Quarterly Report for Quarter Ending September 27, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

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You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025, filed with the Securities and Exchange Commission ("SEC") on March 30, 2026 (the "2025 10-K"). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A, "Risk Factors" in our 2025 10-K. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

Overview

Lulu's Fashion Lounge Holdings, Inc., a Delaware Corporation ("Lulus", "we", "our", or the "Company") is a women's clothing brand offering modern, feminine styles at accessible prices for every occasion. Our goal is to make every customer feel their most confident and beautiful for the moments that matter most. Lulus primarily serves a large, diverse community of Gen Z and Millennial women, who typically meet us in their 20s and stay with us through their 30s and beyond. We use direct customer feedback and insights to refine product offerings and elevate the customer experience. Lulus' world-class personal stylists, bridal concierge, and customer care team provide thoughtful, personalized service to shoppers around the world.

Recent Developments

Approval of Suspension of 2026 Annual RSU Awards and Cash Payment in Lieu Thereof

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On June 3, 2026, the Compensation Committee approved suspending the 2026 Annual RSU Awards to the Company's independent directors valued at $100,000 pursuant to the Company's Non-Employee Director Compensation Program, in order to avoid the potential dilutive impact to the Company's outstanding shares of common stock.

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On July 30, 2026, after consulting with and receiving the recommendations of its independent compensation consultant, the Compensation Committee recommended and the Board of Directors approved a cash payment totaling $125,000 to each of the Company's independent directors as an alternative form of compensation in lieu of receiving the 2026 Annual RSU Awards. This cash payment will be payable in monthly installments retroactive to the date of the 2026 annual meeting of stockholders and paid through the date of the 2027 annual meeting of stockholders, subject to each independent director's continued service on the Board of Directors through each payment date.

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Registration Statement on Form S-3

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On July 2, 2026, we filed a Shelf Registration Statement with the SEC, which was declared effective on July 14, 2026. The Shelf Registration Statement permits us to sell, in one or more public offerings, shares of our common stock, shares of preferred stock, warrants, and units in an aggregate amount of up to $7.5 million, subject to limitations in accordance with General Instruction I.B.6 of Form S-3. In no event will we sell shares pursuant to the Shelf Registration Statement with a value of more than one-third of the aggregate market value of our common stock held by non-affiliates in any 12-month period, so long as the aggregate market value of our common stock held by non-affiliates is less than $75.0 million. We have not yet sold any securities under the Shelf Registration Statement. The Shelf Registration Statement will expire on July 14, 2029. 

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Nasdaq Listing Compliance Update

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On July 6, 2026, the Company submitted a compliance plan (the "Compliance Plan") to the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC ("Nasdaq") to address its deficiency with the minimum amount of $2.5 million of stockholders' equity required for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq

Listing Rule 5550(b)(1). Subsequently, on August 5, 2026, the Company received notice from Nasdaq confirming the Company had regained compliance with the Nasdaq continued listing requirements by satisfying the alternative market value of listed securities standard of at least $35 million set forth in Nasdaq Listing Rule 5550(b)(2) for ten consecutive business days. The Company's common stock continues to trade on the Nasdaq Capital Market under the symbol "LVLU".

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Special Committee of the Board of Directors

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On July 13, 2026, we announced that the Board of Directors had formed a special committee of independent directors ("Special Committee") to evaluate strategic alternatives available to us to maximize stockholder value. These alternatives include a possible transaction involving the Company and continued execution of our standalone strategic plan. The Special Committee has retained Solomon Partners as its financial advisor and Willkie Farr & Gallagher LLP as its legal advisor to assist in connection with the strategic review process. The Board of Directors is continuing its strategic alternatives review process.

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Second Amendment to the 2025 Credit Agreement

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On July 27, 2026, the Company entered into a Second Amendment to the 2025 Credit Agreement (the "Second Amendment"), which changes the earliest date the Borrowers can include an increased inventory formula into the revolver borrowing base from August 14, 2026 to July 21, 2026 (the "July 2026 Increased Inventory Availability Period"), provides that, on a going-forward basis after giving effect to the July 2026 Increased Inventory Availability Period, the increased inventory formula may be used once before June 30, 2027 and twice after June 30, 2027 through the third anniversary of the revolver closing date, and provides that during the July 2026 Increased Inventory Availability Period only, for purposes of determining increased reporting requirements, the excess revolver availability requirement is decreased from $5.0 million to $4.0 million. This Second Amendment gives the Borrowers increased flexibility in accessing borrowings and managing inventory levels. In connection with entering into the Second Amendment, the Borrowers paid an amendment fee of $10,000, as specified in the Second Amendment.

