Lulu's Fashion Lounge Holdings Inc (LVLU) 2024 Q2 法說會逐字稿

Good afternoon, and welcome to the Lulu second-quarter 2024 earnings conference call. Today's call is being recorded, and we have allocated one hour for the prepared remarks and Q&A. At this time, I'd like to turn the conference over to Lulu's General Counsel and Corporate Secretary, Naomi Beckman-Straus. Thank you. You may begin.

下午好，歡迎參加 Lulu 2024 年第二季財報電話會議。今天的電話會議正在錄音，我們分配了一個小時來準備發言和問答。這次，我想將會議轉交給 Lulu 的總法律顧問兼公司秘書 Naomi Beckman-Straus。謝謝。你可以開始了。

Good afternoon, everyone, and thank you for joining us to discuss Lulu second-quarter 2024 results. Before we begin, we would like to remind you that this conference call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

大家下午好，感謝您加入我們討論 Lulu 2024 年第二季業績。在開始之前，我們想提醒您，本次電話會議將包含 1995 年《私人證券訴訟改革法案》含義內的前瞻性陳述。

All statements made on this call that do not relate to matters of historical fact should be considered forward looking statements, including but not limited to statements regarding management's expectations, plans, strategies, goals and objectives and our implementation, our expectations around the continued impact of the macroeconomic environment, consumer demand and return rates on our business, our future expectations regarding financial results.

本次電話會議中所做的所有與歷史事實無關的陳述均應被視為前瞻性陳述，包括但不限於有關管理層的預期、計劃、戰略、目的和目標以及我們的實施情況、我們對未來持續影響的預期的陳述。

Our ability to realize the intended impact of cost reduction measures references to the fiscal year ending December 29, 2024, including our financial outlook for 2024. Market opportunities, product launches and other initiatives and our growth. These statements, which are subject to various risks, uncertainties, assumptions and other important factors could cause our actual results, performance or achievements to differ materially from results, performance or achievements expressed or implied by these statements.

我們實現成本削減措施預期影響的能力參考截至 2024 年 12 月 29 日的財政年度，包括我們對 2024 年的財務展望。市場機會、產品發布和其他舉措以及我們的成長。這些陳述受到各種風險、不確定性、假設和其他重要因素的影響，可能導致我們的實際結果、績效或成就與這些陳述明示或暗示的結果、績效或成就有重大差異。

These risks, uncertainties and assumptions are detailed in this afternoon's press release, as well as our filings with the SEC, including our annual report on Form 10-K for the fiscal year ended December 31, 2023, and our quarterly report on Form 10-Q for the second quarter ended June 30, 2024, filed with the SEC this afternoon, all of which can be found on our website at investors.lulu.com.

這些風截至 2024 年 6 月 30 日的第二季 Q 已於今天下午向 SEC 提交，所有內容均可在我們的網站 Investors.lulu.com 上找到。

Any such forward-looking statements represent management's estimates as of the date of this call, but we may elect to update such forward-looking statements at some point in the future we undertake no obligation to revise or update any forward-looking statements or information, except as required by law.

任何此類前瞻性陳述均代表管理層截至本次電話會議之日的估計，但我們可能選擇在未來某個時候更新此類前瞻性陳述，我們不承擔修改或更新任何前瞻性陳述或資訊的義務，法律要求的除外。

During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA, adjusted EBITDA margin, net debt and free cash flow. We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business.

在今天的電話會議中，我們還將參考某些非 GAAP 財務信息，包括調整後 EBITDA、調整後 EBITDA 利潤率、淨債務和自由現金流。我們在一些財務討論中使用非公認會計準則衡量標準，因為我們相信它們更準確地代表了我們業務的真實營運績效和基本結果。

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. Our non-GAAP measures may be different from non-GAAP measures used by other companies, reconciliation of GAAP to non-GAAP measures as well as the description limitations and rationale for using each measure can be found in this afternoon's press release and in our SEC filings.

本非 GAAP 財務資訊的呈現不應被孤立地考慮，也不能被視為替代或優於根據 GAAP 準備和呈現的財務資訊。我們的非 GAAP 衡量標準可能與其他公司使用的非 GAAP 衡量標準不同，GAAP 與非 GAAP 衡量標準的調整以及描述限制和使用每項衡量標準的理由可以在今天下午的新聞稿和我們的 SEC 中找到備案。

For me on the call today our CEO, Crystal Landsem; our CFO, Tiffany Smith; and our President and CIO, Mark Vos. Following our prepared remarks, we'll open the call for your questions.

今天我在電話會議上，我們的執行長 Crystal Landsem；我們的財務長蒂芙尼‧史密斯；還有我們的總裁兼資訊長 Mark Vos。在我們準備好的發言之後，我們將開始電話詢問您的問題。

With that, I'll turn the call over to Crystal.

這樣，我會將電話轉給克里斯托。

Thank you, Naomi, and good afternoon, everyone. We appreciate you joining us today. Our second quarter results were in line with the expectations laid out in our preliminary results with net revenue of $92 million 13% lower than the prior year period and adjusted EBITDA of $0.2 million losses $4.4 million below the prior year period.

謝謝內奧米，大家下午好。我們感謝您今天加入我們。我們第二季的業績符合初步業績中的預期，淨收入為 9,200 萬美元，比去年同期低 13%，調整後 EBITDA 為 20 萬美元，虧損比去年同期低 440 萬美元。

First quarter headwinds, including declines in markdown sales and higher return rates due to strong sales and high margin occasion, where combined with slower adoption of our new return policy contributed to the softer than expected results for the quarter. Despite progress on margin goals and reduced operating expenses, profitability was limited by fixed costs against lower than expected net revenue base.

第一季的不利因素，包括由於銷售強勁和高利潤率而導致降價銷售下降和退貨率上升，再加上我們新退貨政策的採用速度較慢，導致本季業績低於預期。儘管利潤率目標取得了進展並且營運費用有所減少，但盈利能力仍受到固定成本和低於預期淨收入基礎的限制。

As with many direct to consumer companies we are navigating a range of external challenges, putting pressure on top line and bottom line results. However, we view these obstacles as temporary and are tightly managing expenses to withstand the short term headwinds. To that end, we remain committed to our long-term growth initiatives, which reinforce our competitive strengths, and that will enable us to endure near term volatility and position us for sustainable growth.

與許多直接面向消費者的公司一樣，我們正在應對一系列外部挑戰，對營收和利潤帶來壓力。然而，我們認為這些障礙是暫時的，並且正在嚴格管理費用以抵禦短期阻力。為此，我們仍然致力於長期成長計劃，這將增強我們的競爭優勢，並使我們能夠承受短期波動並為永續成長做好準備。

These include continued evolution and optimization of our data-driven merchandising model with customer data and insights to drive value to our brand fans through our robust reorder algorithm and an improved and evolving assortment. Amplifying our unique brand DNA and community-focused culture by leveraging our deep performance, marketing insights, elevating brand awareness efforts to grow visibility and brand engagement and delivering excellent customer service to drive increased word-of-mouth introductions.

