our growth may place increased demands on our existing operational, managerial, administrative, and other resources. Specifically, our inventory management systems and personnel processes may need to be further upgraded to keep pace with our growth strategy.
In addition, our growth may place increased demands on our existing operational, managerial, administrative, and other resources. Specifically, our inventory management systems, personnel and processes will need to continue to evolve to keep pace with our growth strategy.
For example, online businesses have been targeted with attacks aimed at compromising the security of payment card information submitted by customers for online purchases, including by injecting malicious code or scripts on website pages or by gaining unauthorized access to payment systems.
For example, online businesses have been targeted with attacks aimed at compromising the security of payment card information submitted by customers for online purchases, including by injecting malicious code or scripts on website pages or by gaining unauthorized access to payment systems. As an online retailer, we may be targeted with similar attempts.
As a public company, among other things, we have to: ● prepare and distribute periodic public reports and other stockholder communications in compliance with our obligations under the federal securities laws and applicable Nasdaq rules; ● create or expand the roles and duties of our Board of Directors and committees of the board; ● institute more comprehensive financial reporting and disclosure compliance functions; ● enhance our investor relations function; ● establish new internal policies, including those relating to disclosure controls and procedures; and ● involve and retain to a greater degree outside counsel and accountants in the activities listed above.
As a public company, among other things, we have to: ● prepare and distribute periodic public reports and other stockholder communications in compliance with our obligations under the federal securities laws and applicable Nasdaq rules; ● maintain our majority independent Board of Directors and maintain certain committees of the board; ● maintain comprehensive financial reporting and disclosure compliance functions; ● maintain our investor relations function; ● maintain and enhance as necessary internal policies, including those relating to disclosure controls and procedures; and ● involve and retain to a greater degree outside counsel and accountants in the activities listed above.
In addition, these stockholders could take actions that have the effect of delaying or preventing a change-in-control of us or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares.
In addition, these stockholders could take actions that have the effect of delaying or preventing a change-in-control of us or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even if other stockholders oppose them.
Further, we modify our policies relating to returns from time to time, which may result in customer dissatisfaction or an increase in the number of merchandise returns. Supplier non-compliance can also result in increased returns. From time to time our products are damaged in transit, which can increase return rates and harm our brand.
Further, we modify our policies relating to returns or damages from time to time, which may result in customer dissatisfaction or an increase in the number of merchandise returns or damaged products. Supplier non-compliance can also result in increased returns or damages.
These changes will require a significant commitment of additional resources and many of our competitors already comply with these obligations. We may not be successful in complying with these obligations and the significant commitment of resources required for complying with them could have a material adverse effect on our business, financial condition, and results of operations.
We may not be successful in continuing to comply with these obligations and the significant commitment of resources required for complying with them could have a material adverse effect on our business, financial condition, and results of operations.
These factors have contributed, and may continue to contribute in the future, to intense pricing pressure and uncertainty throughout the supply chain. Pricing pressure has been exacerbated by the availability of raw materials in recent years.
These factors have contributed, and may continue to contribute in the future, to intense pricing pressure and uncertainty throughout the supply chain. Pricing pressure has been exacerbated by the availability of raw materials in recent years. Additionally, inflation and supply chain constraints could increase pricing pressure on our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSee Note 6, Leases, of the accompanying notes to our consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information on our leases. ​ ​ ​ ​ ​ ​ ​ ​ ​ Square Footage Location Type (approximate) Chico, California ​ Distribution facility and office space ​ 109,600 Chico, California ​ Corporate headquarters ​ 7,600 Chico, California ​ Studio space ​ 7,400 Chico, California ​ Retail space ​ 8,400 Los Angeles, California ​ Office and studio space ​ 26,800 Ontario, California ​ Distribution facility ​ 140,400 Easton, Pennsylvania ​ Distribution facility ​ 258,200 ​ ​ ​
Biggest changeWe carefully evaluate our leased space needs and adjust our leases accordingly as they approach renewal or expiration. ​ See Note 6, Leases, of the accompanying notes to our consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information on our leases. ​ ​ ​ ​ ​ ​ ​ ​ ​ Square Footage Location Type (approximate) Chico, California ​ Retail space ​ 5,600 Los Angeles, California ​ Retail space ​ 6,400 Chico, California ​ Corporate headquarters ​ 7,600 Los Angeles, California ​ Office and studio space ​ 26,800 Chico, California ​ Distribution facility and office space ​ 100,000 Ontario, California ​ Distribution facility ​ 140,400 Easton, Pennsylvania ​ Distribution facility ​ 258,200 ​ ​
Item 2. Properties ​ We do not own any real property. Our corporate headquarters are located in a leased facility in Chico, California. We also operate a leased facility primarily used for office space in Chico, California, and we also lease a retail space in Chico, California.
Item 2. Properties ​ We do not own any real property. Our corporate headquarters are located in a leased facility in Chico, California. We also operate a leased facility primarily used for office and studio space in Los Angeles, California, and we also lease additional office and retail spaces in Chico, California and Los Angeles, California.
We operate three leased distribution facilities: a facility (which includes office space) located in Chico, California; a facility located in Easton, Pennsylvania; and a facility located in Ontario, California. Our creative buying and inventory planning offices and our creative studio are located in Los Angeles, California in a leased facility.