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The Company is in active negotiations with its existing lender, as well as with potential new lenders, regarding additional financing. These discussions are ongoing, and there can be no assurance that they will result in definitive agreements or that any financing will be available on acceptable terms.

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Equity Line of Credit

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On August 11, 2026, the Company entered into a Purchase Agreement (the "Purchase Agreement") with ARC Group International Ltd. (the "Investor"), pursuant to which the Company has the right to sell to the Investor up to $4.5 million of shares of the Company's common stock subject to the terms and conditions set forth in the Purchase Agreement during a commitment period that will terminate on the earlier of the 36-month anniversary of the Purchase Agreement or the date the Investor has purchased shares equal to the full commitment amount. The purchase price per share will be based on a discount to the volume-weighted average price of the Company's common stock over specified pricing periods, and sales under the Purchase Agreement are subject to certain limitations as described in the Purchase Agreement. The Company retains full discretion over the timing and amount of any sales under the Purchase Agreement and there is no requirement that the Company sell any shares thereunder. Actual sales of shares of common stock to the Investor from time to time will depend on a variety of factors, including, without limitation, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations, and the satisfaction of any necessary conditions, including the filing of a post-effective amendment to its registration statement on Form S-3 (File No. 333-297232) or a new registration statement covering the resale of shares issuable under the Purchase Agreement. In connection with entering into the Purchase Agreement, the Company issued shares of common stock valued at $200,000 to the Investor as a commitment fee. As of the date of this Quarterly Report, the Company has not sold any shares under the Purchase Agreement. The Purchase Agreement also provides the Company with the option, following the termination of the Purchase Agreement upon either the conclusion of the commitment period or the Investor's purchase of shares equal to the full commitment amount, to enter into a subsequent purchase agreement with the Investor for up to an additional $5.5 million on substantially the same terms as the Purchase Agreement, provided that no commitment fee would be payable by the Company to the Investor under any such subsequent purchase agreement.

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Company's Cost Reduction Initiatives

Subsequent to the end of the thirteen weeks ended September 27, 2026, the Board of Directors approved a reduction of approximately 10% of the Company's workforce across the organization, representing an anticipated annualized cost savings of $5.0 million, as part of the Company's ongoing cost reduction efforts and continued focus on its path to profitability. The total pre-tax charges, which the Company expects to incur in the fourth quarter of fiscal 2026, are estimated to be approximately $0.4 million consisting of severance costs.

President and CIO's Employment Term

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On October 30, 2026, the Company and Mark Vos agreed that Mr. Vos's employment as President and Chief Information Officer will conclude on December 31, 2026, at the end of the current term under his employment agreement dated May 12, 2022 ("Employment Agreement"), as amended by the Amendment to Employment Agreement, dated March 5, 2023, and the Second Amendment to Employment Agreement, dated January 9, 2024. Mr. Vos will continue serving as President and Chief Information Officer through December 31, 2026. The Company and Mr. Vos are continuing discussions regarding potential post-employment consulting services and related transition terms.

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Impact of Macroeconomic Trends on Business

Changing macroeconomic factors, including inflation, interest rates, tariffs or bans, world events, wars and domestic and international conflicts, existing and future laws, regulations, directives and executive orders, and overall consumer confidence with respect to current and future economic conditions have directly impacted our sales as discretionary consumer spending levels and shopping behavior fluctuate with these factors. We have responded to these factors by taking appropriate pricing, promotional and other actions to stimulate customer demand. These factors are expected to continue to have an impact on our business, results of operations, our growth and financial condition.

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Liquidity

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The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the thirty-nine weeks ended September 27, 2026, the Company's net loss was $9.8 million. As of September 27, 2026, we had total cash and cash equivalents of $6.5 million and $15.4 million in outstanding amounts under the Loan and Security Agreement with White Oak Commercial Finance, LLC, as amended (the "2025 Credit Agreement"), in addition to a $0.3 million letter of credit outstanding. The primary sources of funds for our business activities are cash flows from operations and cash available under the 2025 Credit Agreement. For further information on the 2025 Credit Agreement, see Note 5, Debt.

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The Company is continuing to take certain cash conservation measures, including adjustments to headcount, marketing and other fixed and variable costs and capital spend to meet its obligations as needed. The Company is also in active negotiations with its existing lender, as well as with potential new lenders, regarding additional financing. However, there can be no assurances that the Company will be able to secure additional financing in a timely manner on acceptable terms, if at all. As the ability to secure additional financing is outside of management's control, the Company cannot conclude that management's plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements are issued. Accordingly, the Company has concluded that these plans do not alleviate substantial doubt about the Company's ability to continue as a going concern. The condensed consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty.

