Brief Summary:
Lulu’s Fashion brand reported a significant increase in revenue and an increase in the average order value for the second quarter.
Customers who were actively engaged also outpaced a leading rival.
What’s the Story About Lulu’s Fashion Lounge Shares?
Lulu’s Fashion Lounge Holdings (NASDAQ:LVLU) fell 17.5% on Wednesday. The company recorded a 27% increase in revenue compared to the same quarter the previous year; nevertheless, weaker margins put pressure on profitability, which caused the stock to decline.
The stock has lost 37% of its value this year, performing worse than the overall market.
Then what?
Despite the challenges posed by the macroeconomic environment, Lulu’s (NASDAQ:LVLU) business is doing reasonably well. The decrease in gross profit margin that occurred during the quarter, which was roughly 4 percentage points to 45.8%, was attributed by management to greater transportation expenses and higher returns. As a result of narrower profit margins, the company’s earnings per share dropped from $0.28 in the prior-year period to $0.15.
On the other hand, there were many reasons to be optimistic. Active consumers increased by approximately 53% year on year (YOY), reaching 3.2 million, while average order values rose by 13% during the same period. Despite the challenging economic environment, these data suggest that the brand has maintained its strength and is continuing to attract new customers.
What’s Next?
The management team reaffirmed its earlier guidance, which forecasts an increase in full-year revenue between 17.1% and 27.8% throughout 2021.
Revolve Group, one of Lulu’s (NASDAQ:LVLU)competitors, had the same revenue growth in the most recent quarter but recorded a lower rate of increase in the number of active consumers. Because of this, Lulu’s is in a better position than before to gain market share.
However, expenditure by consumers on fashion apparel experienced a sharp decline in July. According to the company’s report, sales growth has slowed to roughly 10% year over year. The management team at Lulu (NASDAQ:LVLU) has stated that they are taking a conservative stance about the future, but they did observe that things were beginning to look up at the end of July.
Because Lulu’s (NASDAQ:LVLU) stock is currently trading at a significantly lower value than it was a year ago, meager expectations have already been priced. This creates a significant recovery once the economic climate has returned to its normal state.
Featured Image: Megapixl @Zamuruev
Author Shariq Khan 
