Ladies and gentlemen, good afternoon, and welcome to Lulu's First Quarter 2024 Earnings Conference Call. Today's call is being recorded, and we have allocated 1 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.

Good afternoon, everyone, and thank you for joining us to discuss Lulu's First 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. 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 their 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; references to the fiscal year-ending December 29, 2024, including our financial outlook for full year 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. 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 first quarter ended March 31, 2024 filed with the SEC this afternoon, all of which can be found on our website at investors.lulus.com. Any such forward-looking statements represent management's estimates as of the date of this call. While 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. 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. 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. Joining me on the call today are 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. With that, I'll turn the call over to Crystal.

Thank you, Naomi, and good afternoon, everyone. We appreciate you joining us today. Jumping into results from the first quarter, net revenue was $77.3 million, a 15% decline from Q1 of last year attributed to top line pressure and ongoing elevated return rates. Initial momentum with our new and novelty products remains promising, and we've seen sequential improvement in many of our reorder categories as well, both of which contributed to a 250 basis point sequential net revenue comp improvement from the fourth quarter. This positive trend supports our reorder pipeline conviction, contributing to positive sales comparisons and favorable margin performance in several of our high-volume categories. Consistent with recent trends, event dresses continued to drive sales with positive year-over-year comps in both categories. Gross margin saw a 60 basis point improvement year-over-year, propelled by lower markdown sales and a shift towards higher-margin product classes. Notably, markdown sales have decreased by more than 20% year-to-date, attributed to our healthy inventory position and normalization of inventory turns. Our new and first-time reorder product continues to stimulate demand, presenting an opportunity for us to further increase the depth of our buys and optimize our ability to capitalize on upside demand. We experienced top line challenges stemming from customer demand outpacing the depth of our buys, resulting in more frequent stockouts and size and completeness. We are proactively working to mitigate these issues, supported by technology platform investments around presale orders to capture customer demand and mitigate the negative impact of product stockouts. With the rollout of this technology at the beginning of the year, we expect to see more meaningful improvements by June and beyond. Adjusted EBITDA of a $2.7 million loss was closely in line with expectations despite revenue coming in slightly below our projections and was mostly impacted by the lower top line and mitigated by modest adjustments in operating expenses. Inventory levels decreased by 20% to $41.3 million for Q1 2024, which exceeded our net revenue decline year-over-year, reflecting the ability of our data-driven buying model and enduring relevance of our core reorder products. We are strategically positioned within our current inventory levels and have resumed chase mode for several of our product categories. Additionally, we continue to generate liquidity and maintain our strong balance sheet, supporting our ongoing strategic initiatives that will catalyze our return to growth. We reduced our revolver by $2 million during the quarter, while our cash balance increased by $3 million. Free cash flow was $6 million in the period, an improvement of $3.4 million over Q1 2023. We started this year with clear targets in mind, including: continued refinement of our assortment to align with evolving customer preferences, expanding both depth and breadth to approach pre-pandemic levels; focus on product margin expansion and better leveraging our supply chain and differentiated buying model to further expand merchandise margins; expansion of brand awareness through a more diversified marketing approach to strengthen our relationship with our customers and ensure we are top of mind for her year-round fashion needs; investment in technology and advancement of our existing AI tools to support future growth and expansion into new and better ways to connect with our customers, both online and in real life; maintaining a cash flow positive year while still investing in strategic priorities that support future growth. Starting with our continued product assortment optimization and margin expansion efforts. As we touched on last quarter, we are diligently adapting some more meaningful trend changes while maintaining the enduring quality that defines our brand. We're excited about the tangible value our new product and merchandising team members are bringing and will continue to bring in the near term and long term based on the early progress we've already seen. We continue to test and adjust pricing strategies in an effort to broaden our customer reach and better address the top and bottom ends of our socioeconomic spectrum. To that end, we have begun to expand our product offering across a broader range of price points, spanning from entry