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Key Operating and Financial Metrics

We collect and analyze operating and financial data to assess the performance of our business and optimize resource allocation. The following table sets forth our key performance indicators for the periods presented (in thousands, except for percentages) and Average Order Value (defined below).

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Gross Margin

We define Gross Margin as gross profit as a percentage of our net revenue. Gross profit is equal to our net revenue less cost of revenue. Certain of our competitors and other retailers may report cost of revenue differently than we do. As a result, the reporting of our gross profit and Gross Margin may not be comparable to other companies.

Active Customers

We define Active Customers as the number of customers who have made at least one purchase across our platform in the prior 12-month period. Active Customer count is measured as of the last day of the relevant period. We consider the number of Active Customers to be a key performance metric on the basis that it is directly related to consumer awareness of our brand, our ability to attract visitors to our primarily digital platform, and our ability to convert visitors to paying customers. Active Customers counts are based on deduplication logic using customer account and guest checkout name, address, and email information.

Average Order Value

We define Average Order Value ("AOV") as the sum of the total gross sales before returns across our platform in a given period, plus shipping revenue, less discounts and markdowns, divided by the Total Orders Placed (as defined below) in that period. AOV reflects the average basket size of our customers. AOV may fluctuate as we continue investing in the development and introduction of new Lulus' merchandise and as a result of our promotional discount activity.

Total Orders Placed

We define Total Orders Placed as the number of customer orders placed across our platform during a particular period. An order is counted on the day the customer places the order. We do not adjust the number of Total Orders Placed for any cancellation or return that may have occurred subsequent to a customer placing an order. Total Orders Placed, together with AOV, is an indicator of the net revenue we expect to generate in a particular period.

Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles in the U.S. ("GAAP"). However, management believes that certain non-GAAP financial measures provide investors with additional useful

information in evaluating our performance and that excluding certain items that may vary substantially in frequency and magnitude period-to-period from net loss provides useful supplemental measures that assist in evaluating our ability to generate earnings and to more readily compare these metrics between past and future periods. These non-GAAP financial measures may be different than similarly titled measures used by other companies.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income (loss) before interest expense, income taxes or benefit, depreciation and amortization adjusted to exclude the effects of equity-based compensation expense and other non-routine expenses. Adjusted EBITDA is a key measure used by management to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of equity-based compensation, excludes items that we do not consider to be indicative of our core operating performance. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors and others in understanding and evaluating our operating results and in comparing operating results across periods.

To supplement our unaudited condensed consolidated financial statements which are prepared in accordance with GAAP, we use "Adjusted EBITDA" and "Adjusted EBITDA Margin" (collectively referred to as "Adjusted EBITDA") which are non-GAAP financial measures. Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. There are several limitations related to the use of our non-GAAP financial measures as compared to the closest comparable GAAP measures. Some of these limitations include:

Due to these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of depreciation and amortization, interest expense, income taxes, equity-based compensation and other non-routine expenses. It is reasonable to expect that some of these items will

occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal results of operations and results of operations of other companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the following reconciliation table help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. Adjusted EBITDA Margin is a non-GAAP financial measure that we calculate as Adjusted EBITDA (as defined above) as a percentage of our net revenue.

The following table provides a reconciliation for Adjusted EBITDA and Adjusted EBITDA Margin:

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Free Cash Flow

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Free Cash Flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used for capitalized software development costs and purchases of property and equipment. We view Free Cash Flow as an important indicator of our liquidity because it measures the amount of cash we generate.

A reconciliation to non-GAAP Free Cash Flow from net cash (used in) provided by operating activities for the thirteen and thirty-nine weeks ended September 27, 2026 and September 28, 2025 is as follows:

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Factors Affecting Our Performance

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including what is discussed below. See Part I, Item 1A, "Risk Factors" in our 2025 10-K.

Customer Acquisition

Our business performance depends in part on our continued ability to cost-effectively acquire new customers. We define customer acquisition cost ("CAC") as our brand and performance marketing expenses attributable to acquiring new customers, including, but not limited to, agency costs and marketing team costs but excluding any applicable equity-based compensation, divided by the number of customers who placed their first order with us in a given period. As a primarily digital brand, our marketing strategy is primarily focused on brand awareness marketing and digital advertising in channels like search, social, and programmatic - platforms that enable us to engage our customer where she spends her time, and in many cases also quickly track the success of our marketing, which allows us to adjust and optimize our marketing spend.

