Lovesac Announces First Quarter of Fiscal 2024, Ending April 30

June 8, 2023  by HFBusiness Staff in Business Strategy, Industry   

Shawn Nelson, chief executive officer, stated, “We are very pleased with our first quarter performance, highlights of which included 9% and 15% increases in total sales and comparable sales, respectively, despite dampened consumer spending and higher interest rates.”

“Lovesac’s relative outperformance reflects success executing our highly differentiated, customer-centric business model, the loyalty commanded by our Designed For Life product platforms, and our stellar operational platform.”

Mr. Nelson continued, “While we expect unfavorable macro-economic conditions to continue in the coming quarters, Lovesac continues to operate from a position of strength with a debt free balance sheet and a proven track record of cost discipline and rigor.”

“We believe that we are thus poised to continue investing in the future with an accelerated pace of new product innovation that will expect to drive further customer enthusiasm and uptake.”

Highlights for the Quarter Ended April 30:

~  The net sales increase of 9.1% was driven by growth across all channels. Showroom net sales, which include kiosks and mobile concierges, increased 2.9%. Internet net sales increased 28.7%, and our “Other” channel which principally includes pop-up-shops and shop-in-shops increased 3.1%. The increase in showroom net sales was driven by an increase of 8.4% in comparable showroom sales related to higher point of sale transactions with lower promotional discounting, the addition of 50 new showrooms and one less kiosk compared to the prior year period, and strong promotion campaigns.

~  Gross profit increased $4.6 million, or 7.0%, to $70.7 million in the first quarter of fiscal 2024 from $66.1 million in the first quarter of fiscal 2023. Gross margin decreased 100 basis points to 50.1% of net sales in the first quarter of fiscal 2024 from 51.1% of net sales in the prior year period primarily driven by a decrease of 120 basis points in product margin driven by higher promotional discounting partially offset by a decrease of approximately 20 basis points in total distribution and related tariff expenses.

~  SG&A expense as a percent of net sales increased by 560 basis points due to investments in payroll, selling related expenses, and rent, partially offset by equity-based compensation and travel.

~  Advertising and marketing expense increased 6.4% due to continued investments in marketing spend to support our net sales growth. As a percent of net sales, advertising and marketing decreased by 30 basis points.

~  Operating loss was $5.9 million in the first quarter of fiscal 2024 compared to operating income of $2.6 million in the first quarter of fiscal 2023. Operating margin was (4.2)% of net sales in the first quarter of fiscal 2024 compared to 2.0% of net sales in the first quarter of fiscal 2023.

~  Net loss was $4.2 million in the first quarter of fiscal 2024 or $0.28 loss per diluted share compared to a net income of $1.9 million or $0.12 per diluted share in the first quarter of fiscal 2023. During the first quarter of fiscal 2024, the Company recorded an income tax benefit of $1.3 million, compared to income tax expense of $0.7 million, for the first quarter of fiscal 2023. The change in provision is primarily driven by the Company generating net loss before taxes of $5.5 million and net income before taxes of $2.6 million in the first quarter of fiscal 2024 and fiscal 2023, respectively.

Other Financial Highlights as of April 30:

~  The cash and cash equivalents balance as of April 30 was $45.1 million as compared to $64.4 million as of May 1, 2022. There was no balance on the Company’s line of credit as of April 30, 2023, and May 1, 2022. The Company’s availability under the line of credit was $36.0 million and $31.2 million as of April 30, 2023, and May 1, 2022, respectively.

~  Total merchandise inventory was $106.8 million as of April 30, 2023, as compared to $123.0 million as of May 1, 2022, principally related to a stock inventory increase of $7.6 million coupled with a decrease in freight capitalization of $24.1 million related to the decrease in inbound freight expense.

Outlook:

The Company provides guidance of select information related to the Company’s financial and operating performance, and such measures may differ from year to year. The projections are as of this date and the Company assumes no obligation to update or supplement this information.

The Company continues to expect the following for the full year of fiscal 2024:

~  Net sales in the range of $700.0 million to $740.0 million.

~  Adjusted EBITDA in the range of $55.0 million to $66.0 million.

~  Net income in the range of $30.0 million to $36.0 million.

~  Diluted income per common share in the range of $1.83 to $2.24 on approximately 16.4 million estimated diluted weighted average shares outstanding.

~  Fiscal 2024 will contain an additional “53rd week” in the fourth quarter versus 52 weeks in fiscal 2023.