level to more aspirational and our more mature product categories. These calculated adjustments continue to contribute to our year-over-year gross margin expansion, and we believe will result in meaningful future benefits and customer file expansion. We also took steps in Q1 to further diversify our product sourcing network to mitigate risks stemming from geopolitical and external uncertainties and to strengthen the resilience of our supply chain. While still early, we are encouraged by the quality, margin and speed our new vendor partners are able to bring us, while decreasing our exposure to China over time. In an effort to temper elevated return rates, we rolled out several initiatives, including website optimization and return policy changes to drive a more holistic approach to our customer shopping journey while also driving more profitable outcomes, which Mark will go into in more depth. Turning to our next priority. We are making investments in brand initiatives and activations that support customer acquisition and retention as well as reinforcing brand differentiation. As we noted on our last call, in the latter half of January, we opened our first-ever bridal boutique within the Melrose Lulu's location. The opening event was a huge success, eliciting positive customer sentiment and engagement online and noticeably higher foot traffic, creating a palpable buzz around the store. We are excited about the brand activations we have planned in 2024 to further leverage our space on Melrose and drive brand engagement in support of our e-commerce strategy. Beginning in Q4 and throughout the first quarter, we have been increasing the number of influencers and creators we partner with, while also launching our first of many influencer edits of 2024, which have garnered exceptional traction and successfully drove customer engagement in Q1. On the wholesale front, we continue to host active discussions with several wholesale partners to introduce our brands to new audiences across various omnichannel settings, with in-store wholesale partnerships expected to continue to grow in the second half of this year. Most recently, in early Q2, we launched our first major multichannel brand campaign, ushering in a new era for the Lulu's brand with out-of-home advertising, creative social and influencer activations and experiential marketing across L.A., New York, Chicago, Nashville and beyond. The launch is an opportunity to further differentiate Lulu's from competitors and underscores our unique role as a brand that's there through all of life's moments. Through the campaign, we expect to build excitement and loyalty among existing customers while also bringing in new customers that we can grow with over time. We believe our test-and-learn approach and data-driven culture allows us to quickly gauge the impact of new marketing channels, enabling us to optimize spending and strategically allocate resources in our long-term marketing mix based on our learnings. Our next priority focuses on driving technology enablement that supports customer engagement and customer experience across multiple channels. In the first quarter, we rolled out a complete restyling of our website with various enhancements around product assortment and discovery that has driven positive engagement. We began testing several platforms to enhance our predictive capabilities and responsiveness to changes in demand, which we believe will help refine our buying model and strengthen our ability to navigate future fluctuations in consumer buying patterns more effectively. In the first week of Q2, we simplified our return policy, which now includes a restocking fee to encourage purchasing behavior with the intent to keep the products and support better unit economics and profitability. Lastly, we are maintaining a cash flow positive year while preserving our commitment to growth. We are doubling down on our focus on profitable orders and gross margin expansion, prioritizing sustainable growth over short-term gains, including parting ways with excessive returning and unprofitable customers. Our dedication to long-term growth stems from the continued optimization of our buying model. We're enhancing initial buy depths to accelerate the reorder funnel, embracing newness and novelty further without sacrificing the benefits of our established reorder strategies while mitigating inventory risk in an increasingly dynamic consumer landscape. Our cash flow generative model will allow us to invest in our future growth as well as opportunistically repurchase Lulu's stock. As some of you may have already seen, our Board recently authorized a stock repurchase program of up to $2.5 million of Lulu's common stock. Tiffany will provide further insights on this matter in her remarks. We consider our common stock to be an attractive investment, and this demonstrates our confidence in the business. As we work towards becoming one of the most beloved women's brands for attainable luxury fashion, I'm optimistic about the advancements we've made in Q1 and the continued momentum we are seeing in the second quarter. We are passionate about supporting our customers through all of life's moments and remain focused on driving these initiatives forward and continuing to strategically invest in our brand. We believe the steps we are taking now will position us for strong growth and profitability, which will be further accelerated once consumer and inflationary headwinds ease. 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 our progress against 2024 priorities.