Customer Retention

Our continued success depends in part on our ability to retain and drive repeat purchases from our existing customers. We monitor retention across our entire customer base. Our goal is to attract and convert visitors into Active Customers and foster relationships that drive repeat purchases. During the trailing 12 months ended September 27, 2026, we served 2.0 million Active Customers compared to 2.4 million for the trailing 12 months ended September 28, 2025.

Inventory Management

We utilize a data-driven strategy that leverages our proprietary reorder algorithm to manage inventory as efficiently as possible. Our "test, learn, and reorder" approach consists of limited inventory purchases followed by the analysis of proprietary data including real-time transaction data and customer feedback, which then informs our selection and customization of popular merchandise prior to reordering in larger quantities. While our initial orders are limited in size and financial risk and our supplier partners are highly responsive, we nonetheless purchase inventory in anticipation of future demand and therefore are exposed to potential shifts in customer preferences and price sensitivity over time. We will continue to adjust our inventory purchases to align with the current needs of the business.

Investment in Our Operations and Infrastructure

We will continue to invest in our operations and infrastructure to facilitate further operational efficiencies and growth of our business, while managing expenses to align with our net revenue expectations and goals to return to profitability. We will continue to carefully evaluate any new investments or capital spending initiatives as we believe that a disciplined approach to capital spending will enable us to generate positive returns on our investments over the long term.

Components of Our Results of Operations

Net Revenue

Net revenue consists primarily of gross sales, net of merchandise returns, international duties and taxes and promotional discounts and markdowns, generated from the sale of apparel, footwear, and accessories. Net revenue excludes sales taxes assessed by governmental authorities. We recognize net revenue at the point in time when control of the ordered product is transferred to the customer, which we generally determine to have occurred upon shipment.

Cost of Revenue and Gross Profit

Cost of revenue consists of the product costs of merchandise sold to customers; shipping and handling costs, including all inbound, outbound, and return shipping expenses; rent, insurance, business property tax, utilities, depreciation and amortization, and repairs and maintenance related to our distribution facilities; and charges related to inventory shrinkage,

damages, and our allowance for excess or obsolete inventory. Cost of revenue is primarily driven by the orders placed by customers, the mix of the product available for sale on our site, and transportation costs related to inventory receipts from our suppliers. We expect our cost of revenue to fluctuate as a percentage of net revenue primarily due to how we manage our inventory and merchandise mix.

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Gross profit is equal to our net revenue less cost of revenue. We calculate Gross Margin as gross profit as a percentage of our net revenue. Our Gross Margin varies across Lulus, exclusive to Lulus, and third-party branded products. Exclusive to Lulus consists of products that we develop with design partners and have exclusive rights to sell across our platform, but that do not bear the Lulus brand. Gross Margin on sales of Lulus and exclusive to Lulus merchandise is generally higher than Gross Margin on sales of third-party branded products, which we offer for customers to "round out" the shopping basket. As we continue to optimize our distribution capabilities and gain more negotiation leverage with suppliers, our Gross Margin may fluctuate from period to period depending on the interplay of these factors.

Selling and Marketing Expenses

Our selling and marketing expenses consist primarily of payment processing fees, advertising, targeted online performance marketing and customer order courtesy adjustments. Selling and marketing expenses also include our spend on brand marketing channels, including compensation and free products to social media influencers, events, and other forms of online and offline marketing related to growing and retaining the customer base. As discussed in "Net Revenue" above, in any given period, the amount of our selling and marketing expense can be affected by the use of promotional discounts in such period.

General and Administrative Expenses

General and administrative expenses consist primarily of fixed and variable labor payroll and benefits costs, including equity-based compensation for our employees involved in general corporate functions including finance, merchandising, marketing, and technology, as well as costs associated with the use by these functions of facilities and equipment, including depreciation and amortization, rent and other occupancy expenses. General and administrative expenses are primarily driven by headcount related costs required to support our business and meet our obligations as a public company.

Interest Expense

Interest expense consists of interest expense related to the prior credit agreement with Bank of America (the "Prior Credit Agreement") and the 2025 Credit Agreement.

Provision for Income Taxes

The provision for income taxes represents federal, state, and local income taxes. The effective rate differs from the statutory rate primarily due to non-deductible equity-based compensation expenses, non-deductible officer compensation, valuation allowance and state taxes. Our effective tax rate will change from quarter to quarter based on recurring and nonrecurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, state and local income taxes, the impact of permanent tax adjustments, tax audit settlements, and the interaction of various tax strategies.