We operate two leased distribution facilities: a facility located in Easton, Pennsylvania; and a facility located in Ontario, California. In early 2025 we recently consolidated two of our distribution facilities by moving operations from our former distribution facility in Chico, California to our existing distribution facility in Ontario, California.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe 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. ​ ​ 50 Table of Contents Item 4. Mine Safety Disclosures Not applicable. ​ ​ ​ ​ ​ 51 Table of Contents PART II ​
Biggest changeWe 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. ​ ​ Item 4. Mine Safety Disclosures Not applicable. ​ ​ ​ ​ ​ 51 Table of Contents PART II ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrior to that date, there was no public trading market for our common stock. ​ Holders of Record ​ As of March 10, 2023, there were 113 holders of record of our common stock. ​ Dividends We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future.
Biggest changeThe actual number of stockholders is greater than this number and includes stockholders whose shares are held in street name by brokers and other nominees, and stockholders whose shares may be held in trust by other entities. ​ Dividends We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future.
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Our future ability to pay cash dividends on our capital stock is limited by the terms of our New Revolving Facility and may be limited by any future debt instruments or preferred securities. ​ ​ 52 Table of Contents Performance Graph ​ The following graph and table compare the performance of (1) an investment in our common stock over the period of November 11, 2021 through January 1, 2023, beginning with an investment at the $13.06 closing market price on November 11, 2021, the end of the first day our common stock traded on the Nasdaq following our initial public offering at $16.00 per share, and thereafter based on the closing price of our common stock on the Nasdaq, with (2) an investment in the S&P 500 and the S&P Retail Select Industry, in each case beginning with an investment at the closing price on November 11, 2021 and thereafter based on the closing price of the index.
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Prior to that date, there was no public trading market for our common stock. ​ Holders of Record ​ American Stock Transfer & Trust Company, LLC is the transfer agent and registrar for our common stock. As of March 26, 2025, there were 16 registered stockholders of record of our common stock.
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The graph and table assume $100 was invested on the starting date at the price indicated above and that dividends, if any, were reinvested.
Added
Our future ability to pay cash dividends on our capital stock is limited by the terms of our 2021 Revolving Facility, as amended, and may be limited by any future debt instruments or preferred securities. ​ Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities ​ Recent Sales of Unregistered Securities None Issuer Purchases of Equity Securities by the Issuer and Affiliated Purchasers ​ A summary of our common stock repurchases during the thirteen weeks ended December 29, 2024 is set forth in the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ ​ Maximum Dollar Value ​ ​ Total Number ​ Weighted ​ Shares Purchased ​ ​ of Shares that May Yet ​ of Shares Average Price ​ as Part of the ​ ​ Be Purchased Under Period ​ Purchased (1) ​ Paid Per Share ​ Publicly Announced Plan ​ ​ the Plan October 1, 2024 through October 31, 2024 ​ (49,287) ​ $ 1.63 ​ ​ (49,287) ​ $ 2,144,117 November 1, 2024 through November 30, 2024 ​ (38,574) ​ $ 1.48 ​ ​ (38,574) ​ $ 2,087,194 December 1, 2024 through December 29, 2024 ​ (73,317) ​ $ 1.13 ​ ​ (73,317) ​ $ 2,004,263 ​ (1) On May 8, 2024, the Company's Board of Directors announced that it 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").
Removed
The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common stock. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ November 11, ​ January 2, ​ January 1, Company/Index 2021 2022 2023 Lulu's Fashion Lounge Holdings, Inc. ​ $ 100.00 ​ $ 78.33 ​ $ 19.22 S&P 500 Index ​ $ 100.00 ​ $ 102.51 ​ $ 82.58 S&P Retail Select Industry Index ​ $ 100.00 ​ $ 89.54 ​ $ 60.37 ​ Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities ​ Recent Sales of Unregistered Securities ​ None. 53 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ​ 54 Table of Contents Item 6. [Reserved] ​
Added
The 2024 Repurchase Program is open-ended in term and may be modified, suspended or terminated by the Company’s Board of Directors at any time.
Added
All shares repurchased during the thirteen and fifty-two weeks ended December 29, 2024 were repurchased in open market transactions pursuant to 10b5-1 purchase plans entered into by the Company. ​ ​ 52 Table of Contents Item 6. [Reserved] ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

65 edited+83 added−61 removed32 unchanged
Biggest changeOur Results of Operations The following tables set forth our consolidated results of operations for the years presented and as a percentage of net revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage Change ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2022 VS 2021 ​ 2020 ​ ​ (in thousands) Net revenue $ 439,652 ​ $ 375,625 17 % ​ $ 248,656 Cost of revenue ​ 248,206 ​ 198,893 ​ 25 ​ 138,364 Gross profit ​ 191,446 ​ 176,732 ​ 8 ​ 110,292 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling and marketing expenses ​ 83,559 ​ 66,684 ​ 25 ​ 47,812 General and administrative expenses ​ 99,148 ​ 87,710 ​ 13 ​ 67,155 Income (loss) from operations ​ 8,739 ​ 22,338 ​ (61) ​ (4,675) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense), net: ​ ​ ​ ​ ​ ​ Interest expense ​ (1,103) ​ (12,774) ​ (91) ​ (16,037) Loss on extinguishment of debt ​ ​ — ​ ​ (1,392) ​ (100) ​ ​ ​ — Other income, net ​ 136 ​ 85 ​ 60 ​ 137 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total other expense, net ​ (967) ​ (14,081) ​ (93) ​ (15,900) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) before income taxes ​ 7,772 ​ 8,257 ​ (6) ​ (20,575) Income tax (provision) benefit ​ (4,047) ​ (6,212) ​ (35) ​ 1,271 Net income (loss) ​ $ 3,725 ​ $ 2,045 ​ 82 % ​ $ (19,304) ​ ​ 61 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ Net revenue ​ 100 % ​ 100 % ​ 100 % Cost of revenue ​ 56 ​ ​ 53 ​ 56 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 44 ​ ​ 47 ​ 44 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling and marketing expenses ​ 19 ​ ​ 18 ​ 19 ​ General and administrative expenses ​ 23 ​ ​ 23 ​ 27 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ 2 ​ ​ 6 ​ (2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense), net: ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ — ​ ​ (3) ​ (6) ​ Loss on extinguishment of debt ​ ​ — ​ ​ — ​ — ​ Other income, net ​ — ​ ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total other expense, net ​ — ​ ​ (3) ​ (6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) before income taxes ​ 2 ​ ​ 3 ​ (8) ​ Income tax (provision) benefit ​ (1) ​ ​ (2) ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ ​ 1 % ​ 1 % ​ (8) % ​ Comparisons for the Fiscal Years Ended January 1, 2023 and January 2, 2022 Net Revenue Net revenue increased in 2022 by $64.0 million, or 17%, compared to 2021.