Thank you, Crystal. I'll start by providing an update on our customer and how she interacted with us during the quarter. Despite a year-over-year decline in active customer counts, we are encouraged by the increasing penetration of active customers that are repeating on a quarter-over-quarter basis, indicating continued strong customer loyalty. Compared to Q1 2023, we also grew the number of new loyalty program entrants, total loyalty program membership and saw more customers upgrade to our top 3 member tiers, which are all strong indicators of Lulu's brand loyalty and future revenue opportunity. Due to reduced availability of markdown inventory on one hand and a general lack of depth in new and novelty full-price products to meet the demand on the other hand, we have seen impacts on our new customer acquisition rate. The buying and merchandising teams are working hard to improve our inventory position in new and novelty products and subsequently improve our new customer acquisition. The investments we are making in Lulu's brand awareness will further support our new customer acquisition growth over time. Additionally, in Q1, we saw a year-over-year increase in average unit retail, driving a higher average order value, coupled with increased merchandise margins in the quarter. Reviewing the purchase behavior by customer household income segments shows stable trends across our core segments, $50,000 to $150,000 annual income, both from a new customer acquisition as well as a repeat customer perspective. A micro trend we have observed in Q1 2024 is that high-income segments, outside and above our core segments, on a Q1 year-over-year basis, outperformed from a new customer acquisition, order counts and net revenue perspective, and that they did so with higher discount usage. We expect that these segments will continue to gravitate towards Lulu's, supported by our expanded price ranges and new and novelty product offering. While international sales still remain a very small percentage of our total company sales, in the first quarter, we saw in Q1 year-over-year unit sales comp of 50% in our top 15 countries outside the U.S. Given the positive early trends we've seen in international markets, we are confident that we can grow ex-U.S. revenue into a meaningful part of our revenue mix by 2026 by optimizing our current business model of shipping from the U.S. with selective investments in brand activation. Crystal briefly recapped some of the progress against our 2024 priorities, but I'll drill down a bit more to share some additional detail around the specific actions we're taking. Number one, product assortment optimization. We are well underway in diversifying our product range to include more new and novelty as well as casual and sportswear. The strategic move, we believe, will fuel our long-term growth. The merchandising and buying teams are firing on all cylinders, evolving and refining our assortment to best meet the changing preferences of our core Lulu's customer. As part of this process, we have made investments in advanced machine learning and predictive AI modeling to more effectively forecast demand and better navigate trend cycles. With the demand volatility we have experienced in recent years, we see an opportunity to further enrich our demand forecasting algorithms with external data sources like trend, weather, geographic and other macro data to detect earlier and more accurately changes in demand patterns and volume. We look forward to incorporating the new forecast capabilities into our buying algorithms starting in Q2 of 2024 for products arriving in Q3 and later. As previously discussed last quarter, several initiatives are currently in progress to support our assortment optimization and reduce risk related to sourcing, geopolitics and returns. Our goal is to improve on the modest margin expansion contemplated in our 2024 guidance in 2025 and beyond. We continue to see ongoing product margin improvements driven by our fortified product costing team, and we expect to see additional margin expansion in 2024. Our efforts to consolidate our vendor network are progressing as we focus on improving product cost by balancing purchasing power per vendor, diversifying geographical product sourcing to reduce dependencies on certain countries of origin, and improving consistency in our fabrics and fit. As Crystal mentioned, in the first week of Q2 2024, we implemented return policy changes to stabilize our return rates and reduce the financial impact of returns to our net contribution margin. The changes added a modest restocking fee to all returns as well as tightened return window. Preliminary data suggests that our policy changes are yielding favorable outcomes in attracting customers with a stronger inclination to retain products. We will continue to monitor, evaluate and enhance our return policy to further discourage excessive return behavior and minimize unprofitable customers. On the fit front, we are striving to reduce fit-related returns by implementing a holistic approach that enhances the overall shopping journey for our customers while optimizing our bottom line. We've improved our collaboration and communication channels with key vendors to streamline fit communication and to refine products with improved fit flexibility and consistency while preserving the Lulu's fit expression. The anticipated benefits from these enhancements are expected to affect our assortment by late Q2 of 2024. We're also exploring utilizing real customer feedback to enhance fit information on the Lulu's platforms, empowering shoppers to make more informed sizing decisions. Number 2, continued