We regularly assess the realizability of deferred tax assets ("DTAs") and record a valuation allowance to reduce the DTAs to the amount that is more likely than not to be realized. In assessing the realizability of our DTAs, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Due to the weight of objectively verifiable negative evidence management has concluded that it is more likely than not that the Company will not realize its U.S. net deferred tax assets and, accordingly, continues to maintain a valuation allowance against those assets.

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Our Results of Operations

The following tables set forth our condensed consolidated results of operations for the periods presented and as a percentage of net revenue:

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Comparisons for the Thirteen Weeks ended September 27, 2026 and September 28, 2025

Net Revenue

Net revenue decreased in the thirteen weeks ended September 27, 2026 by $15.0 million, or 20%, compared to the same period of the prior year, primarily due to a 20% decrease in Total Orders Placed and the impact of higher return rates driven primarily from sales mix, partially offset by an increase in wholesale revenue.

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Cost of Revenue

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Cost of revenue decreased in the thirteen weeks ended September 27, 2026 by $10.0 million, or 24%, compared to the same period of the prior year, primarily driven by reduced sales volume in addition to freight cost savings due to improved shipping rates.

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Gross Profit

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Gross profit decreased in the thirteen weeks ended September 27, 2026 by $5.0 million, or 16%, compared to the same period of the prior year even though revenues declined by 20%, reflecting the improvement in gross margins to 44.9%

versus 42.6% in the prior year from a combination of strong product margins along with continued freight cost savings due to improved shipping rates.

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Selling and Marketing Expenses

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Selling and marketing expenses, which are correlated to sales, decreased in the thirteen weeks ended September 27, 2026 by $1.4 million, or 8%, compared to the same period of the prior year, primarily due to lower marketing costs of $0.9 million and merchant processing fees of $0.5 million.

General and Administrative Expenses

General and administrative expenses decreased in the thirteen weeks ended September 27, 2026 by $1.6 million or 10%, compared to the same period of the prior year. The decrease was primarily due to a $0.9 million decrease in variable labor and benefits associated with lower sales volume, a $0.8 million decrease in fixed labor and benefits costs driven by reduced fixed headcount, a $0.2 million decrease in equity-based compensation expense, partially offset by a $0.3 million increase in other general and administrative expenses.

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Interest Expense

Interest expense decreased in the thirteen weeks ended September 27, 2026, by $0.2 million, or 32%, compared to the same period of the prior year. Interest expense in the prior year included $0.2 million in fees related to amendments to our Prior Credit Agreement. Excluding the impact of these non-recurring fees, interest expense increased modestly primarily due to higher average borrowings and a higher interest rate.

Income Tax Provision

Income tax provision in the thirteen weeks ended September 27, 2026 decreased by $0.03 million to a provision of $0.02 million, compared to a provision of $0.05 million in the thirteen weeks ended September 28, 2025.

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Comparisons for the Thirty-nine Weeks ended September 27, 2026 and September 28, 2025

Net Revenue

Net revenue decreased in the thirty-nine weeks ended September 27, 2026 by $35.3 million, or 16%, compared to the same period of the prior year, primarily due to an 18% decrease in Total Orders Placed partially offset by the impact of higher AOV and an increase in wholesale revenue.

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Cost of Revenue

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Cost of revenue decreased in the thirty-nine weeks ended September 27, 2026 by $26.4 million, or 21% compared to the same period of the prior year, primarily driven by reduced sales volume in addition to freight cost savings due to improved shipping rates.

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Gross Profit

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Gross profit decreased in the thirty-nine weeks ended September 27, 2026 by $8.9 million, or 9% compared to the same period of the prior year even though revenues declined by 16%, reflecting the improvement in gross margins to 46.3% versus 42.9% in the prior year from a mix shift to higher margin products combined with freight cost savings due to improved shipping rates.

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Selling and Marketing Expenses

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Selling and marketing expenses, which are correlated to sales, decreased in the thirty-nine weeks ended September 27, 2026 by $6.9 million, or 13%, compared to the same period of the prior year, primarily due to lower marketing costs of $5.7 million and merchant processing fees of $1.2 million.

General and Administrative Expenses

General and administrative expenses decreased in the thirty-nine weeks ended September 27, 2026 by $6.0 million or 12%, compared to the same period of the prior year. The decrease was primarily due to a $2.7 million decrease in variable labor and benefits associated with lower sales volume and productivity enhancements, a $2.0 million decrease in fixed labor and benefits costs driven by reduced fixed headcount and a $1.6 million decrease in equity-based compensation expense, partially offset by a $0.3 million increase in other general and administrative expenses.