Biggest changeOur Results of Operations The following tables set forth our consolidated results of operations for the years presented and as a percentage of net revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ 2024 VS 2023 ​ 2022 ​ (in thousands, except percentages) Net revenue $ 315,887 ​ $ 355,175 (11) % ​ $ 439,652 Cost of revenue 185,639 ​ 206,949 ​ (10) ​ 248,206 Gross profit 130,248 ​ 148,226 ​ (12) ​ 191,446 Selling and marketing expenses 72,927 ​ 76,312 ​ (4) ​ 83,559 General and administrative expenses 81,334 ​ 92,129 ​ (12) ​ 99,148 Goodwill impairment ​ 28,374 ​ ​ - ​ NM ​ ​ ​ - Income (loss) from operations (52,387) ​ (20,215) ​ 159 ​ 8,739 Interest expense (1,271) ​ (1,728) ​ (26) ​ (1,103) Other income, net 705 ​ 933 ​ (24) ​ 136 Income (loss) before income taxes (52,953) ​ (21,010) ​ 152 ​ 7,772 Income tax benefit (provision) (2,333) ​ 1,676 ​ NM ​ (4,047) Net income (loss) $ (55,286) ​ $ (19,334) ​ 186 % ​ $ 3,725 NM – not meaningful ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ 2022 ​ Net revenue ​ 100 % ​ 100 % ​ 100 % Cost of revenue 59 ​ ​ 58 ​ 56 ​ Gross profit 41 ​ ​ 42 ​ 44 ​ Selling and marketing expenses 23 ​ ​ 22 ​ 19 ​ General and administrative expenses 26 ​ ​ 26 ​ 23 ​ Goodwill impairment ​ 9 ​ ​ — ​ ​ — ​ Income (loss) from operations (17) ​ ​ (6) ​ 2 ​ Interest expense — ​ ​ — ​ — ​ Other income, net — ​ ​ — ​ — ​ Income (loss) before income taxes (17) ​ ​ (6) ​ 2 ​ Income tax benefit (provision) (1) ​ ​ — ​ (1) ​ Net income (loss) ​ (18) % ​ (6) % ​ 1 % ​ Comparisons for the Fiscal Years Ended December 29, 2024 and December 31, 2023 Net Revenue Net revenue decreased in 2024 by $39.3 million, or 11%, compared to 2023.
As a result, the reporting of our gross profit and Gross Margin may not be comparable to other companies. Non-GAAP Financial Measures We report our financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
As a result, the reporting of our gross profit and Gross Margin may not be comparable to other companies. Non-GAAP Financial Measures We report our financial results in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
As a 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.
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.
Investing Activities Our primary investing activities have consisted of purchases of equipment to support our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure. Purchases of property and equipment may vary from period-to-period due to timing of the expansion of our operations. We have no material commitments for capital expenditures.
Investing Activities Our primary investing activities have consisted of purchases of equipment to support our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure. Purchases of property and equipment may vary from period to period due to the timing of the expansion of our operations. We have no material commitments for capital expenditures.
However, management believes that certain non-GAAP financial measures provide investors of our financial information with additional useful information in evaluating our performance and that excluding certain items that may vary substantially in frequency and magnitude period-to-period from net income (loss) provides useful supplemental measures that assist in evaluating our ability to generate earnings and to more readily compare these metrics between past and future periods.
However, management believes that certain non-GAAP financial measures provide investors with additional useful information in evaluating our performance and that excluding certain items that may vary substantially in frequency and magnitude period-to-period from net income (loss) provides useful supplemental measures that assist in evaluating our ability to generate earnings and to more readily compare these metrics between past and future periods.
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 report cost of revenue differently than we do.
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.
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 in that period. AOV reflects average basket size of our customers.
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 average basket size of our customers.
General and administrative expenses are primarily driven by increases in headcount required to support business growth and meeting our obligations as a public company. Since our IPO, we have incurred significant legal, accounting, and other expenses that we did not incur as a private company.
General and administrative expenses are primarily driven by increases in headcount required to support business growth and to meet our obligations as a public company. Since our IPO, we have incurred significant legal, accounting, and other expenses that we did not incur as a private company.
Selling and marketing expenses also include our spend on brand marketing channels, including compensation and free clothing to social media influencers, events, and other forms of online and offline marketing related to growing and retaining the customer base.
