Lulu Fashion shares after 2Q results.

By Michael Dabay

Shares of Lulu Fashion Lounge Holdings Inc. fell 17 percent to $6.47 after the company reported pre-announced results and upped its guidance.
After the bell Tuesday, the fashion brand reported second-quarter revenue of $131.5 million, up 27.% and in line with FactSet consensus.  Earnings per share were 15 cents.  The company said it will report revenue of $131 million to $132 million at the end of July.

Gross margin decreased 380 basis points to 45.8% and gross profit increased 17.0%.
The company maintained its 2022 guidance for revenue of between $440 million and $480 million.
In a note, Jefferies analysts praised the quarter’s top-line performance and customer growth, but reiterated lower gross profit and guidance for the quarter as their dislikes.
Cowen analysts say they believe LVLU’s sales slowdown and margin pressure are more macro-driven than company-specific, and view the current challenges as temporary.
“2Q22 EPS was in line with prior guidance issued on 7/28 and management reiterated its revised outlook, which assumes continued congestion with consumer demand, return rates and freight surcharges, and pre-Covid promotional levels unchanged,” Cowen said. Analysts said in a note.  “We believe guidance is likely to be raised into 2H22 as continued revenue and margin pressure is anticipated.”
CEO David McCreight said on the company’s first-quarter earnings call that “and like many others,” the company is beginning to see volatility in traffic trends and conversion rates, possibly due to increasing macro pressures that are affecting consumer spending behavior.  .
“We’ve seen higher returns as well as shipping surcharges, which have had a disproportionately negative impact on our Ebitda margins,” Mr McCreath said.
“Due to this change in consumer behavior, we are actively managing our inventory and reasonable costs due to the macro environment. We view these challenges as temporary and remain confident in our long-term prospects for continued profitable growth,” the CEO said on the call.
KeyBanc Capital Markets analysts Noah Zatkin and Chandana Madaka said in a note that while they think the top line and margins will come under pressure in the near term, “we think the revised FY guidance looks fairly conservative.”
“Encouragingly, LVLU is seeing some green shoots related to low-income customers as fuel prices drop,” the analysts said.
Write to Michael Dabaie at michael.dabaie@wsj.com