其中包括利用客戶數據和見解不斷發展和優化我們的數據驅動的銷售模型，透過我們強大的再訂購演算法和改進和不斷發展的產品組合為我們的品牌粉絲帶來價值。透過利用我們深厚的業績和行銷洞察力，提升品牌知名度以提高知名度和品牌參與度，並提供卓越的客戶服務以推動口碑傳播，從而擴大我們獨特的品牌 DNA 和以社區為中心的文化。

By capitalizing on these strengths, we're confident that we can reach a broad base of potential customers and steadily increase our market share over time. Continued investments in our proprietary technology stack and analytics platforms to improve our customer insights and operations and continually drive better decisioning, higher engagements and increased efficiencies. We are confident in our competitive strengths and are encouraged by the steady improvements these focused initiatives have yielded across our core competencies.

透過利用這些優勢，我們有信心接觸到廣泛的潛在客戶，並隨著時間的推移穩步提高我們的市場份額。持續投資我們的專有技術堆疊和分析平台，以改善我們的客戶洞察和運營，並不斷推動更好的決策、更高的參與度和更高的效率。我們對自己的競爭優勢充滿信心，並對這些重點舉措在我們的核心能力方面取得的穩步進步感到鼓舞。

So with that, I'd like to highlight some of the positive outcomes from the quarter. Our special occasion and bridesmaid net sales grew by over 30% year over year and surpassed our pre-pandemic peak, marking a record quarter for these product categories and reinforcing Lulu's brand position as the go-to destination for all of life's moments.

因此，我想強調本季的一些積極成果。我們的特殊場合和伴娘淨銷售額同比增長超過 30%，超過了大流行前的峰值，標誌著這些產品類別創下了季度紀錄，並鞏固了 Lulu 作為生活中所有時刻的首選目的地的品牌地位。

Gross margin improved in the second quarter with an 80 basis point expansion year over year due to lower markdown sales and a shift toward higher margin product classes. Markdown sales decreased by approximately 30% compared to the prior year, thanks to our healthier inventory position. Inventory levels declined by 19% for Q2 2023, driven by further tightening of our weeks of supply and our reorder business, surpassing the year-over-year net revenue decline and showcasing the agility of our data-driven buying model.

由於降價銷售減少以及轉向利潤率更高的產品類別，第二季毛利率有所改善，較去年同期成長 80 個基點。由於我們的庫存狀況更加健康，降價銷售額與前一年相比下降了約 30%。由於我們的供應週數和再訂購業務進一步收緊，2023 年第二季度的庫存水準下降了 19%，超過了同比淨收入的下降幅度，並展示了我們數據驅動的購買模式的敏捷性。

Additionally, inventory mix across new novelty and reorder products continues to improve, driving further confidence in the future reorder funnel. Our new return policy boosted restocking fee revenue and led to an improvement in customer return behavior towards the end of the quarter, even as we extended our exceptions to the previous policy, which resulted in some top line pressure.

此外，新奇產品和再訂購產品的庫存組合持續改善，進一步增強了人們對未來再訂購管道的信心。我們的新退貨政策增加了重新進貨費收入，並導致季度末客戶退貨行為有所改善，儘管我們延長了先前政策的例外情況，這導致了一些頂線壓力。

We are seeing continued progress on our net revenue comps, which improved sequentially in the quarter with early third quarter sales showing a continuation of positive trends suggesting improving traction within our strategic initiatives our third party branded influencer collaborations this quarter have proven highly effective driving increased media interest, social traffic and purchase intent.

我們看到我們的淨收入比較持續取得進展，該季度環比有所改善，第三季度初的銷售顯示出持續的積極趨勢，這表明我們的戰略計劃的牽引力有所提高，事實證明，本季度我們的第三方品牌影響者合作非常有效地推動了媒體的增加興趣、社群流量和購買意願。

Notable partnerships with Levi's, Vans and the Dominican Sisters have not only strengthened our brand equity, but also catalyzed prospective partnership opportunities. In Q2, we renewed our strategy on third party partnerships, recognizing their value and enhancing product visibility and desirability for both new and existing customers.

與 Levi's、Vans 和 Dominican Sisters 的著名合作關係不僅增強了我們的品牌資產，而且還催生了潛在的合作機會。在第二季度，我們更新了關於第三方合作夥伴關係的策略，認識到他們的價值並提高新舊客戶的產品知名度和吸引力。

We believe returning to pre-pandemic third party merchandise allocations enhances our offerings, lowers the entry barrier for new customers and creates significant growth opportunities for synergistic brand partnerships. We also saw continued strong demand for new and novelty products, supporting our reorder pipeline and driving positive sales and favorable margin performance in key high-volume categories.

我們相信，恢復疫情前的第三方商品分配可以增強我們的產品，降低新客戶的進入門檻，並為協同品牌合作夥伴關係創造重大成長機會。我們也看到對新奇產品的持續強勁需求，支持了我們的再訂購管道，並推動了關鍵大批量類別的積極銷售和良好的利潤率表現。

As discussed in prior quarters, we are actively adapting to significant trend shifts while upholding the enduring quality that defines our brand. We anticipate sustained momentum with third quarter receipts, reflecting our merchandising team's fresh vision. I'm excited about the tangible value our new products and merchandising efforts are generating.

正如前幾季所討論的，我們正在積極適應重大趨勢變化，同時堅持定義我們品牌的持久品質。我們預計第三季的營收將保持持續成長勢頭，這反映了我們的銷售團隊的新願景。我對我們的新產品和行銷工作所產生的有形價值感到興奮。

Finally, our wholesale business is progressing steadily, highlighted by the introduction of more cohesive collections and new developments based on our best selling items, streamlined fulfillment processes and reinvigorated partnership with a long-standing major in the second half.

最後，我們的批發業務正在穩步發展，重點是在下半年推出了更具凝聚力的產品系列和基於我們最暢銷產品的新開發產品，簡化了履行流程，並重振了與長期合作夥伴的合作夥伴關係。

Looking ahead to Q3 and Q4, we are working towards further expanding partnerships enhancing IMUs for both Lulu's and our wholesale partners, further optimizing our product strategy and offering in-season and chase opportunities, which will drive meaningful wholesale growth in the back half of the year. We remain focused on growth with our department store partners and have open distribution with three new major retailers.

展望第三季和第四季度，我們正在努力進一步擴大合作夥伴關係，增強Lulu 和我們的批發合作夥伴的IMU，進一步優化我們的產品策略並提供當季和追逐機會，這將推動下半年批發業務的有意義的增長年。我們仍然專注於與百貨公司合作夥伴的成長，並與三家新的主要零售商進行開放分銷。

Turning to the less favorable aspects about the quarter, our casual business was disproportionately challenged during the quarter, driving the majority of the year-over-year declines in net sales returns continued to pressure results, driven partially by mix shifts into higher return rate products. A higher concentration of full-price sales and consumer behavior favoring larger orders to accommodate bringing the dressing room home.

談到本季不太有利的方面，我們的休閒業務在本季度受到了不成比例的挑戰，導致淨銷售回報同比下降的大部分繼續給業績帶來壓力，部分原因是混合轉向更高回報率的產品。全價銷售和消費者行為更加集中，有利於更大的訂單，以適應將更衣室帶回家的需求。

That said, we are encouraged by the downward trend in return rates across most product classes towards the end of the quarter. Profitability was pressured due to higher fixed costs on a lower than anticipated net revenue base due to the softer results and continued macroeconomic pressures and uncertainty. We are swiftly implementing cost reduction measures alongside our strategic initiatives to improve profitability and better position the company for growth.