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.
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. 65 Table of Contents We believe that the assumptions and estimates associated with revenue recognition, equity-based compensation, and income taxes have the greatest potential impact on our consolidated financial statements.
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. We believe that the assumptions and estimates associated with revenue recognition, equity-based compensation, and income taxes have the greatest potential impact on our consolidated financial statements.
We also elected the practical expedient to combine lease and non-lease components. We determine if an arrangement contains a lease at inception based on whether the Company has the right to control the asset during the contract period and other facts and circumstances. We are the lessee in a lease contract when we obtain the right to control the asset.
We also elected the practical expedient to combine lease and non-lease components. We determine if an arrangement contains a lease at inception based on whether we have the right to control the asset during the contract period and other facts and circumstances. We are the lessee in a lease contract when we obtain the right to control the asset.
Income Taxes ​ We compute our provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carryforwards.
Income Taxes We compute our provision for income taxes using the asset and liability method, under which DTA and DTLs are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carryforwards.
We expect that compliance with the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as 60 Table of Contents rules and regulations subsequently implemented by the SEC, will increase our legal and financial compliance costs and will make some activities more time consuming and costly.
We expect that compliance with the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC, will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
For information on our New Revolving Facility, see Note 5, Debt , and for information on our contractual obligations for operating leases, see Note 6, Leases , of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
For information on our 2021 Revolving Facility, as amended, see Note 5, Debt , and for information on our contractual obligations for operating leases, see Note 6, Leases , of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which they are expected to be realized or settled. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the amount that is more likely than not to be realized.
DTAs and DTLs are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which they are expected to be realized or settled. DTAs are evaluated for future realization and reduced by a valuation allowance to the amount that is more likely than not to be realized.
Our primary requirements for liquidity and capital are inventory purchases, payroll and general operating expenses, capital expenditures associated with distribution, network expansion and capitalized software and debt service requirements.
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.
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.
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.
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 determine to have occurred upon shipment. Net revenue is impacted by our number of customers and their spending habits, AOV, product assortment and availability, and marketing and promotional activities.
We recognize net revenue at the point in time when control of the ordered product is transferred to the customer, which we determine to have occurred upon shipment. Net revenue is impacted by our number of customers and their spending habits, AOV, product assortment and availability, and marketing and promotional activities.
We consider Total Orders Placed as a key performance metric on the 56 Table of Contents basis that it is directly related to our ability to attract and retain customers as well as drive purchase frequency. Total Orders Placed, together with Average Order Value, is an indicator of the net revenue we expect to generate in a particular period.
We consider Total Orders Placed as a key performance metric on the basis that it is directly related to our ability to attract and retain customers as well as drive purchase frequency. Total Orders Placed, together with AOV, is an indicator of the net revenue we expect to generate in a particular period.
General and administrative expenses consist primarily of payroll and benefit costs and vary quarter to quarter due to changes in the number of seasonal 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 New Revolving Facility.
General and administrative expenses consist primarily of payroll and benefit costs and vary quarter to quarter due to changes in the number of seasonal workers to meet demand based on our seasonality. 60 Table of Contents Liquidity and Capital Resources Our primary sources of liquidity and capital resources are cash generated from operating activities and borrowings under our 2021 Revolving Facility, as amended.
Equity-based compensation expense is recognized on a straight-line basis over the period the employee or non-employee is required to provide service in exchange for the award, which is generally the vesting period. We recognize forfeitures as they occur. Under an employment agreement entered into with Mr.
Equity-based compensation expense is recognized on a straight-line basis over the period the employee or non-employee is required to provide service in exchange for the award, which is generally the vesting period. We recognize forfeitures as they occur. Under an employment agreement entered into with former CEO, David McCreight in 2021 (the “McCreight IPO Employment Agreement”) , Mr.
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.
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.
Contractual Obligations and Other Commitments ​ Our most significant contractual obligations relate to our New Revolving Facility and operating lease obligations on our distribution facilities and corporate offices.
Contractual Obligations and Other Commitments Our most significant contractual obligations relate to our 2021 Revolving Facility, as amended and operating lease obligations on our distribution facilities and corporate offices.
Discussion of the year-to-year comparisons between 2021 and 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2022.
Discussion of the year-to-year comparisons between 2023 and 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Recent Accounting Pronouncements See Note 2, Significant Accounting Policies—Recently Issued Accounting Pronouncements , of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more 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.
No goodwill impairment was recorded for the years ended December 31, 2023, and January 1, 2023 . ​ Recent Accounting Pronouncements See Note 2, Significant Accounting Policies—Recently Issued Accounting Pronouncements , of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more 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.
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 digital platform, and our ability to convert visitors to paying customers.
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.
During fiscal 2022, 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. Historically, our business model has resulted in strong growth.
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.
During the trailing twelve months ended January 1, 2023, we served 3.2 million Active Customers compared to 2.8 million for the trailing 12 months ended January 2, 2022. Inventory Management We utilize a data-driven strategy that leverages our proprietary reorder algorithm to manage inventory as efficiently as possible.
During the trailing 12 months ended December 29, 2024, we served 2.6 million Active Customers compared to 2.8 million for the trailing 12 months ended December 31, 2023. Inventory Management We utilize a data-driven strategy that leverages our proprietary reorder algorithm to manage inventory as efficiently as possible.
For stock option awards, we apply the Black-Scholes option pricing model to determine the fair value. The model utilizes the estimated per share fair value of our underlying common stock at the measurement date, the expected or contractual term of the option, the expected stock price volatility, risk-free interest rates, and the expected dividend yield of the common stock.
