Lovesac Company Reports Fourth Quarter and Year End Results

April 11, 2024  by HFBusiness Staff in Business Strategy, Industry   

Note: Lovesac's fourth quarter and fiscal 2024 results contain an additional, non-comparable week, or the "53rd week”, when compared to the fourth quarter and full year results for the respective 52- and 13-week periods ended January 29, 2023 (“fiscal 2023”), and full year guidance for the 52-week fiscal year ending February 2, 2025 (“fiscal 2025”). Unless stated otherwise, financial metrics discussed in this release, such as net sales, operating income, net income and net income per share, are calculated in accordance with generally accepted accounting principles (“GAAP”) and therefore include the 53rd week for the applicable fiscal 2024 periods.

Shawn Nelson, CEO, stated, “Lovesac delivered market leading fiscal fourth quarter and full year 2024 sales performances. We surpassed $700 million in revenues for the fiscal year, representing a net sales increase of $49.1 million, or 7.5%, despite another year of significant category decline for the home furnishing sector. Interest in – and passion for – the Lovesac brand, from new and existing customers alike, continues to grow. We will fortify our momentum by doubling-down on what we do best: strengthening our unique omni-channel infinity flywheel, reinforcing our designed for life platform, investing in genuine innovation, and making the strategic investments necessary to profitably scale our brand and business for years to come.”

Nelson continued, “Lovesac enters fiscal 2025 in a position of strength with a truly massive opportunity ahead. We’re primed to over-participate in an eventual category rebound through continued market share gains driven by our core platform. In addition, this fiscal year, we plan to enhance our core Sactional and Sac platforms with an impressive pace of complementary product innovation launches, positioning us well to build-on our track record of delivering profitable growth.”

Highlights for the Fourth Quarter Ended February 4, 2024:

•  Net sales increased 5.0% in the fourth quarter primarily driven by growth within the Showroom and Internet channels.
•  Gross profit increased $15.9 million, or 11.9%, to $149.6 million in the fourth quarter of fiscal 2024 from $133.7 million in the prior year period.
•   SG&A expense as a percent of net sales increased by 170 basis points due to net investments in payroll, infrastructure, selling related expenses, restatement related costs, and other professional fees, partially offset by a reduction in equity incentive compensation.
•   Advertising and marketing expense increased 14.2% due to continued investments in marketing spend to support the net sales growth.
•   Operating income was $40.4 million in the fourth quarter of fiscal 2024 compared to $36.5 million in the prior year period. Operating margin was 16.0% of net sales in the fourth quarter of fiscal 2024 compared to 15.4% of net sales in the prior year period.
•   Net income was $31.0 million in the fourth quarter of fiscal 2024, or $1.87 net income per diluted share, compared to $26.2 million, or $1.65 net income per diluted share, in the prior year period.

Highlights for the Fiscal Year Ended February 4, 2024:

•   Net sales increased 7.5% in fiscal 2024 primarily driven by growth within the Showroom and Internet channels.
•   Gross profit increased $57.3 million, or 16.7%, to $401.0 million in fiscal 2024 from $343.7 million in the prior year period.
•   SG&A expense as a percent of net sales increased by 450 basis points due to investments in payroll, selling related expenses, infrastructure, restatement related costs, and other professional fees, partially offset by a reduction in equity incentive compensation. Selling related expenses includes customer financing fees which increased $5.8 million, or 19.5%, to $35.5 million in fiscal 2024 from $29.7 million in the prior year period.

•   Advertising and marketing expense increased 17.8% due to continued investments in marketing spend to support net sales growth and 25th anniversary brand campaign.
•   Operating income was $30.1 million in fiscal 2024 compared to $37.0 million in the prior year period. Operating margin was 4.4% of net sales in fiscal 2024 compared to 5.6% of net sales in the prior year period.
•   Net income was $23.9 million in fiscal 2024, or $1.45 net income per diluted share, compared to $26.5 million, or $1.66 net income per diluted share, in the prior year period. During fiscal 2024, the Company recorded an income tax expense of $8.0 million, compared to $10.4 million for the prior year period.

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 expects the following for the full year of fiscal 2025:
•   Net sales in the range of $700 million to $770 million.
•   Adjusted EBITDA¹ in the range of $46 million to $60 million.
•   Net income in the range of $18 million to $27 million.
•   Diluted income per common share in the range of $1.06 to $1.59 on approximately 17.0 million estimated diluted weighted average shares outstanding.
•   Fiscal 2025 will contain 52 weeks versus Fiscal 2024 which contained an additional “53rd week” in the fourth quarter.
•   The Company currently expects the following for the first quarter of fiscal 2025:
•   Net sales in the range of $126 million to $132 million.
•   Adjusted EBITDA1 loss in the range of $13 million to $16 million.
•   Net loss in the range of $13 million to $16 million.
•   Basic loss per common share in the range of $0.84 to $1.03 on approximately 15.5 million estimated weighted average shares outstanding.

¹ Adjusted EBITDA is a non-GAAP measure. See “Non-GAAP Information” and “Reconciliation of Non-GAAP Financial Measures” included in this press release.

Conference Call Information:

A recorded replay of the results conference call from April 11 will be available within two hours of the conclusion of the call and can be accessed online at investor.lovesac.com for 90 days.