儘管如此，我們對本季末大多數產品類別的退貨率下降趨勢感到鼓舞。由於業績疲軟以及持續的宏觀經濟壓力和不確定性，固定成本增加，淨收入基礎低於預期，獲利能力受到壓力。我們正在迅速實施降低成本的措施以及我們的策略性舉措，以提高獲利能力並更好地為公司的成長做好準備。

These cost reductions will include the following an approximate 10% to 15% reduction in operating expenses for the second half of 2024 compared to the first half, including a reduction in fixed payroll costs coming from reduced headcount and pay cuts to the executive and management team as well as tightening of fixed and variable costs to better align with the anticipated slower sales recovery.

這些成本削減將包括與上半年相比，2024 年下半年營運費用減少約 10% 至 15%，其中包括因人員減少以及高階主管和管理團隊減薪而導致的固定工資成本減少以及收緊固定和可變成本，以更好地適應預期較慢的銷售復甦。

Capital expenditure estimates for the year are expected to decrease by $1.5 million to $2.5 million, and we are now projecting approximately $3.5 million in CapEx for the fiscal year. We anticipate realizing savings from these actions in the third and fourth quarter of 2024, extending through 2025.

今年的資本支出預計將減少 150 萬美元至 250 萬美元，目前我們預計本財年的資本支出約為 350 萬美元。我們預計這些行動將在 2024 年第三季和第四季實現節省，並持續到 2025 年。

We believe these actions will allow us to achieve our growth and profitability goals more efficiently while still maintaining a strong operating model that can meet our strategic objectives, deliver positive cash flow and ultimately provide a runway for long-term sustainable growth. We continue to make progress against our 2024 strategic initiatives of product assortment and supply chain optimization, brand awareness efforts, investments and technology and remaining cash flow positive.

我們相信，這些行動將使我們能夠更有效地實現成長和獲利目標，同時仍保持強大的營運模式，以滿足我們的策略目標，提供正現金流，並最終為長期可持續成長提供跑道。我們繼續在產品分類和供應鏈優化、品牌知名度努力、投資和技術以及保持正現金流等 2024 年策略舉措方面取得進展。

As we enter into the second half of the year, I'm confident that our cost reductions alongside our strategic initiatives and brand awareness and customer engagement will drive long-term sustainable growth, expand profitability and enhance our customer base over time.

隨著我們進入下半年，我相信我們的成本削減以及我們的策略性舉措、品牌知名度和客戶參與度將推動長期可持續成長，擴大獲利能力並隨著時間的推移增強我們的客戶群。

That said, for the slower than expected recovery amidst persistent macroeconomic pressures weighing on consumer demand, we are withdrawing our full year net revenue and adjusted EBITDA outlook and providing quarterly guidance as we assess the immediate impacts of our cost saving measures and other initiatives. We remain optimistic about our sales recovery and business turnaround and are encouraged by improving month-to-month trends in our business.

儘管如此，由於宏觀經濟壓力持續影響消費者需求，復甦速度慢於預期，我們將撤回全年淨收入和調整後的 EBITDA 前景，並在評估成本節約措施和其他舉措的直接影響時提供季度指導。我們對銷售復甦和業務轉虧為盈仍持樂觀態度，並因業務逐月趨勢的改善而受到鼓舞。

With that, I'd like to turn the call over to Mark Vos, our President and Chief Information Officer. He will share some updates on progress against 2024 priorities. Mark?

說到這裡，我想將電話轉給我們的總裁兼資訊長 Mark Vos。他將分享 2024 年優先事項的一些最新進展。標記？

Thank you, Crystal. I'll start by providing an update on our customer and how she interacted with us during the quarter. While active customer counts declined in the second quarter compared to prior year. We remain encouraged by the increase in penetration of active customers that are repeating on a quarter-over-quarter basis.

謝謝你，水晶。首先，我將介紹我們客戶的最新情況以及她在本季如何與我們互動。雖然第二季的活躍客戶數量與去年同期相比有所下降。我們仍然對每季重複活躍客戶滲透率的增加感到鼓舞。

Also new entrants and total loyalty program membership grew once again year over year, and both repeat customer penetration and loyalty program growth are strong indicators of Lulu's brand's relevance and future revenue opportunity. As mentioned last quarter, limited markdown inventory has constraints the new customer acquisition segments of potential customers that are looking for a deal.

此外，新進業者和忠誠度計畫會員總數較去年同期再次成長，回頭客滲透率和忠誠度計畫成長都是 Lulu 品牌相關性和未來營收機會的有力指標。正如上季度所提到的，有限的降價庫存限制了尋求交易的潛在客戶的新客戶獲取部分。

However, our new customer acquisition segments of only full-priced products purchase which are our largest segments, perfect best and also showed quarter-over-quarter improvement in their comps. The relative strength in these important full-price new customer acquisition segments, alliance with an increased ratio of new products sold and our optimism around our merchandising assortment adjustments. The third quarter receipts expected to further reinforce our buying and merchandising team's focus.

然而，我們的新客戶獲取部分僅購買全價產品，這是我們最大的部分，完美最好，其比較也顯示出季度環比的改善。這些重要的全價新客戶獲取細分市場的相對優勢、與新產品銷售比例增加的聯盟以及我們對商品品種調整的樂觀態度。第三季的收入預計將進一步加強我們的採購和銷售團隊的重點。

We are optimistic about the customer acquisition ramp up from these new and novelty product introductions. Additionally, in Q2, we saw a year-over-year increase in average unit retail driving a higher average order value and total order value per customer for both new and returning customers and was higher compared to Q2 last year.

我們對這些新奇產品的推出所帶來的客戶成長感到樂觀。此外，在第二季度，我們看到平均單位零售量同比增長，推動新客戶和回訪客戶的平均訂單價值和每位客戶的總訂單價值更高，並且與去年第二季度相比更高。

Additionally, we increased merchandise margins due to the combined effects of our costing efforts and lower markdown sales. While international sales remain a small percentage of our total company sales, we achieved another consecutive quarter of year-over-year high double digit growth in units sold comps in our top 15 countries outside the US, including strong growth in our largest markets, Canada, the UK and Mexico.

此外，由於我們的成本會計工作和較低的降價銷售的綜合影響，我們提高了商品利潤。雖然國際銷售額僅占公司總銷售額的一小部分，但我們在美國以外的前15 個國家/地區的銷售量再次連續一個季度實現了兩位數的同比高增長，其中包括我們最大的市場加拿大的強勁成長、英國和墨西哥。

We see much room for optimizing our international top and bottom lines of the current US-based shipping model, product and price offering differentiation and building on our growth momentum by making selective brand activation investments abroad.

我們認為，優化當前美國運輸模式的國際營收和利潤、產品和價格差異化以及透過在海外進行選擇性品牌活化投資來增強我們的成長動力還有很大的空間。

I'll now share some updates around our strategic initiatives progress during the quarter. Starting with our product assortment optimization and related margin expansion efforts. Our merchandising and buying teams remain highly focused on evolving and refining our assortment to best meet the changing preferences of our core loose customer, incorporating newer styles and improving product margin through our strengthened product costing team.

我現在將分享有關本季度我們戰略計劃進展的一些最新情況。從我們的產品種類優化和相關利潤擴張工作開始。我們的銷售和採購團隊仍然高度專注於發展和完善我們的品種，以最好地滿足我們核心鬆散客戶不斷變化的偏好，透過我們強化的產品成本核算團隊納入更新的款式並提高產品利潤。

New and novelty merchandise saw meaningful year-over-year growth in both style and color for varieties offers. And while customers responded positively and new products share of order value substantially decreased year over year, we frequently sold out too quickly missing potential sales opportunities.