The model utilizes the estimated per share fair value of our underlying common stock at the measurement date, the expected or contractual term of the option, the expected stock price volatility, risk-free interest rates, and the expected dividend yield of the common stock.
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.
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. 54 Table of Contents Total Orders Placed We define Total Orders Placed as the number of customer orders placed across our platform during a particular period.
Each of the normal recurring adjustments and other adjustments described in this paragraph and in the following reconciliation table 57 Table of Contents help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.
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.
We consider both actions together, so increased promotional discounts in a period, which would reduce net revenue accordingly in such period, might also result in lower selling and marketing expenses in such period. Similarly, if we increase selling and marketing expenses in a given period, promotional discounts may be correspondingly reduced, thereby improving net revenue.
We consider both actions together, so increased promotional discounts in a period, which would reduce net revenue accordingly in such period, might also result in lower selling and marketing expenses in such period.
McCreight in 2021 and subject to ongoing employment, and in light of the closing of the IPO, Mr. McCreight will receive two bonuses to settled in fully-vested shares of our common stock equal to $3.0 million each ($6.0 million in aggregate) on March 31, 2022 and March 31, 2023. We initially concluded that the two bonuses were liability-classified upon issuance.
McCreight received two bonuses in the form of fully-vested shares of our common stock equal to $3.0 million each ($6.0 million in aggregate) on March 31, 2022 and March 31, 2023. We initially concluded that the two bonuses were liability-classified upon issuance.
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; ● 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; ● 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; ● Net Debt subtracts cash and cash equivalents and therefore may imply that there is less Company debt than the most comparable GAAP measure indicates; and ● other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative 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; ● 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; ● 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; ● Free Cash Flow does not represent the total residual cash flow available for discretionary purposes; and ● other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures. 55 Table of Contents Due to these limitations, Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow should not be considered as measures of discretionary cash available to us to invest in the growth of our business.
As we continue to grow, we will adjust our inventory purchases to align with the current needs of the business. Investment in Our Operations and Infrastructure We will continue to invest in our operations and infrastructure to facilitate further growth of our business.
As we continue to grow, we will adjust our inventory purchases to align with the current needs of the business.
Cost of Revenue and Gross Margin 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.
Similarly, if we increase selling and marketing expenses in a given period, promotional discounts may be correspondingly reduced, thereby improving net revenue. 57 Table of Contents 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.
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 quarterly net revenue in 2021 was most highly concentrated outside of the fourth fiscal quarter.
The increase was primarily due to the establishment of a valuation allowance that was recorded against federal and state DTAs. 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.
Actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in Part I, “Item 1A. Risk Factors” included elsewhere in this Annual Report on Form 10-K.
Actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in Part I, “ Item 1A.
Key Operating and Financial Metrics We collect and analyze operating and financial data to assess the performance of our business and optimize resource allocation.
No goodwill impairment was recorded for the years ended December 31, 2023, and January 1, 2023. ​ Key Operating and Financial Metrics We collect and analyze operating and financial data to assess the performance of our business and optimize resource allocation.
Our corporate banking relationship is with Bank of America. 63 Table of Contents Credit Facilities During November 2021, we entered into a Credit Agreement with Bank of America to provide a revolving facility that provides for borrowings up to $50.0 million.
Credit Facilities In November 2021, we entered into the 2021 Credit Agreement with Bank of America to provide the 2021 Revolving Facility that provided for borrowings up to $50.0 million with a maturity date of November 15, 2024.
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.
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.
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, and the interaction of various tax strategies.
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. 58 Table of Contents 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.
Refer to Note 6, Leases , of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. ​ Equity-Based Compensation Equity-based compensation is measured at the grant date or modification date (“measurement date”) for all equity-based awards made to employees and nonemployees based on the estimated fair value of the awards.
Equity-Based Compensation Equity-based compensation is measured at the grant date or modification date (“measurement date”) for all equity-based awards made to employees and nonemployees based on the estimated fair value of the awards.
There is judgment in utilizing historical trends for estimating future returns. Our refund liability for sales returns is included in returns reserve on the consolidated balance sheets and represents the expected value of the refund that will be due to our customers. ​ Leases On January 3, 2022, we adopted ASC 842.
Our refund for sales returns is included in returns reserve and asset for recovery on the consolidated balance sheets and represents the expected value of the refund that will be due to our customers. 63 Table of Contents Leases On January 3, 2022, we adopted Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”).
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.
There are several limitations related to the use of our non-GAAP financial measures as compared to the closest comparable GAAP measures.
Cash Flow Analysis The following table summarizes our cash flows for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 ​ ​ ​ ​ ​ (in thousands) Net cash provided by (used in): ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ $ 6,199 ​ $ 26,896 ​ $ 4,856 Investing activities ​ ​ (5,123) ​ ​ (3,394) ​ ​ (1,913) Financing activities ​ ​ (2,765) ​ ​ (27,653) ​ ​ 6,755 Net (decrease) increase in cash, cash equivalents and restricted cash ​ $ (1,689) ​ $ (4,151) ​ $ 9,698 ​ Operating Activities During 2022, net cash provided by operating activities was $6.2 million after net income of $3.7 million was adjusted for certain non-cash items, including depreciation and amortization, non-cash lease expense, amortization of debt discount and debt issuance costs, equity-based compensation, deferred taxes and the effect of changes in working capital and other activities.