investments in the Lulu's brand. Building on the success of our brand activations at Lulu's on Melrose, we are promoting the Lulu's brand in new and exciting ways with a number of in-person activations, including through experiential events and product collaborations. Our first major multichannel brand campaign, Friends for Life, launched in early Q2 and is a key example of how Lulu's is working hard to reinvigorate our core customers and cultivate a new era for Lulu's where we can reinforce our differentiated brand image. The Friends for Life campaign, which centers on a group of 4 women during a pivotal year in their lives, underscores how Lulu's is there for women during all of life's moments, from the everyday to the extraordinary. We're testing new out-of-home opportunities, designing experiential events that celebrate community and bring the brand to life, activating new social and influencer initiatives and exploring strategic partnerships that align with the Lulu's customer. For example, we have launched a Besties That Brunch series, where we meet our customers for brunch across several cities in the U.S. and effectively bring the URL and the IRL together. We are focused on driving partnerships, influencer edits and social content creation volume and amplifying impact and reach through earned media, brand relationships and other channels. Our first influencer edit of 2024 with Kennedy Lyons saw great success in February. The edit garnered close to 5 million video views, over 1 million impressions and was successful in driving new visitors to Lulu's platforms. We are very encouraged by the strong return on these types of collaborations and we are looking forward to launching several additional influencer edits in the coming months, in addition to growing our overall creator count per month. We also received significant exposure in the first quarter on Los Angeles KTLA news and The Kelly Clarkson Show, which featured Lulu's on-air and offered nearly 200 guests in the audience gift cards. To date, we've seen high double-digit redemptions resulting from our appearance on the latter with the majority redemptions coming from new customers. We are very excited about the high conversion rate we are seeing through these placements and promotions, and we will continue to seek these opportunities. We've undertaken a strategic approach to media, third-party brand partnerships and creator content aimed at maximizing impact and amplification of our content and campaigns. Third-party brand partnerships is a major initiative for us this year in our efforts to expand our customer reach and leverage other brands' platforms to increase awareness for the Lulu's brand. For example, recently, we collaborated with footwear brand, Teva, for our Desert Disco Festival Showroom event, where we hosted more than 100 influencers and secured media coverage of the event in consumer lifestyle publications. Additionally, this year, we have achieved notable publicity milestones, including expanding our relationships with media, hosting successful press briefings and fostering discussions with several brand franchises and studio productions for potential partnerships. We are encouraged by this strategy's impact and reach, as well as the increased interest from various media outlets we are receiving. We are building a foundation and are very excited about our packed roster of upcoming influencer edits and branded media partnerships that we will expect to continue to build the momentum of the Lulu's brand, Lulu's awareness and ultimately, revenue. Number 3, technology enablement. In the first quarter, we rolled out a complete restyling of our website with various enhancements around product discovery that has driven positive engagement. Product detail pages show large photography and video where available. We have added video to an increasing number of our products to provide our customers with a better perspective on how the garments look and flow with movement. The website redesign provides for a clean shopping experience distinction between Lulu's and Lulu's weddings, such that each is better tailored to its specific product discovery needs. Our product listing pages have been enriched with additional content elements, including video, to support our customers in their product discovery within and across product categories. We are standing up various technology platform enhancements to better capture its customer demand. At the end of January, we launched presale order technology, which allows customers to place preorders on products that are out of stock or have limited size availability at the point of sale. We saw a successful presale conversion during testing, and we have since initiated a broader rollout of this tool to support the customer shopping journey and mitigate potential for lost sales. We continue to improve our operational efficiency with strategic investments in automation and robotics in our distribution centers. In Q2, we will be adding additional automation in our largest fulfillment center in Eastern Pennsylvania, which we expect will improve order accuracy, reduce our cycle time and improve our unit economics in that facility. We are excited about the many initiatives we have in place to get the right products into the hands of customers that connect with the Lulu's brand beyond the transaction. We are focused on executing against these opportunities and the positive impact we expect it will have on the Lulu's customers, the LuCrew and our investors going forward. And now I'll hand you over to Tiffany Smith, Lulu's Chief Financial Officer, to provide more color on our financials.