新奇商品的款式和顏色品種均出現年比顯著成長。儘管客戶反應積極，新產品佔訂單價值的份額逐年大幅下降，但我們經常很快就售空，錯過了潛在的銷售機會。

In Q2, we tested our buying algorithms with new forecast capabilities, which could start impacting products arriving in Q3 and beyond. Once fully ramped, we expect this to improve visibility and predictability around trend cycles and provide better insight into depth of product demand. Additionally, we see opportunities in external data sources like trends, whether geographic and other macro data could detect demand patterns earlier and more accurately.

在第二季度，我們使用新的預測功能測試了我們的購買演算法，這可能會開始影響第三季及以後到達的產品。一旦全面推廣，我們預計這將提高趨勢週期的可見性和可預測性，並更好地洞察產品需求的深度。此外，我們還看到了趨勢等外部資料來源的機會，地理和其他宏觀資料是否可以更早、更準確地偵測需求模式。

Our ongoing vendor network consolidation has continued to improve product costs by balancing purchasing across vendors, diversifying geographical sourcing to reduce dependencies on certain countries of origin and enhancing fit and fabric consistency.

我們正在進行的供應商網路整合透過平衡供應商之間的採購、實現地域採購多樣化以減少對某些原產國的依賴以及提高合身性和布料一致性來持續提高產品成本。

On the fleet front, we have been working to reduce fit related returns through a holistic approach that enhances the overall shopping journey for our customers while optimizing our bottom line. Our shopping experience improvements have increased customer engagements with Fit related information and contributed to positively impacting our return rates, improved collaboration and communication channels with key vendors, streamlining of processes and refining product fit, flexibility are starting to reflect increased fit consistency.

在車隊方面，我們一直致力於透過整體方法減少與適配相關的退貨，從而增強客戶的整體購物體驗，同時優化我們的利潤。我們的購物體驗改善提高了客戶對版型相關資訊的參與度，並對我們的退貨率產生了積極影響，改善了與主要供應商的協作和溝通管道，簡化了流程並改進了產品版型，靈活性開始反映出版型一致性的提升。

These enhancements are expected to benefit a significant portion of our assortment in Q3 of 2024 and have full effect from Q4 '24 forward. We believe improved fit consistency and increased flexibility where possible will have a positive impact on fit related return rates as well as strengthen the overall Lulu's customer shopping experience.

這些增強功能預計將使我們的大部分產品在 2024 年第三季受益，並自 2024 年第四季起全面生效。我們相信，在可能的情況下，提高合身一致性和增加靈活性將對合身相關的退貨率產生積極影響，並增強 Lulu 的整體客戶購物體驗。

And last but not least, we are also very excited about the addition of size, double XL for select Lulu's branded apparel. Initial shipments began in Q2 with availability expanding over the next several quarters. Initial readings support our belief that greater size inclusivity will broaden our potential customer base and boost new customer acquisition and reduce return rates in adjacent sizes.

最後但並非最不重要的一點是，我們也對 Lulu 精選品牌服裝增加了雙 XL 尺寸感到非常興奮。首批出貨於第二季開始，並且在接下來的幾個季度中供貨範圍不斷擴大。初步讀數支持我們的信念，即更大的尺寸包容性將擴大我們的潛在客戶群，促進新客戶獲取並降低相鄰尺寸的退貨率。

As Crystal highlighted, our Q2 return policy changes, together with before-mentioned initiatives started to show positive impacts by late Q2 and into Q3, reducing return costs as a reminder, the new policy introduced a modest restocking fee and a tighter return window. We will continue to monitor and refine our return policy to discourage excessive returns and minimize and profitable customers.

正如Crystal 所強調的那樣，我們第二季度退貨政策的變化以及前面提到的舉措在第二季度末和第三季度開始顯示出積極影響，降低了退貨成本，提醒您的是，新政策引入了適度的補貨費用和更嚴格的退貨窗口。我們將繼續監控和完善我們的退貨政策，以阻止過度退貨並最大限度地減少和獲利客戶。

Next, we are making investments in brand initiatives that support customer acquisition, retention and brand differentiation. As discussed on our last call, our first major multi-channel brand campaign, Friends for Life launched in early Q2 with the goals of reinvigorating our core customers and communicating our distinctive brand image, which underscores Lulu's role in all of life's moments from the everyday through the extraordinary.

接下來，我們正在對支持客戶獲取、保留和品牌差異化的品牌計劃進行投資。正如我們在上次電話會議中所討論的那樣，我們的第一個主要多渠道品牌活動“Friends for Life”於第二季度初推出，其目標是重振我們的核心客戶並傳達我們獨特的品牌形象，這強調了Lulu 在日常生活中所有時刻的作用透過非凡。

In May, our Friends for Life campaign took center stage on a heavily trafficked billboards in Times Square, but first for the brand, our best Easter brunch series, which kicked off in Nashville in May, followed by Chicago in June, received more than 500 RCPs and effectively bridged our online and in-person branch presence, activating new social and influencer initiatives and celebrating the Lulu's community.

5 月份，我們的Friends for Life 活動在時代廣場人流量大的廣告牌上佔據了中心舞台，但對於該品牌來說，首先是我們最好的複活節早午餐系列，該系列於5 月份在納什維爾啟動，隨後於6 月在芝加哥啟動，收到了500 多個關注RCP 並有效地連接了我們的線上和線下分支機構，激活了新的社交和影響力舉措並慶祝了 Lulu 社區。

The Friends for Life for final campaign and real-life activations directly resulted in more than 80% of website visitors that future campaign were new to lose brand hook. Many of which we converted to first time new customers. The strongest ever at recall numbers, demonstrating a great connection between our differentiating brand message and prospective and existing customers.

終生之友的最終活動和現實生活中的活化直接導致超過 80% 的網站訪客對未來的活動失去了品牌吸引力。其中許多我們轉化為首次新客戶。召回數量創歷史新高，展示了我們差異化的品牌訊息與潛在客戶和現有客戶之間的緊密聯繫。

A full funnel marketing approach that operated at low CPMs and showed promising incremental return on advertising spend in several digital channels. In addition to the campaign success, we gained valuable insights into platform performance and add formats. We will refine our approach going forward and are confident in our ability to further improve our brand campaign performance in next campaigns

全漏斗行銷方法以低每千次展示費用運行，並在多個數位管道中顯示出可觀的廣告支出增量回報。除了活動的成功之外，我們還獲得了有關平台性能和添加格式的寶貴見解。我們將改進我們的方法，並對在接下來的活動中進一步提高品牌活動績效的能力充滿信心

In the second quarter and quarter to date, we have announced several exciting third party partnerships, launched influencer edits, increased social content creation volume and amplify our reach through earned media and brand relationships. We've ramped up our investments in third party partnerships collaborating with iconic and sought after brands, including Levi's voice line bands and in early Q3, Demilio footwear.

在第二季和迄今為止的季度中，我們宣布了幾個令人興奮的第三方合作夥伴關係，推出了影響者編輯，增加了社交內容創作量，並透過贏得媒體和品牌關係擴大了我們的影響力。我們加大了對第三方合作夥伴的投資，與標誌性和受歡迎的品牌合作，包括 Levi's 語音樂團和第三季初的 Demilio 鞋類。

The launch of Levi's was particularly successful, driving sales and quick stockouts. In conjunction with these announcements, we have introduced a Lulu's loves feature on our website. I highlight these partnerships, which have allowed us to expand our reach and enhance brand awareness by leveraging other brands platforms.