Cash Flow Analysis The following table summarizes our cash flows for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 2022 ​ ​ (in thousands) Net cash provided by: ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ $ 2,601 ​ $ 15,421 ​ $ 6,199 Investing activities ​ ​ (2,874) ​ ​ (4,003) ​ ​ (5,123) Financing activities ​ ​ 2,227 ​ ​ (19,131) ​ ​ (2,765) Net increase (decrease) in cash and cash equivalents ​ $ 1,954 ​ $ (7,713) ​ $ (1,689) ​ Operating Activities Net cash provided by operating activities consists primarily of net income (loss) adjusted for certain non-cash items, including depreciation, amortization, equity-based compensation, the effect of changes in working capital and other activities.
Other Income (Expense), Net Other income (expense), net consists primarily of interest expense and other miscellaneous income. (Provision) Benefit for Income Taxes The (provision) benefit 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 and state taxes.
The effective rate differs from the statutory rate primarily due to non-deductible equity-based compensation expenses, non-deductible officer compensation, and state taxes.
The following table sets forth our key performance indicators for the periods presented (in thousands, except for percentages and Average Order Value). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin 43.5 % ​ 47.1 % ​ 44.4 % Net income (loss) ​ $ 3,725 ​ $ 2,045 ​ $ (19,304) ​ Adjusted EBITDA (1) ​ $ 29,096 ​ $ 41,406 ​ $ 18,911 ​ Adjusted EBITDA Margin (1) ​ 6.6 % 11.0 % 7.6 % Active Customers (2) ​ ​ 3,223 ​ ​ 2,760 ​ ​ 2,000 Average Order Value ​ $ 131 ​ $ 120 ​ $ 106 ​ (1) For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure and why we consider them useful, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” (2) Active Customers count is based on de-duplication logic using customer account and guest checkout name, address, and email information.
The following table sets forth our key performance indicators for the periods presented (in thousands, except for percentages and Average Order Value). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Margin 41.2 % ​ 41.7 % ​ 43.5 % Net income (loss) ​ $ (55,286) ​ $ (19,334) ​ $ 3,725 ​ Adjusted EBITDA (1) ​ $ (9,738) ​ $ 3,231 ​ $ 29,096 ​ Adjusted EBITDA margin (1) ​ (3.1) % 0.9 % 6.6 % Active Customers ​ ​ 2,620 ​ ​ 2,830 ​ ​ 3,223 Average Order Value ​ $ 137 ​ $ 133 ​ $ 131 ​ (1) For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure and why we consider them useful, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.” ​ 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.
See “Risk Factors.” Customer Acquisition Our business performance depends in part on our continued ability to cost-effectively acquire new customers.
See Part I, “ Item 1A. Risk Factors ” included elsewhere in this Annual Report on Form 10-K. 56 Table of Contents Customer Acquisition Our business performance depends in part on our continued ability to cost-effectively acquire new customers.
We consider many factors when assessing the likelihood of future realization, including our recent cumulative loss, earnings expectations in earlier future years, and other relevant factors.
We consider many factors when assessing the likelihood of future realization, including our recent cumulative loss, earnings expectations in earlier future years, and other relevant factors. ​ As of December 29, 2024, we had approximately $24.4 million in gross DTAs and $10.3 million in gross DTLs, which resulted in a net DTA of $14.1 million.
These non-GAAP financial measures may be different than similarly titled measures used by other companies. To supplement our audited consolidated financial statements which are prepared in accordance with GAAP, we use “Adjusted EBITDA”, “Adjusted EBITDA Margin” and “Net Debt” which are non-GAAP financial measures (collectively referred to as “Adjusted EBITDA”).
To supplement our audited consolidated financial statements which are prepared in accordance with GAAP, we use “Adjusted EBITDA”, “Adjusted EBITDA Margin” (collectively referred to as “Adjusted EBITDA”) and “Free Cash Flow” which are non-GAAP financial measures. Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP.
When quarterly gross profit fluctuations have been unfavorable relative to the fluctuations in sales, these situations have been driven by non-recurring, external factors, such as the COVID-19 pandemic and the ensuing macroeconomic slowdown that began in mid-2022.
Our quarterly gross profit fluctuates primarily based on how we manage our inventory and merchandise mix and has typically been in line with fluctuations in net revenue. When quarterly gross profit fluctuations have deviated relative to the fluctuations in sales, these situations have been driven by non-recurring, external factors, such as the COVID-19 pandemic.
Critical Accounting Policies and Estimates Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K 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.
In addition to these non-cash expenses, we incurred travel costs and some inefficiency and redundancies in our labor costs during the first quarter of 2025 as we completed consolidation of the facilities. ​ Critical Accounting Policies and Estimates Our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP.
We believe that our 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 and promotional discounts and markdowns, generated from the sale of apparel, footwear, and accessories.
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.
McCreight will receive two bonuses equal to $2.0 million and $1.0 million in March 2023 and March 2024, respectively, which will be settled in RSUs that vest in 4 and 2 quarterly installments from March 2023 and March 2024, respectively, through December 2023 and June 2024, respectively.
McCreight received one bonus equal to $2.0 million in March 2023 and one bonus equal to $1.0 million in March 2024, both in the form of RSUs that vested in four and two quarterly installments from March 2023 and March 2024, respectively, through December 2023 and June 2024, respectively. U nder the Executive Chairman Employment Agreement, Mr.
Due to these limitations, Adjusted EBITDA, Adjusted EBITDA margin, and Net Debt 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.
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.
