- Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of Lulu’s Fashion Lounge Holdings Inc LVLU with a price target of $5.
- LVLU will report 1Q23 results after the market close on Tuesday, May 9.
- The analyst is looking for 1Q23 adjusted EBITDA of $2.0 million versus $9.9 million last year and the consensus of $2.2 million.
- The analyst sees sales to decline 14.9% YoY to $95.2 million, slightly ahead of the consensus of $93.9 million.
- As of mid-March, Q1-to-date sales trends were tracking down mid-to-high-teens from last year’s 62% comparable sales, due to fewer wedding-related events and ongoing macro pressures, said the analyst.
- The analyst added that this reflects a sequential deceleration from 4Q22's 6.0% YoY revenue decline primarily attributable to slower order frequency.
- Given the industry's elevated promotional levels, LVLU has been strategic with its discounts to remain relevant to cautious consumers but not uncharacteristically promotional, noted the analyst.
- Revenue growth is expected to rebound to positive in the back half of the year, as the first half faces tough comparisons from pent-up demand for special occasion apparel.
- While the LVLU customer is exposed to macro pressures, the analyst sees wedding/event cycle and digital/physical channel normalizations as more temporary volatility factors, which have clouded visibility for FY23 when combined with macro concerns and the broader promotional landscape.
- The analyst continues to see LVLU's nimble model as well positioned to deliver sustained growth.
- The analyst sees company’s unique “test, learn, and reorder” strategy as a competitive advantage.
- Also, there is less inventory obsolescence associated with LVLU's assortment compared to many fashion retailers, noted the analyst.
- Price Action: LVLU shares are trading lower by 2.24% at $2.18 on the last check Tuesday.
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