Thanks, Mark, and good afternoon, everyone. Our net revenue for the first quarter was approximately $77.3 million, down 15% year-over-year. Driven by the net revenue miss to our plan, partly offset by disciplined levels of operating expenses, our first quarter adjusted EBITDA loss of $2.7 million fell slightly below our Q1 expectations. We continue to observe a promising upward trend in occasion wear purchases with the sales mix of these categories increasing sequentially from Q4 and from Q1 of last year. This trend aligns with a sales mix shift toward higher return rate products, amplifying return-related costs for the quarter. We also saw a higher concentration of expedited orders for part of the quarter, resulting in increased outbound shipping expenses, partially offset by a full quarter of savings from shipping carrier diversification when compared to Q1 of last year. Lastly, selling and marketing costs as well as general and administrative expenses were substantially lower on a dollar basis, though slightly higher on a percentage of net revenue basis attributed to the higher return rates. Moving on to the Q1 P&L line item comparisons to the same period last year. The 15% decline in net revenue year-over-year stemmed primarily from higher return rates as well as lower markdown sales during the period. As our customers' preferences in Q1 continued to lean toward newness, novelty and occasion wear, the resulting product mix and lower final sale ratios drove our overall return rate in the first quarter above that of the prior year. With return rates continuing to compress our sales growth and the cost of returns impacting our profitability through Q1, we implemented return policy changes in early Q2. These policy changes, while aimed at directly improving our profitability by reducing return rates and partially offsetting the cost of returns, are designed to work alongside other site enhancements and fit improvements to arm our customer with better information, increasing confidence in her purchases so that she can shop with greater intent to keep more of her purchases. Our early Q2 reads since the return policy change suggest that while our gross demand is down year-over-year, primarily driven by lower units per transaction, an indication that our customers are being more selective about their purchases, we expect lower return rates and higher contribution margins. Our expectation is that net revenue comparisons to last year trend toward negative high single digits in April. We expect continued sequential improvements on net revenue trends. Gross margin ended the quarter at 42.3%, an increase of 60 basis points compared to the same period last year, driven by lower markdown sales as well as higher margin product mix as newness, novelty and occasion wear continued to resonate with our customers. Building on the margin improvements observed in Q1, along with benefits of the return policy changes implemented in Q2, we are also seeing improvement in our April gross profit dollars, which are expected to be down mid-single digits compared to the same period last year. Moving down the P&L to give some insights into expense line items. Q1 2024 selling and marketing expenses were $17.7 million, down about $1.8 million from Q1 2023 due to lower marketing spend and merchant processing fees in the period. As we've highlighted in the past, we manage our marketing spend in conjunction with markdowns and discounts, and in the first quarter, we maintained the combination of these items within our typical range as a percentage of revenue. General and administrative expenses decreased by about $3.2 million to $21.1 million, a 13.3% decline compared to Q1 2023. The decrease was primarily driven by a reduction in stock-based compensation expenses due to a one-time reversal of previously accrued expenses, coupled with lower variable labor costs driven by lower sales volume as well as lower insurance costs. Our net loss of $5.7 million was in line with a net loss of $5.6 million in the same period last year. Our adjusted EBITDA loss for the quarter was approximately $2.7 million compared to Q1 2023's adjusted EBITDA gain of $16,000. Our adjusted EBITDA margin for Q1 was negative 3.4% compared to 0% in the same period last year. Interest expense for the quarter was approximately $383,000 compared to $523,000 in Q1 2023. For the quarter, we reported a diluted loss per share of $0.15, which is a decrease of $0.01 compared to a diluted loss per share of $0.14 in the first quarter of 2023. Throughout the first quarter of 2024, our balance sheet remained resilient, positioning us to execute our long-term growth plans with agility while adeptly navigating any new or lingering macroeconomic headwinds. Our net cash provided by operating activities for the quarter improved by $3.2 million or 88% on a year-over-year basis, with $6.9 million of net cash provided by operating activities in Q1 of 2024, compared to $3.7 million of net cash provided by operating activities in Q1 of 2023. Similarly, free cash flow for the quarter improved by $3.4 million or 127% on a year-over-year basis. We repaid $2 million of the revolver during Q1 2024 and plan to continue to