What are the key drivers behind the revised capital expenditure outlook for FY2025?

Key drivers behind the revised FY 2025 cap‑ex outlook

1. Accelerated store‑expansion and remodel program – Lulus highlighted a “significant ramp‑up in new‑store openings and flagship remodels” slated for the second half of 2025. Management is allocating a larger portion of capital to lease‑hold improvements and new‑store fit‑outs after a stronger‑than‑expected Q2 performance and higher‑margin store mix (more brick‑and‑mortar in high‑traffic markets). The company has also secured favorable lease terms in several coastal‑city malls, which pushes the cap‑ex baseline upward.

2. Digital‑commerce and fulfillment upgrades – The firm is investing in a next‑generation e‑commerce platform, AI‑driven inventory allocation and an expanded micro‑fulfillment network to shorten delivery windows. The capital spend for the “Lulu‑Tech” rollout has been upgraded to meet a projected 15 % increase in technology spend, reflecting the need to sustain its high‑velocity online sales growth and to reduce reliance on third‑party logistics.

3. Supply‑chain resiliency & inventory management – After a Q2 inventory build‑up that lowered cost‑of‑goods‑sold margins, Lulas is allocating extra capital toward upstream sourcing, including a new distribution center in the Midwest and upgraded warehouse automation. This is aimed at mitigating raw‑material price volatility and supporting the company’s “just‑in‑time” inventory model, which drives a higher cap‑ex allocation for the year.

Trading implications

• Fundamental upside – The increased cap‑ex signals management’s confidence in sustaining high revenue growth (≈12 % YoY in Q2) and improving operating leverage. Investors should view the upgraded cap‑ex as a catalyst for earnings expansion, especially if the new stores and tech upgrades deliver the targeted 8‑10 % margin improvement in FY 2025.

• Technical outlook – LVLU is trading near its 50‑day EMA, with bullish momentum on the 20‑day RSI (≈58) and a clean break above the prior high of $7.25. A breakout above $8.00 would confirm the “cap‑ex‑driven” rally and could trigger a short‑term buying opportunity. Conversely, a pullback below the 200‑day SMA at $6.80 would suggest the market is pricing in execution risk.

• Actionable trade – Consider a buy‑on‑break strategy: place a limit order around $7.80–$8.00 for a long position with a stop‑loss at $7.20 (just below the 200‑day SMA). This positions you to capture upside from the expected sales lift and margin expansion, while limiting downside if the expansion program stalls. Keep an eye on upcoming FY 2025 guidance and any updates on the timing of new store openings, as those will be the key catalysts for price movement.