A reconciliation of non-GAAP Net Debt as of January 1, 2023 and January 2, 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ January 1, 2023 ​ ​ January 2, 2022 ​ ​ (in thousands) Revolving line of credit, long term ​ $ (25,000) ​ $ (25,000) Cash and cash equivalents ​ ​ 10,219 ​ ​ 11,402 Net Debt ​ $ (14,781) ​ $ (13,598) ​ 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.
We believe free cash flow is an important metric because it represents a measure of how much cash from operations we have available for discretionary and non-discretionary items after the deduction of capital expenditures . ​ A reconciliation to non-GAAP Free Cash Flow from net cash provided by operating activities for the periods presented is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 2022 Net cash provided by operating activities ​ $ 2,601 ​ $ 15,421 $ 6,199 Capitalized software development costs ​ ​ (1,574) ​ ​ (2,055) ​ (2,500) Purchases of property and equipment ​ ​ (1,300) ​ ​ (1,880) ​ (2,511) Free Cash Flow ​ $ (273) ​ $ 11,486 $ 1,188 ​ 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.
This was primarily driven by a $19.6 million decrease in accrued expenses and other current liabilities, $15.7 million increase in inventory balances, $6.5 million increase in income tax receivable and a $2.6 million decrease in operating lease liabilities; these were partially offset by $4.0 million increase in accounts 64 Table of Contents payable, $3.4 million increase in prepaid and other current assets, $3.5 million decrease in accounts receivable, $2.6 million decrease in assets for recovery, and a $1.4 million decrease in other non-current liabilities.
This was partially offset by $4.0 million in accrued expenses and other current liabilities primarily driven by an increase in our stored-value card liability, a $3.0 million decrease in prepaids and other current assets driven by lower prepaid marketing and prepaid supplies costs due to lower sales, a $1.0 million decrease in accounts receivable driven by lower sales and a $0.3 million increase related to other noncurrent liabilities driven by increased non-current deferred tax liabilities.
The IBR is determined at the lease commencement and is subsequently reassessed upon a modification to the lease arrangement.
The IBR is determined at the lease commencement and is subsequently reassessed upon a modification to the lease arrangement. Refer to Note 6, Leases , of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We concluded that the two bonuses were liability-classified upon issuance in November 2022. 66 Table of Contents The fair value of grants of restricted stock or restricted stock units is based on the fair value of our common stock underlying the award on the measurement date.
The fair value of grants of restricted stock or RSUs is based on the fair value of our common stock underlying the award on the measurement date. For stock option awards, we apply the Black-Scholes option pricing model to determine the fair value.
This was offset by a reduction of $83.4 million of net proceeds from the IPO in 2021 and related offering costs, a $16.5 million decreases in proceeds (net of repayments) from our revolving line of credit facilities, $1.1 million of withholding tax p ayments related to vesting of RSUs, and a $0.8 million increase of finance lease payments primarily attributed to the robotics system at the Pennsylvania distribution center.
The increase was primarily due to higher borrowings of $20.1 million on our 2021 Revolving Facility, as amended, a $2.0 million decrease in repayments on our 2021 Revolving Facility, as amended, and a $0.4 million decrease in withholding tax payments related to vesting of RSUs, partially offset by a $0.5 million increase related to the 2024 Repurchase Program, a $0.4 million increase in finance lease payments, and a $0.3 million decrease in proceeds received from issuance of common stock under our employee stock purchase plan (“ESPP”).
Overview Lulus is a customer-driven, digitally-native fashion brand primarily serving a large, diverse community of Millennial and Gen Z women, who typically meet us in their 20s and stay with us through their 30s and beyond. We focus relentlessly on giving our customers what they want.
Our goal is to become the most trusted and number one destination for dresses, helping every woman feel confident and celebrated, supporting her for all of life's occasions. Lulus primarily serves a large, diverse community of Millennial and Gen Z women, who typically meet us in their 20s and stay with us through their 30s and beyond.
For additional discussion of risks related to the COVID-19 pandemic and the impact of the COVID-19 pandemic on our Company, see “Risk Factors—Risks Related to our Business—The COVID-19 pandemic has had and may in the future have an adverse effect on our labor workforce availability, supply chain, business, financial condition, cash flows, and results of operations in ways that remain unpredictable.” ​ ​ ​ 55 Table of Contents Impact of Macroeconomic Trends on Business ​ Changing macroeconomic factors, including inflation, interest rates, fuel prices, and overall consumer confidence with respect to current and future economic conditions have directly impacted our sales in fiscal 2022 as discretionary consumer spending levels and shopping behavior fluctuate with these factors.
Impact of Macroeconomic Trends on Business Changing macroeconomic factors, including inflation, interest rates, student loan repayment resumption, tariffs or bans, world events, wars and domestic and international conflicts, existing and future laws and regulations, directives (including executive orders), and overall consumer confidence with respect to current and future economic conditions have directly impacted our sales in fiscal 2024 as discretionary consumer spending levels and shopping behavior fluctuate with these factors.
The changes in cash provided was primarily driven by an increase of $1.7 million due to an increase in net income from $2.0 million in 2021 to net income of $3.7 million in 2022, a decrease of $29.5 million related to changes in our operating assets and liabilities and an increase of $7.1 million of non-cash items .