李維斯 (Levi's) 的推出特別成功，推動了銷售並迅速缺貨。結合這些公告，我們在網站上推出了「露露之愛」功能。我強調這些合作關係，它們使我們能夠利用其他品牌平台擴大影響力並提高品牌知名度。

We are early on in these brands, collaborations and partnerships and look forward to optimizing various impacts on Lulu's brand awareness, relevance and reaching new potential customers and ultimately sales building on the success of our influence, we're headed with Kennedy Lions in Q1, we partnered with NI. Haring intervene Childs in Q2 to further drive brand awareness and audiences to the site, notably and adherence at excellent final amassing over 1.5 million views and nearly 40,000 shares.

我們在這些品牌、合作和夥伴關係方面處於早期階段，並期待優化對Lulu 品牌知名度、相關性的各種影響，並接觸新的潛在客戶，並最終在我們影響力的成功的基礎上進行銷售，我們將在第一季度與Kennedy Lions 合作，我們與 NI 合作。Haring 在第二季度對 Childs 進行了乾預，以進一步提高該網站的品牌知名度和受眾群體，特別是堅持出色的決賽，積累了超過 150 萬次觀看次數和近 40,000 次分享。

We're encouraged by the strong return in these collaborations, and we look forward to upcoming influencer collaborations and expanding our creator network. Our diverse influencer strategy has resonated with the movie's customer community, and we believe further reinforces our mission of being there for all (inaudible) moments.

這些合作的強勁回報讓我們深受鼓舞，我們期待即將到來的影響者合作並擴大我們的創作者網絡。我們多元化的影響者策略引起了電影客戶群的共鳴，我們相信進一步強化了我們在所有（聽不清楚）時刻都存在的使命。

In Q2, we also launched a Pretty Little Liars original [Synetics] curated by the hit shows wardrobe styles and features on the show's webpage leveraging a collaborative media post and giveaway, reaching the show's 12 million followers in addition to ours. Our media expansion and publicity efforts gained significant momentum this quarter, doubling press coverage in Q2 on and securing placements in top-tier retail, financial and consumer publications.

在第二季度，我們還利用合作媒體貼文和贈品在節目網頁上推出了由熱門節目的服裝風格和特色策劃的《美少女的謊言》原創[Synetics]，吸引了除我們之外該節目的1200萬粉絲。本季我們的媒體擴張和宣傳工作取得了顯著的勢頭，第二季度的媒體報告翻了一番，並確保了頂級零售、金融和消費者出版物的展示位置。

This boost increased users on Lulu's channels, Andrew inbound interest from various media outlet. We believe in the strategic value of our brands and customer acquisition initiatives and are confident in maximizing our reach and impact despite broader cost reduction efforts in Q3. We anticipate continuing to build momentum for the Lulu's brand, increasing awareness and driving revenue as we actually execute our strategies.

這增加了 Lulu 頻道上的用戶，Andrew 也提高了來自各種媒體的興趣。我們相信我們的品牌和客戶獲取計劃的戰略價值，並且儘管在第三季度採取了更廣泛的成本削減措施，但仍有信心最大限度地擴大我們的影響力和影響力。我們預計在實際執行我們的策略時，將繼續為 Lulu 的品牌打造動力，提高知名度並增加收入。

Our next priority focuses on driving technology enablement that supports customer engagement and customer experience across multiple channels. We are encouraged by increasing usage of the Lulu's app and its growing share of overall revenue. Year over year, Q2 saw healthy growth in app users and improved conversion rates.

我們的下一個重點是推動技術支持，支持跨通路的客戶參與和客戶體驗。Lulu 應用程式的使用量不斷增加，其在總收入中所佔份額不斷增加，這讓我們深受鼓舞。與去年同期相比，第二季應用程式用戶數量健康成長，轉換率提高。

Additionally, our investment in driving more page traffic towards tools. App is yielding strong returns. So website redesign, featuring larger and more prominent product images and expanded CTO use has led to the increased engagement on our website, higher conversion rates and an increase in account registrations. Our engineering and continuous revenue optimization teams have an exciting roadmap further enhance the shopping experience and product discovery. We are enhancing operational efficiency with strategic investments in automation and robotics in our distribution centers.

此外，我們也投資於推動更多工具頁面流量。應用程式正在產生豐厚的回報。因此，網站重新設計，以更大、更突出的產品圖片為特色，並擴大了 CTO 的使用，從而提高了我們網站的參與度、更高的轉換率和帳戶註冊量的增加。我們的工程和持續收入優化團隊制定了令人興奮的路線圖，進一步增強購物體驗和產品發現。我們透過對配送中心的自動化和機器人技術進行策略性投資來提高營運效率。

As mentioned on the last call, in Q2, we added automation to our largest distribution center in eastern Pennsylvania and early feedback shows improvements in order accuracy, reduce cycle times and better unit economics.

正如上次電話會議中所提到的，在第二季度，我們為賓州東部最大的配送中心增加了自動化，早期回饋顯示訂單準確性有所提高，縮短了週期時間並提高了單位經濟效益。

As you've heard, we continue to make good progress on our strategic initiatives, maximizing our impact in this thoughtful and cost-efficient manner. I'm excited about the team we have in place and their dedication to delivering the right products to our customers. And now, I'll hand you over to Tiffany Smith, who's Chief Financial Officer, to provide more color on our financials. Tiffany?

正如您所聽說的，我們的策略性舉措繼續取得良好進展，以這種深思熟慮且具有成本效益的方式最大限度地發揮我們的影響力。我對我們現有的團隊以及他們為客戶提供合適產品的奉獻精神感到興奮。現在，我將把您交給財務長蒂芙尼史密斯，為我們的財務狀況提供更多資訊。蒂芙尼？

Thanks, Mark, and good afternoon, everyone. Our net revenue for the second quarter was approximately $92 million, a 13% decrease year over year, driven by a 14% decrease in total orders placed with increased return rates, partially offset by higher average order value. Markdown sales were down approximately 32% compared to the second quarter of 2023, contributing to the overall net revenue decline and gross margin improvement.

謝謝，馬克，大家下午好。我們第二季的淨收入約為 9,200 萬美元，年減 13%，原因是退貨率增加，訂單總數減少 14%，但平均訂單價值上升部分抵消了這一影響。與 2023 年第二季相比，降價銷售額下降約 32%，導致整體淨收入下降和毛利率提高。

We also saw notable declines in our casual business during the quarter. As a result of the implementation of our new return policy, we saw an increase in restocking fee revenue and some improvement in customer return behavior despite our decision to honor exceptions to the previous return policy through part of Q2 to ease customers into the changes, which resulted in some top-line pressure.

本季我們的休閒業務也顯著下降。由於實施了新的退貨政策，儘管我們決定在第二季度的部分時間裡尊重之前退貨政策的例外情況，以方便客戶適應這些變化，但我們還是看到了重新進貨費用收入的增加和客戶退貨行為的一些改善。

Gross margin ended the quarter at 45.5%, an increase of 80 basis points compared to the same period last year, driven by lower markdowns and a shift toward higher margin product categories.