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Interest Expense

Interest expense decreased in the thirty-nine weeks ended September 27, 2026, by $0.9 million, or 46%, compared to the same period of the prior year. Interest expense in the prior year included $0.9 million in fees related to amendments to our Prior Credit Agreement. Excluding the impact of these non-recurring fees, interest was in-line with the prior-year period.

Income Tax Provision

Income tax provision in the thirty-nine weeks ended September 27, 2026 increased by $0.2 million to a provision of $0.2 million, compared to a provision of $0.04 million for the thirty-nine weeks ended September 28, 2025. The increase was primarily due to state income taxes and deferred taxes relating to the annual tax amortization expense on certain indefinite-lived intangible assets.

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Quarterly Trends and Seasonality

We experience moderate seasonal fluctuations in aggregate sales volume during the year. Seasonality in our business does not follow that of traditional retailers, such as a typical concentration of revenue in the holiday quarter. Our net revenue is typically highest in the second and third quarters due to the increased demand for event dresses in the spring and summer. Net revenue is typically the lowest in the first and fourth quarters when event dresses are less in demand. The seasonality of our business has resulted in variability in our total net revenue quarter-to-quarter. We believe that this seasonality has affected and will continue to affect our results of operations.

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While our quarterly gross profit generally fluctuates in line with our net revenue, it is also based on how we manage our inventory and merchandise mix and can be further affected by non-recurring, external factors, such as global pandemics or trade wars.

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Selling and marketing expenses generally fluctuate with net revenue. Further, in any given period, the amount of our selling and marketing expense can be affected by the use of promotional discounts in such period. In addition, we may increase or decrease marketing spend to assist with optimizing inventory mix and quantities.

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General and administrative expenses consist primarily of payroll and benefit costs and vary quarter to quarter as we manage distribution center labor to meet the demand based on our seasonality and the changes in the number of short term workers to meet demand based on our seasonality.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash generated from operating activities and borrowings under our 2025 Credit Agreement. Our primary requirements for liquidity and capital are inventory purchases, payroll and general operating expenses, capital expenditures associated with our distribution facilities, capitalized software and debt service requirements.

Credit Facility

On November 15, 2021, we entered into a Credit Agreement with Bank of America (the "lender") for a revolving facility that provided for borrowings up to $50.0 million with a maturity date of November 15, 2024 (the "Prior Credit Agreement"). The Prior Credit Agreement was amended subsequently by five amendments which modified a number of terms, including extending the maturity date to August 22, 2025, reducing and ultimately prohibiting further borrowings, revising the applicable interest rates, revising or providing limited waivers of compliance with certain financial covenants, and adding covenants related to achieving a refinancing transaction. The Prior Credit Agreement was satisfied in full and terminated upon entry into the 2025 Credit Agreement described below.

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On August 14, 2025, we entered into the 2025 Credit Agreement for an asset-based revolving credit facility with a $20.0 million commitment, a $5.0 million uncommitted accordion and a $1.0 million sublimit for letters of credit. The amount that the Borrowers may borrow under the 2025 Credit Agreement is tied to our borrowing base calculated based on advance rates for various assets serving as collateral for the 2025 Credit Agreement. The 2025 Credit Agreement provides that at two times during each year (counted from the anniversary date of the 2025 Credit Agreement), the Borrowers may elect to include an increased inventory formula into the borrowing base, giving them access to more loan availability than under the standard borrowing base calculation. As originally executed, the 2025 Credit Agreement provided for an initial increased inventory availability period beginning in November 2025 and ending in February 2026 and permitted the Borrowers to elect up to two additional 60-day periods during each of the second and third 12-month periods following the closing date. Borrowings under the 2025 Credit Agreement bear interest at a rate equal to the 30-day SOFR rate plus 3.95%. The 2025 Credit Agreement is secured by a first-priority security interest in and lien upon all tangible and intangible personal property of the Borrowers now owned or acquired in the future. The 2025 Credit Agreement includes covenants that limit the Borrowers' ability to incur indebtedness, to create liens or other encumbrances, to make certain payments and investments, to engage in transactions with affiliates, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities. The 2025 Credit Agreement also includes a financial covenant of the greater of $4 million or 20% of the total commitment in minimum excess availability under the 2025 Credit Agreement, and additional reporting requirements when excess availability is less than $5 million. It also requires us to maintain lockbox accounts and cash management arrangements under the control of the Administrative Agent, who has full dominion and control over each Collection Account and all Deposit Accounts (except Excluded Accounts). Outstanding borrowings are classified as current liabilities, however, the 2025 Credit Agreement does not mature until August 14, 2028.