pay it down. We ended the quarter with cash of about $5.5 million and a total debt position of $6 million, which was the amount drawn on our revolver, resulting in a net debt balance of $0.5 million. Also, we are pleased with the announcement of our newly authorized stock repurchase program of up to $2.5 million of Lulu's common stock, which enables us to utilize our strong liquidity and cash flow position to opportunistically repurchase shares of Lulu's stock while continuing to support organic growth objectives to drive shareholder value. We will continue to take a holistic view on evaluating how we allocate capital on a quarterly basis to ensure we are getting the highest return on our investments while also maintaining a healthy financial position. Our inventory balance at quarter end was $41.3 million, down about $10.6 million from the same period last year. This 20% inventory decrease year-over-year exceeded our 15% year-over-year sales decrease, which reflects our ability to manage inventory in challenging macro environments. Our primary focus is on maintaining brand integrity and preserving gross margin levels as we strengthen our buying model. Moving on to guidance. Due to our softer Q1 sales as well as the impacts of our new return policy and our conviction in seeking more profitable customers, we are slightly revising our expectations for full year 2024 net revenue to be between $350 million and $360 million, a $10 million reduction from the previous range of $350 million to $370 million. We believe our return policy changes will encourage customers to purchase with greater intent to keep and discourage excessive returning behavior. Additionally, given our inventory health and return to chase mode for many of our product classes, we anticipate more difficult comparisons related to markdown sales that will not be anniversaried. As a result, we expect to see less upside in net revenue this year, but improved gross margins as our updated return policy will drive more profitable unit economics. We anticipate 180 to 200 basis points of year-over-year gross margin expansion throughout the balance of the year. As such, we are raising the low end of our adjusted EBITDA range to reflect an updated full year adjusted EBITDA range of $6 million to $8 million, compared to our previous range of $5 million to $8 million. This equates to an adjusted EBITDA margin of between 1.7% and 2.2%, a modest improvement compared to 2023 as we made progress on our previously highlighted initiatives. These updates to our sales and profitability outlook for 2024 emphasize our focus on profitable orders and gross margin expansion, even if it comes with a more tempered top line outlook in the short term. As a reminder, our baseline guidance anticipates that our core customer, who is heavily positioned within the $50,000 to $150,000 income range, will continue to face macro headwinds throughout 2024. When modeling revenue for our business, seasonality of demand plays an important role. In a normalized year, our net revenue typically peaks in the second and third quarters, driven by a heightened demand for event dressing with fiscal Q4 and Q1 typically representing the lowest net revenue and profit quarters of our fiscal year. In fiscal 2024, we anticipate that Q1 will be our lowest sales and profit quarter of the year. We expect our net revenue comps to increase sequentially each quarter this year, with the most significant step-ups in Q2 and Q3 and a more modest step-up in Q4. Also, given our updated return policy, we expect to see slightly lower average order value driven by lower units per transaction. However, we anticipate net units per transaction kept after returns will remain relatively flat. In order to set expectations for modeling purposes, our quarterly adjusted EBITDA margin rates have similar seasonality fluctuations as our net revenues and will likely fluctuate above or below our full year guidance rate depending on the quarter. With respect to the previously cited year-over-year gross margin expansion of 180 to 200 basis points, we expect the most significant gains to occur in Q2 and Q3. We incur modest levels of interest expense associated with our operating revolver and equipment leases for our distribution facilities. With the impact of lower expected revolver balances, we continue to anticipate interest expense for the full year 2024 to be approximately $600,000. We continue to expect our stock-based compensation expense in 2024 to be roughly half of what it was in fiscal 2023, and our weighted average fully diluted share count at the end of 2024 is expected to be approximately 40 million shares. Moving on to capital expenditures. We continue to expect between $5 million and $6 million for the full year, which includes capital expenditures for technology enablement that supports customer engagement and customer experience across multiple channels as well as additional automation capabilities in our distribution centers. We believe investing in future growth opportunities, driving efficiencies and enhancing the customer experience are key to our long-term success. And with that, I'll pass it back to Crystal for closing remarks.