由於降價幅度降低以及轉向利潤率較高的產品類別，本季毛利率達到 45.5%，較去年同期成長 80 個基點。

Moving down the P&L to give some insights into expense line items. Q2 2024, selling and marketing expenses were $24.9 million, up about $200,000 from Q2 2023 due to increased brand marketing initiatives, including the first brand campaign launch since 2021 to drive brand awareness and customer engagement. We expect the value generation from this incremental marketing spend to materialize over multiple quarters.

向下移動損益表以深入了解費用項目。2024 年第二季度，銷售和行銷費用為2,490 萬美元，比2023 年第二季度增加約20 萬美元，原因是品牌行銷舉措增加，包括自2021 年以來推出的首次品牌活動，以提高品牌知名度和客戶參與度。我們預計增量行銷支出將在多個季度內實現價值創造。

General and administrative expenses decreased by about $3 million to $21.4 million, a 12% decline from Q2 2023. This reduction was primarily driven by lower stock comp expenses as well as lower variable labor and benefits costs, which were lower with decreased sales volumes and increased operational efficiencies.

一般及管理費用減少約 300 萬美元，至 2,140 萬美元，較 2023 年第二季下降 12%。這一減少主要是由於庫存補償費用的降低以及可變勞動力和福利成本的降低，這些成本隨著銷售量的下降和營運效率的提高而降低。

Quarterly G&A expenses included a $423,000 accrual for a pending legal matter. Excluding this nonroutine items, we achieved some leverage in the quarter on our G&A costs, resulting in a 14% decline in the remaining G&A expenses compared to the 13% decline in net revenue.

季度管理及行政費用包括未決法律事務的應計費用 423,000 美元。排除這些非常規項目，我們在本季度的 G&A 成本方面取得了一定的槓桿作用，導致剩餘 G&A 費用下降了 14%，而淨收入下降了 13%。

Our net loss of $10.8 million worsened by $8.2 million compared to the same period last year. The net loss was impacted by a noncash expense, increasing our income tax provision by $5.4 million related to the establishment of a valuation allowance on our deferred tax assets during the second quarter as well as the previously noted, $423,000 non-routine accrual for a legal matter included in G&A expenses.

我們的淨虧損為 1,080 萬美元，比去年同期增加了 820 萬美元。淨虧損受到非現金支出的影響，使我們的所得稅準備金增加了540 萬美元，這與第二季度我們的遞延稅資產的估值準備金以及之前提到的423,000 美元的非常規應計法律費用有關。

Adjusted EBITDA loss for the second quarter was approximately $200,000 compared to Q2 2023's adjusted EBITDA gain of $4.2 million due to elevated fixed costs amid reduced revenue. Our Q2 adjusted EBITDA margin was negative 0.2% compared to 4% in the same period last year.

第二季調整後 EBITDA 損失約 20 萬美元，而 2023 年第二季調整後 EBITDA 收益為 420 萬美元，因為收入減少導致固定成本上升。我們第二季調整後 EBITDA 利潤率為負 0.2%，而去年同期為 4%。

Interest expense for the quarter was approximately $270,000 compared to $426,000 in Q2 2023. For the quarter, we reported a diluted loss per share of $0.26, which is a decrease of $0.19 compared to a diluted loss per share of $0.07 in the second quarter of 2023.

本季的利息支出約為 27 萬美元，而 2023 年第二季為 42.6 萬美元。本季度，我們報告的攤薄每股虧損為 0.26 美元，與 2023 年第二季度攤薄每股虧損 0.07 美元相比，減少了 0.19 美元。

Turning to our balance sheet and liquidity. On July 22, we finalized an amendment to extend our revolving credit agreement with Bank of America, which was originally set to mature on November 15 of this year. The amended agreement now matures on August 15, 2025 and reduces our revolving facility from $50 million to $15 million with a future reduction to $10 million on March 31, 2025.

轉向我們的資產負債表和流動性。7 月 22 日，我們敲定了一項修正案，以延長與美國銀行的循環信貸協議，該協議原定於今年 11 月 15 日到期。修訂後的協議現已於 2025 年 8 月 15 日到期，並將我們的循環貸款從 5,000 萬美元減少至 1,500 萬美元，並於 2025 年 3 月 31 日減少至 1,000 萬美元。

The original $50 million borrowing capacity was partly intended to repay prior debt at our 2021 IPO. We believe the reduced borrowing capacity is sufficient. And in the short term, while we actively work toward a longer-term source of financing. At the end of the second quarter 2024, we remain in compliance with all applicable financial covenants under the amended credit agreement.

最初 5000 萬美元的借款能力部分是為了償還 2021 年 IPO 時的先前債務。我們認為減少的借貸能力是足夠的。在短期內，我們積極努力尋求長期融資來源。截至 2024 年第二季末，我們仍遵守修訂後的信貸協議下的所有適用財務契約。

In the second quarter 2024 our business continue to generate cash with $3.7 million of net cash provided by operating activities, a decrease of $900,000 on a year over year basis. Similarly, we generated $3 million of free cash flow for the quarter, representing a $900,000 decrease on a year-over-year basis. During the second quarter, we paid off our revolving line of credit balance, ending the quarter in a net cash position of $1.8 million.

2024 年第二季度，我們的業務繼續產生現金，經營活動提供的淨現金為 370 萬美元，年減 90 萬美元。同樣，我們本季產生了 300 萬美元的自由現金流，年減 90 萬美元。在第二季度，我們還清了循環信用額度餘額，季度末淨現金部位為 180 萬美元。

As announced last quarter, our Board of Directors authorized the stock repurchase program to repurchase up to $2.5 million of our common stock. In the second quarter, we repurchased approximately $87,000 worth or about 48,000 shares of stock. We will continue to take a holistic view to allocate capital on a quarterly basis, driving for the highest return on our investments while maintaining a healthy liquidity position.

正如上季度宣布的那樣，我們的董事會授權股票回購計劃回購最多 250 萬美元的普通股。第二季度，我們回購了價值約 87,000 美元的股票，約 48,000 股股票。我們將繼續以整體視角按季度分配資本，在保持健康的流動性狀況的同時，實現最高的投資回報。

Our inventory balance at quarter end was $37.7 million, down about $8.6 million from the same period last year. This 19% inventory decrease year over year exceeded our 13% year-over-year net revenue decline as we continue to reduce the weeks of supply in our reorder business.

季度末我們的庫存餘額為 3,770 萬美元，比去年同期減少約 860 萬美元。由於我們繼續減少再訂購業務的供應週數，庫存年減 19% 超過了淨收入年減 13%。

Moving on to guidance, given the uncertainty driven by ongoing macroeconomic headwinds and persisting consumer pressures, we are withdrawing the previously issued full year net revenue and adjusted EBITDA outlook, we would like to provide some insight into our sales expectations for the third quarter.

轉向指導，鑑於持續的宏觀經濟逆風和持續的消費者壓力帶來的不確定性，我們將撤回先前發布的全年淨收入和調整後的EBITDA 前景，我們希望對第三季的銷售預期提供一些見解。

Our preliminary results for the month of July reflect a net revenue year over year comparison in the negative low single digits with sequential improvement in net revenue comps, we expect slightly more challenging August comps due to last year's promotions and their earlier seasonal clearance in July with a projected return to negative single digits in September.