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On October 28, 2025, we entered into an amendment to the 2025 Credit Agreement, which clarified the terms related to the manner in which interest is calculated, provides us greater flexibility with respect to the location of our corporate headquarters and extends the amount of time to produce our borrowing base reports.

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On July 27, 2026, we entered into the Second Amendment, which changes the earliest date the Borrowers can include an increased inventory formula into the revolver borrowing base from August 14, 2026 to July 21, 2026 (the "July 2026 Increased Inventory Availability Period"), provides that, on a going-forward basis after giving effect to the July 2026 Increased Inventory Availability Period, the increased inventory formula may be used once before June 30, 2027 and twice after June 30, 2027 through the third anniversary of the revolver closing date, and provides that during the July 2026 Increased Inventory Availability Period only, for purposes of determining increased reporting requirements, the excess revolver availability requirement is decreased from $5.0 million to $4.0 million. This Second Amendment gives the Borrowers increased flexibility in accessing borrowings and managing inventory levels. In connection with entering into the Second Amendment, the Borrowers paid an amendment fee of $10,000, as specified in the Second Amendment.

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The initial funding of the 2025 Credit Agreement occurred on August 14, 2025, and the proceeds were used in part to repay approximately $6.0 million outstanding under the Prior Credit Agreement. In connection with entering into the 2025 Credit Agreement and the repayment in full of all outstanding obligations under the Prior Credit Agreement, the Prior Credit Agreement and the related forbearance agreement and amendments with Bank of America, were terminated.

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As of September 27, 2026, the outstanding borrowing under the 2025 Credit Agreement was $15.4 million in addition to a $0.3 million letter of credit outstanding. After giving effect to the Second Amendment, the excess availability covenant and the outstanding letter of credit, the unused availability was $0.4 million. During the thirty-nine weeks ended September 27, 2026, we borrowed $191.5 million and repaid $190.5 million under the 2025 Credit Agreement and borrowings had a weighted average interest rate of 10.3%.

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We are in active negotiations with our existing lender, as well as with potential new lenders, regarding additional financing. These discussions are ongoing, and there can be no assurance that they will result in definitive agreements or that any financing will be available on acceptable terms.

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Availability and Use of Cash

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As of September 27, 2026, we had cash and cash equivalents of $6.5 million. During the thirteen and thirty-nine weeks ended September 27, 2026, we benefited from cost reduction and cash conservation measures, reduced inventory purchases, adjustments to marketing spend and other fixed, variable, and capital spend. We are continuing to take certain cash conservation measures, including adjustments to headcount, marketing and other fixed and variable costs and capital spend to meet its obligations as needed. We are also in active negotiations with our existing lender, as well as with potential new lenders, regarding additional financing. However, there can be no assurances that we will be able to secure additional financing in a timely manner on acceptable terms, if at all. As the ability to secure additional financing is outside of management's control, we cannot conclude that management's plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements are issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty. The condensed consolidated financial statements do not reflect any adjustments that might result from the outcome of this uncertainty. Actual results of operations will depend on numerous factors, many of which are beyond our control, as further discussed in Part I, Item 1A, "Risk Factors" included in our 2025 10-K, Part II - Item 1A, "Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended June 28, 2026 and Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q for the quarter ended September 27, 2026.

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Repurchases Pursuant to the 2024 Repurchase Program

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On May 8, 2024, we announced that our Board of Directors authorized a stock repurchase program to repurchase up to $2.5 million of our common stock (the "2024 Repurchase Program"). During the thirteen and thirty-nine weeks ended September 27, 2026, no shares were repurchased pursuant to the Company's 2024 Repurchase Program. As of September 27, 2026, there was $1.1 million available under the 2024 Repurchase Program authorization.

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The actual timing, number, and value of shares repurchased in the future will be determined at our discretion and will continue to depend on a number of factors, including market conditions, applicable legal requirements, our capital needs, and whether there is a better alternative use of capital. Repurchases will continue to be funded from our existing cash and cash equivalents, or future cash flow. The 2024 Repurchase Program may be modified, suspended, or terminated at any time. For further information on the 2024 Repurchase Program, see Note 8, Stockholders' Equity (Deficit), of the accompanying notes to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Cash Flow Analysis

The following table summarizes our cash flows for the periods indicated:

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Operating Activities

Net cash provided by operating activities consists primarily of net loss and comprehensive loss adjusted for certain non-cash items, including depreciation, amortization, equity-based compensation and the effect of changes in working capital and other activities.