Thank you, Tiffany. We are confident in the resilience of our fresh, not fast direct-to-consumer business model, coupled with the adeptness in testing, learning and optimizing within the dynamic retail landscape. With a healthy balance sheet and heightened focus on gross margin expansion, we believe we are well equipped to navigate the near-term instability and trends. Thank you to our brand fans, LuCrew and shareholders for supporting us in our mission to deliver attainable luxury to our customers, and we look forward to updating you on our next earnings call. With that, I'd like to turn it over to questions now.

Our first question is from Brooke Roach with Goldman Sachs.

Crystal, I was hoping you could elaborate on the factors that give you confidence in a return to strong, healthy mid-single-digit growth for the rest of the year. What assumptions are underpinning that improvement as you think about active customer count, customer acquisition between high-income customers and lower-income customers that might be under a little bit more macro pressure and order values?

Brooke, thanks for the question. I would say there's several factors that are giving us confidence. Just to tick off a few. We have a lot of brand activations, partnerships and influencer partnerships that have been reading really positive for our business, and we will continue to invest in that throughout the rest of the year. From an assortment perspective, the depth of our buys are increasing and we have more and more confidence in our reorder model and some of the changes that we've made towards buying with more depth and more confidence in our second purchases. From a casual and sportswear perspective, we anticipate seeing much more momentum there, especially with our new merchandising team adds. So highly confident around just returning to a more normalized nonevent wear business. From a fit consistency perspective, Mark has spoken to some of the efforts that we have around just giving our customers a better experience and more fit consistency across product classes, which should, in turn, bring lower return rates and just a higher net keep rate throughout the rest of the year. And lastly, just from a price extension perspective, we are testing and seeing quite positive results around more entry-level price points as well as more aspirational price point testing to capture a much broader customer range. That said, we do anticipate some continued pressure on our active customer file counts. We spoke a few quarters ago around a return policy change around pushing back on more excessive returning customers and walking away from less profitable customers. So we do anticipate that there is some pressure in terms of comps year-over-year. But again, the story here is more gross margin expansion over seeking unprofitable growth. So highly optimistic on our side. Our merchandise is getting better every day and very optimistic around the step-up that we talked about.

Great. And then maybe a follow-up for Tiffany. You raised the low end of the EBITDA guidance despite some softer revenues in the first quarter versus expectations. Can you help quantify the impact of the return policy change to your profit forecast for both gross profit and adjusted EBITDA on a dollar basis relative to other changes that may have happened in the quarter?

Sure. Good question, Brooke. Our previous guidance already included some benefits from an improved return rate, especially expected to be more significant in the latter half of the year, showing year-over-year improvement. We advanced the changes to our policy earlier this year, which is reflected in the updated guidance and the increase of the low end of the EBITDA range. This shift signifies an earlier implementation of the policy changes, which we believe will enhance our overall unit economics and lead to increased profitability due to reduced return processing and shipping costs. This improvement will positively impact our profitability sooner than we initially predicted. Additionally, the lower-than-expected sales driven by markdowns will also contribute positively to our EBITDA flow-through.

Our next question is from the line of Janine Stichter with BTIG.

You got Ethan on the line for Janine. First question, could you just provide some more color on the gross margin initiatives in place that get you to that 180 to 200 basis points of expansion for the year and how they're progressing so far?