The decrease was primarily due to an increase of $36.0 million in our net loss after adjusting for an increase in non-cash items of $26.5 million related to goodwill impairment, depreciation, amortization, equity-based compensation, and other activities , a $6.3 million increase in inventory purchases due to less inventory carried over from prior year in 2024, an increase of $3.6 million in income tax refund receivable due to the finalization of a multi-year state income tax audit, a decrease of $1.4 million in accounts payable related to the timing of payments related to our credit card payables, a $0.2 million decrease related to operating lease liabilities, and a $0.1 million increase related to assets for recovery .
McCreight signed in November 2022, reflecting his new role as Executive Chairman, which became effective on the Effective Date, Mr.
McCreight effective in November 2022, when he transitioned to the role of Executive Chairman, (the “Executive Chairman Employment Agreement”) , Mr.
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We do this by using data coupled with human insight to deliver a curated and continuously evolving broad assortment of on-trend, affordable luxury fashion for many of life’s moments. Our customer obsession sets the tone for everything we do, from our personalized online shopping experience to our exceptional customer service.
Added
Overview Lulu’s Fashion Lounge Holdings, Inc., a Delaware Corporation (“Lulus”, “we”, “our”, or the “Company”) is a customer-driven, primarily online, digitally-native attainable luxury fashion brand for women, offering modern, unapologetically feminine designs at attainable prices for all of life’s fashionable moments.
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Initial Public Offering On November 10, 2021, our registration statement on Form S-1 relating to its IPO was declared effective by the SEC and the shares of its common stock began trading on the Nasdaq Global Market on November 11, 2021.
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We focus relentlessly on giving our customers what they want by using direct consumer feedback and insights to refine product offerings and elevate the customer experience. Lulus’ world class personal stylists, bridal concierge, and customer care team share an unwavering commitment to elevating style and quality and bring exceptional customer service and personalized shopping to customers around the world.
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The IPO closed on November 15, 2021, pursuant to which we issued and sold 5,750,000 shares of our common stock at a public offering price of $16.00 per share.
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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. During 2024 and 2023, t he Company incurred net losses of $55.3 million and $19.3 million, respectively, and net income of $3.7 million in 2022 .
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On November 15, 2021, we received net proceeds of approximately $82.0 million from the IPO, after deducting underwriting discounts and commissions of approximately $6.1 million and other issuance costs of approximately $3.9 million.
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As of December 29, 2024, we had total cash and cash equivalents of $4.5 million and $13.1 million in outstanding amounts under the 2021 Credit Agreement, as amended, classified within total current liabilities. During 202 4, we borrowed $33.1 million under the 2021 Credit Agreement, as amended, and repaid $28.0 million of the outstanding balance.
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Immediately prior to the completion of the IPO, we filed an amended and restated certificate of incorporation, which authorized a total of 250,000,000 shares of common stock at $0.001 par value per share, and 10,000,000 shares of preferred stock, $0.001 par value per share.
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For further information on the 2021 Credit Agreement, as amended, see Note 5, Debt of the accompanying notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. ​ We are actively seeking alternative debt financing and will continue to take certain cash conservation measures, including adjustments to marketing and other fixed and variable costs and capital spend to meet our obligations as needed.
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Immediately prior to the completion of the IPO, all shares of the Series A Preferred Stock then outstanding were converted into 15,000,000 shares of common stock. Additionally, 215,702 shares of common stock were issued to the LP immediately prior to the completion of the IPO.
Added
As the ability to raise additional debt financing is outside of management’s control, we cannot conclude that management’s plans will be effectively implemented within twelve months from the date the consolidated financial statements are issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about the Company's ability to continue as a going concern.
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All shares of the Series B Preferred Stock and the Series B-1 Preferred Stock were redeemed and extinguished for a total payment of approximately $17.9 million on November 15, 2021.
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The consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty. ​ 53 Table of Contents Goodwill impairment As of the annual goodwill impairment assessment date for fiscal year 2024 the Company performed a qualitative assessment of its goodwill and determined that it is more likely than not that the fair value of its reporting unit exceeds the carrying value of the reporting unit.
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Impact of the COVID-19 Pandemic While there continues to be uncertainty related to the COVID-19 pandemic, we believe the significant impact of the pandemic on the demand for our product related to social distancing mandates, lockdowns, cancelled social events and travel has largely subsided.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest on any borrowings incurred pursuant to our New Revolving Facility accrue at a floating rate based on a 67 Table of Contents formula tied to certain market rates at the time of incurrence; however, we do not expect that any change in prevailing interest rates will have a material impact on our results of operations.
Biggest changeInterest on any borrowings incurred pursuant to our 2021 Revolving Facility, as amended, accrue at a floating rate based on a formula tied to certain market rates at the time of incurrence; however, we do not expect that any change in prevailing interest rates will have a material impact on our results of operations.
Our inability or failure to do so could harm our business, financial condition and results of operations. ​ 68 Table of Contents
Our inability or failure to do so could harm our business, financial condition and results of operations. 66 Table of Contents ​ 67 Table of Contents
Foreign Currency Risk All of our sales and operating expenses are denominated in U.S. dollars, and therefore, our net revenue is not currently subject to foreign currency risk. Inflation We have experienced inflationary pressures in our supply chain and in our operating costs, as well as impacts related to our customers’ spending levels, which fluctuate with inflation.
Foreign Currency Risk All of our domestic sales and operating expenses are denominated in U.S. dollars, and therefore, our income/(loss) before income taxes is not currently subject to foreign currency risk. Inflation We have experienced inflationary pressures in our supply chain and in our operating costs, as well as impacts related to our customers’ spending levels, which fluctuate with inflation.

Other LVLU 10-K year-over-year comparisons