During the thirty-nine weeks ended September 27, 2026, net cash provided by operating activities was $5.4 million, which consisted of a net loss of $9.8 million, partially offset by non-cash charges of $8.7 million and a net change of $6.5 million in operating assets and liabilities. The non-cash charges were primarily comprised of $3.5 million of non-cash lease expense, $3.1 million of depreciation and amortization and $1.9 million of equity-based compensation expense. The net change in operating assets and liabilities was primarily driven by a $13.1 million increase in accrued expenses, returns reserve and stored-value card liabilities and a $2.5 million increase in accounts payable due to timing of payments. These increases were partially offset by a $3.7 million decrease in lease liabilities, a $3.4 million increase in accounts receivable pertaining to timing-related increase in higher credit card receivables and a $2.9 million increase in assets for recovery.

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During the thirty-nine weeks ended September 28, 2025, net cash provided by operating activities was $5.1 million, which consisted of a net loss of $13.3 million, partially offset by non-cash charges of $11.1 million and a net change of $7.3 million in operating assets and liabilities. The non-cash charges were primarily comprised of $3.9 million of depreciation and amortization, $3.6 million of equity-based compensation expense, and $3.4 million of non-cash lease expense. The net change in operating assets and liabilities was primarily driven by a $10.6 million increase in accrued expenses driven by an increase in returns reserve and stored-value card liabilities; a $7.4 million increase in accounts payable related to purchases in line with the increase in sales; and a $3.0 million decrease in income tax receivable due to the receipt of state income tax refunds. These increases were partially offset by a $4.4 million increase in inventory, a $3.3 million decrease in operating lease liabilities, a $2.8 million increase in assets for recovery and a $2.6 million increase in accounts receivable pertaining to higher credit card receivables.

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Investing Activities

​Our primary investing activities have consisted of purchases of equipment to support our business operations and internally developed software for the continued development of our proprietary technology infrastructure. Purchases of property and equipment may vary from period to period due to the timing of the expansion or contraction of our operations. We have no material commitments for capital expenditures.

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During the thirty-nine weeks ended September 27, 2026, net cash used in investing activities related to the purchase of capitalized software and property and equipment was $1.1 million, as compared to $1.6 million during the thirty-nine weeks ended September 28, 2025.

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Financing Activities

​Financing activities consist primarily of borrowings and repayments related to our revolving facility under our Prior Credit Agreement and 2025 Credit Agreement.

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During the thirty-nine weeks ended September 27, 2026, cash used in financing activities was $0.4 million, primarily due to $190.5 million of repayments under our 2025 Credit Agreement and $1.0 million of principal payments on finance lease obligations, partially offset by $191.5 million proceeds from borrowings under our 2025 Credit Agreement.

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During the thirty-nine weeks ended September 28, 2025, cash used in financing activities was $6.0 million, primarily due to $42.2 million of repayments under our 2025 Credit Agreement, $13.1 million of repayments under Prior Credit Agreement, $0.9 million used in the repurchase of our common stock and $1.0 million of principal payments on finance lease obligations, partially offset by $51.4 million of proceeds from borrowings under our 2025 Credit Agreement.

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Contractual Obligations and Other Commitments

There have been no other material changes to our contractual obligations and commitments as disclosed in our 2025 10-K.

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Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our 2025 10-K and the notes to the audited consolidated financial statements appearing elsewhere in our 2025 10-K. There have been no significant changes to our critical accounting policies and estimates as disclosed in our 2025 10-K.

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Recent Accounting Pronouncements

See Note 2, Significant Accounting Policies - Recently Issued Accounting Pronouncements, in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial position and our results of operations.

JOBS Act Accounting Election

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and a smaller reporting company and non-accelerated filer as defined in the rules under the Exchange Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will no longer qualify as an emerging growth company as of the end of fiscal 2026, but will remain a (i) smaller reporting company until our outstanding common

stock held by nonaffiliates has a value of $250 million or more at the end of a second fiscal quarter; and (ii) non-accelerated filer until we have a public float of $75 million or more at the end of a second fiscal quarter. For as long as we continue to be both a smaller reporting company and non-accelerated filer, we may continue to take advantage of exemptions from certain reporting requirements that are applicable to other public companies, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and reduced financial reporting requirements.

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