我們7 月的初步結果反映了淨收入同比呈負低個位數，並且淨收入比較連續改善，我們預計由於去年的促銷活動以及7 月份較早的季節性清倉，8 月份的比較將更具挑戰性。

For the third quarter, we anticipate net revenue to be between approximately $75 million and $79 million compared to $83.1 million in the same period last year, reflecting a year-over-year decline of between 5% and 10%. As a result of continued macroeconomic pressures and uncertainty. We are in the process of implementing cost reduction measures to improve our profitability and to better align our current business needs with current sales growth trends.

對於第三季度，我們預計淨收入約為 7,500 萬美元至 7,900 萬美元，而去年同期為 8,310 萬美元，年減 5% 至 10%。由於持續的宏觀經濟壓力和不確定性。我們正在實施降低成本的措施，以提高我們的獲利能力，並使我們當前的業務需求與當前的銷售成長趨勢更好地保持一致。

The cost reduction measures include an approximate 10% to 15% reduction in operating expenses for the second half of 2024 compared to the first half, better align with the anticipated slower sales recovery. This includes a decrease in fixed payroll costs resulting from reduced fixed headcount combined with pay cuts for our executives and certain members of the management team in light of the uncertain macroeconomic environment. As we carefully manage the timing and execution of our cost reduction measures, we are refraining from providing an updated outlook on margins and profitability for the third quarter.

成本削減措施包括2024年下半年營運費用較上半年減少約10%至15%，更能配合預期較慢的銷售復甦。這包括由於固定員工人數減少以及鑑於不確定的宏觀經濟環境而削減我們的高階主管和管理團隊某些成員的薪資而導致的固定薪資成本的減少。由於我們仔細管理成本削減措施的時機和執行，因此我們不會提供第三季利潤率和獲利能力的最新展望。

Lastly, as part of our cost reduction efforts, we are reducing our capital expenditure plan for the year by between 30% and 40%. We now project capital expenditures for the full year to be approximately $3.5 million compared to the previous expectation of $5 million to $6 million.

最後，作為降低成本努力的一部分，我們將今年的資本支出計畫減少 30% 至 40%。我們現在預計全年資本支出約為 350 萬美元，而先前的預期為 500 萬至 600 萬美元。

And with that, I'll pass it back to Crystal for closing remarks.

在此之後，我會將其傳回給 Crystal 進行結束語。

Thank you, Tiffany. We are confident that our strategic initiatives and enhancing brand awareness and customer engagement, coupled with our diligent cost reduction efforts, position us for sustainable growth and improved profitability in the coming year.

謝謝你，蒂芙尼。我們相信，我們的策略性舉措、提高品牌知名度和客戶參與度，加上我們努力降低成本的努力，將使我們在未來一年實現永續成長並提高獲利能力。

Our commitment to operational excellence will serve us well amidst ongoing macro volatility. Thank you to our dedicated brand fans, Salute crew and shareholders for your unwavering support as we continue to deliver attainable luxury to our customers. So we look forward to updating you on our next earnings call.

我們對卓越營運的承諾將在持續的宏觀波動中為我們帶來好處。感謝我們忠實的品牌粉絲、Salut 工作人員和股東在我們繼續為客戶提供觸手可及的奢華體驗時給予我們堅定不移的支持。因此，我們期待在下一次財報電話會議上向您通報最新情況。

With that, I'll turn it over to questions now.

現在我將把它轉為問題。

Thank you. (Operator Instructions) Dana Telsey, Telsey Advisory Group.

謝謝。（操作員指示）Dana Telsey，Telsey 諮詢小組。

Hi, good afternoon, everyone. Crystal, as I think about (multiple speakers) -- as you think about the core health of the consumer and what you're seeing out there and the competitive landscape with promotions, what's changing in your business, whether pricing you mentioned some of the categories and how you're planning for the back half of the year in addition to you gave that sales for the third quarter, but not any adjusted EBITDA, any framework you could provide there. Thank you.

嗨，大家下午好。水晶，正如我（多個發言者）所想到的那樣——當您考慮消費者的核心健康狀況以及您所看到的情況以及促銷的競爭格局時，您的業務正在發生什麼變化，您是否提到了一些定價除了提供第三季的銷售額之外，您還提供了下半年的計劃，但沒有提供任何調整後的 EBITDA，以及您可以在那裡提供的任何框架。謝謝。

Thanks for the question, Dana, I think at a high level, we believe our customer continues to be under pressure due to just various macroeconomic pressures that we've discussed over the last several quarters and is also reflected in withdrawing our full year guidance for EBITDA and also just the conservatism and general of our third quarter guidance.

謝謝你的問題，達納，我認為在較高的層面上，我們相信我們的客戶由於我們在過去幾個季度討論過的各種宏觀經濟壓力而繼續面臨壓力，這也反映在撤回我們的全年指導中。

All that being said, we're still focusing on opportunities where we can drive engagement and growth and profitability, especially in this more challenging and volatile environment. What's been really great for us to see is our business does continue to recover. And going into July, we've seen an inflection to roughly flat customer -- active customers within the month. So we're really encouraged by that. I think that the high-level takeaway is that our recovery is well underway it's just taking longer than we had anticipated because of the consumer backdrop.

話雖如此，我們仍然專注於能夠推動參與、成長和獲利能力的機會，特別是在這個更具挑戰性和波動性的環境中。對我們來說真正令人高興的是我們的業務確實在持續復甦。進入 7 月，我們看到客戶數量大致持平——本月內的活躍客戶數量出現了變化。所以我們對此感到非常鼓舞。我認為，高層的結論是，我們的復甦正在順利進行，只是由於消費者背景的原因，所需的時間比我們預期的要長。

Got it. And then on the adjusted EBITDA from (multiple speakers) --

知道了。然後調整後的 EBITDA（多位發言者）——

Yeah, Dana, I'll jump in. This is Tiffany. So we gave the revenue guidance because we have more confidence, obviously in the third quarter revenue on pacing that we've seen today. But given as we announced, we're working through some cost reductions. We announced that during the call and some of those things are going to have more immediate benefits.

是的，達納，我會跳進去。這是蒂芙尼。因此，我們給出了收入指引，因為我們更有信心，顯然對我們今天看到的第三季收入成長充滿信心。但正如我們所宣布的那樣，我們正在努力降低成本。我們在電話會議期間宣布，其中一些事情將帶來更直接的好處。

Some will have longer-term benefits. We're still working through sort of all of the puts and takes around that. And as we work through this, we want to maintain as much flexibility as possible on the timing of these changes also want to make sure that we're reading the business and the macro properly to ensure that we've made sufficient adjustments to adjust our cost structure to better align with our slower sales slower than expected sales recovery.

有些將帶來長期利益。我們仍在努力解決這個問題。當我們解決這個問題時，我們希望在這些變化的時間上保持盡可能多的靈活性，也希望確保我們正確地解讀業務和宏觀，以確保我們已經做出了充分的調整來調整我們的成本結構更好地適應我們較慢的銷售復甦速度。

But at the same time, because of all the momentum Crystal noted that we're seeing in the business want to be careful not to pull back too hard on cost reductions and push too hard there and jeopardize the momentum that we're seeing building in the business.

但與此同時，克里斯托指出，由於我們在業務中看到的所有勢頭，我們希望謹慎行事，不要在成本削減方面過於猛烈地撤退，並在這方面過於努力，從而危及我們正在建立的勢頭。

I just to add to that. I think the way to look at it is our goal is to continue to nurture the areas in our business where we're seeing all the grass issues and the positive momentum, but also managing our cash flow prudently in anticipation of a potentially choppier consumer in the back half.