Sure, this is Tiffany. There are a few key points to discuss. We previously mentioned the impacts we experienced in Q1, and as Crystal noted earlier, markdown sales were lower than expected. This improvement in regular price selling will definitely boost our gross margin, along with the new and innovative products that are resonating well with our customers. As Crystal highlighted in her earlier response, deepening our inventory purchases and introducing more new products into our lineup should help improve our product margins overall. Regarding the changes to our return policy, although this is still in its early stages, we anticipate some margin benefits, such as reduced shipping costs and fewer damaged products being returned. To provide more detail on the return policy updates, it's been about a month since implementation, and we're seeing a decrease in units per transaction at a gross level, which suggests customers are shopping with more intent. Despite this, our net units kept remain consistent with previous levels. This early sign indicates that customers are still engaged with us but are making more deliberate shopping choices, while maintaining a similar return rate to before the policy changes, ultimately contributing to more profitable unit economics. Additionally, it's important to mention that our production team is now fully operational. We are beginning to see some gradual benefits from their efforts, which will take time to fully develop over the next couple of years, but they are successfully enhancing our margins on purchases.

Got it. That's really helpful. And then just another one for me. I think you mentioned it a little bit. I would love to hear some more about your plans on growing active and casual wear into the assortment, how that's progressing as well.

Yes. So it's progressing great, of course. We just added a new CMO who is going to take us to the next level, and it will take time, and our buying model is very much driven by testing, learning and repeating. So we're going to do it cautiously, but also investing in where we believe our customers would shop us in these other categories. So that will evolve over the next several quarters.

Our next question is from the line of Dana Telsey with Telsey Advisory Group.

As you think about reorder categories and you talked about encouraging trends, what did you see there? How do you think of dresses and event dressing versus some of the reorder categories and the margin impact going forward? How are you planning? And then was there any cadence to the quarter in terms of what you saw? And then your store plans, given you mentioned Melrose has been a success, anything you're learning about your customer there versus online, what they buy there, what the average transaction is versus online?

Thanks, Dana. I'll try to touch on the non-dress category business and product category highlights. We did see our growth rates in special occasion and bridal remaining strong due to the enhancements that we've made in our assortment, mostly around novelty and newness. And we think what we've done on the dress front demonstrates the opportunity that we have also to grow our non-dress business, which we've spoken to, again, with our new CMO and our new merchandising leadership really having a strong hold on what's going to be developing there on the non-dress category. But we continue to be really encouraged by what we see on the event dressing front of the business overall.

From a store plans perspective, we're thrilled with the progress that we've made around utilizing our Melrose store, not only for brand credibility online, which is helping marketing efficiency there, but also for influencer activations, customer activations like our 100 dresses for 100 brides or our Desert Festival activation. It's been a really great opportunity for us to showcase the quality of our product and also take it to a digital space across social and having customers and influencers connect with it. That said, we're going to continue to be very calculated around future store plans. I think the future for Lulu's is absolutely omni. But for 2024, we're focusing on rebalancing our assortment across new novelty and reorder and we'll be looking into next year and years forward from an extension of our omni footprint.

And sorry, Dana, I think you had a question also on the cadence of what we saw during the quarter...

Yes, exactly.

So just generally speaking, in terms of the Q1 cadence, after we had our earnings call towards the back half of March, we did see softness on the sales side, which I alluded to before, was really driven by quite a bit higher markdown or a drop-off in markdown sales relative to last year that we didn't comp this year. Similarly, we're seeing improvements in profitability from a gross margin perspective as a result of not comping those markdown sales. So that was a notable change that we saw. We saw markdown sales in general down throughout the quarter, but it dropped off pretty substantially towards the back half of March, and we're continuing to see markdown sales comping way down into early Q2 as well. But again, encouraged by the effect that that's having on margins overall.

And of course, it's also a good indicator for the health of our inventory as we have it today.

And also contemplated in our narrowing of our range in the guidance.

Thank you. Ladies and gentlemen, as there are no further questions, that concludes the conference of Lulu's Fashion Lounge Holdings. Thank you for your participation. You may now disconnect your lines.