我只是想補充一下。我認為看待這個問題的方式是，我們的目標是繼續培養我們的業務領域，在這些領域中，我們看到了所有的草地問題和積極的勢頭，但也要謹慎管理我們的現金流，以應對可能出現的不穩定的消費者。

Got it. Thank you.

知道了。謝謝。

Brooke Roach, Goldman Sachs.

布魯克·羅奇，高盛。

Good afternoon and thank you for taking our question. Crystal, I was hoping you could dive a little bit deeper on the plans that you have to drive engagement in the back half and continue the momentum on the sequential recovery in sales? How are you planning selling and marketing expenses in the back half? And are there fixed versus variable expenses that we should consider within that line item going forward?

下午好，感謝您提出我們的問題。克里斯托，我希望您能更深入地探討下半年必須推動參與度並繼續保持銷售連續復甦勢頭的計劃？您如何規劃下半年的銷售和行銷費用？我們在該行項目中是否應該考慮未來的固定費用和變動費用？

Yes, it's a good question for us. And typically in the third and fourth quarter, when there's more pressure on performance marketing, we tend to pull levers across markdowns, discounts and paid marketing spend. And really it's an optimization at the moment based on where the consumer is and where we're getting the best use of our cash for that marketing spend.

是的，這對我們來說是個好問題。通常在第三和第四季度，當效果行銷面臨更大壓力時，我們傾向於在降價、折扣和付費行銷支出方面發揮槓桿作用。事實上，目前這是一種基於消費者所在位置以及我們在行銷支出中充分利用現金的最佳化。

I think the way to think about this for us is we're continuing to invest, but prudently on the brand side, because we are seeing positive momentum in brand equity and just momentum in general from how our customers are interacting with the brand.

我認為對我們來說，考慮這個問題的方法是我們繼續投資，但在品牌方面要謹慎，因為我們看到品牌資產的積極勢頭，以及我們的客戶與品牌互動的整體勢頭。

But that said, we have to be very cautious about where we're spending and making sure that the payoff is as much for the near term as it is for the long term. So I'd expect to see puts and takes throughout the back half of the year across markdowns, discounts and marketing spend, the way that we've done it in the past, which is truly reactionary to the macro and where we're seeing the best bang for the (inaudible)

但話雖如此，我們必須對花錢的地方非常謹慎，並確保短期和長期的回報一樣多。因此，我預計今年下半年會出現降價、折扣和營銷支出方面的看漲期權和賣出期權，就像我們過去所做的那樣，這確實是對宏觀經濟和我們所看到的情況的反應。好的爆炸（聽不清楚）

As a follow up. Can you talk a little bit about the levers that you can pull to reduce costs and defend profitability in both the near and medium term beyond the 10% to 15%, second half operating expense cuts that were announced today. How are you thinking about the range of outcomes on profit margins and free cash flow generation for the business, should the time line of recovery continue to elongate versus your current expectations?

作為後續。您能否談談除了今天宣布的下半年營運費用削減 10% 至 15% 之外，您可以在近期和中期降低成本並捍衛盈利能力的槓桿。如果恢復時間比您目前的預期持續延長，您如何看待企業利潤率和自由現金流產生的結果範圍？

Yes, good question, Brock. And I think for at the current time free cash flow, maintaining positive cash flow is really a big priority for us. So I think there are, as you said, potentially other levers that we could pull as needed on the ones that we disclosed on the call were largely headcount in nature. And we have done some headcount reduction in certain areas where we felt we could continue to grow without certain individuals.

是的，好問題，布洛克。我認為，就目前的自由現金流而言，維持正現金流確實是我們的首要任務。因此，我認為，正如您所說，我們可以根據需要使用其他潛在的槓桿，我們在電話會議中披露的槓桿本質上主要是人員數量。我們在某些​​領域進行了一些裁員，我們認為在沒有某些人員的情況下我們可以繼續成長。

But I think for the most part, the executive pay cuts have been implemented. A lot of the levers there pulled around headcount we are probably pretty limited in terms of what we can continue to do given we are a fairly lean team already and have been running pretty lean in most areas. There may be a little bit more there, but I doubt it, I think it's going to be more considering other types of G&A spend, other areas where we can make more meaningful reductions. But I don't have specifics that I think we want to share at this point given it's a bit fluid.

但我認為在很大程度上，高階主管減薪已經實施。鑑於我們已經是一個相當精簡的團隊，並且在大多數領域都在相當精簡地運作，因此圍繞人員數量的許多槓桿，我們可以繼續做的事情可能非常有限。那裡可能還有一點，但我對此表示懷疑，我認為這將更多地考慮其他類型的一般行政支出，以及我們可以進行更有意義的削減的其他領域。但我認為我們目前還沒有想要分享的具體細節，因為它有點不穩定。

And just as a reminder, our cost structure is highly variable. So if sales were to worsen from our expectations and our cost structure would also be reduced proportionately.

提醒一下，我們的成本結構變化很大。因此，如果銷售情況低於我們的預期，我們的成本結構也會隨之減少。

Thank you very much. I'll pass it on.

非常感謝。我會把它傳遞下去。

Janine Stichter, BTIG.

珍妮‧史蒂克特 (Janine Stichter)，BTIG。

Hey everyone. You got Ethan Saghi on for Janine. I was just wondering in terms of category trends, I know you highlighted the casual business is seeing some softness. I was just wondering if you could give some more color on what's not working as well in the assortment and strategies you have in place to address those issues? Thanks.

嘿大家。你讓伊桑薩吉（Ethan Saghi）飾演珍妮（Janine）。我只是想知道品類趨勢方面，我知道您強調休閒業務正在出現一些疲軟。我只是想知道您是否可以對解決這些問題的分類和策略中效果不佳的部分提供更多說明？謝謝。

Yeah, it's a good question. So I mean, we had a really robust and record-breaking special occasion and bridesmaid business in the second quarter, which is just a testament to customers leaning on us for their special moments, which was great to see. The most pressure that we experienced was more in the casual space.

是的，這是一個好問題。所以我的意思是，我們在第二季度的特殊場合和伴娘業務非常強勁且破紀錄，這證明了客戶在特殊時刻依賴我們，這很高興看到。我們經歷的最大壓力更多是在休閒空間。

And we are continuing to invest in that recovery of that business. That said, the new site is comping just fine to last year, but we're taking a little bit longer to rebuild the reorder funnel in that space, just given the competitive nature as well as the consumer pressure that we've been seeing with our customer sites and said differently, that's going to continue to improve over time, but it's taking longer than we had anticipated.

我們將繼續投資該業務的復甦。也就是說，新網站與去年相比表現不錯，但考慮到競爭性質以及我們所看到的消費者壓力，我們需要更長的時間來重建該領域的再訂購管道我們的客戶網站並以不同的方式表示，隨著時間的推移，這將繼續改進，但所需時間比我們預期的要長。

Got it. That's helpful. Thank you.

知道了。這很有幫助。謝謝。

This will conclude our question-and-answer session as well as conference call. Thank you for attending today's presentation. You may now disconnect your lines and have a wonderful day.

我們的問答環節和電話會議將結束。感謝您參加今天的演講。您現在可以斷開線路並度過美好的一天。