Lovesac Company Releases First Quarter of Fiscal 2025

June 13, 2024  by HFBusiness Staff in Business Strategy, Industry   

Shawn Nelson, chief executive officer, stated, “We are pleased to deliver first quarter performance inline to slightly above the high end of our expectations. Our results reflect continued outperformance compared to the industry and demonstrate our commitment to executing against our objectives.”

“We believe through our omni-channel infinity flywheel, designed for life platform and advantaged supply chain we are well positioned to continue to deliver results and capitalize on the tremendous opportunity still ahead. With the recent launch of our PillowSac Accent Chair we are continuing to expand our offering and see opportunity to further widen the aperture with exciting innovative launches yet to come.”

Highlights for the Quarter Ended May 5, 2024:

• Net sales decreased $8.6 million, or 6.1%, in the first quarter of fiscal 2025 compared to the prior year period primarily driven by a decrease of 14.8% in omni-channel comparable net sales, partially offset by the net addition of 35 new showrooms compared to the prior year period. During the first quarter of fiscal 2025, we opened 24 additional showrooms and closed 3 showrooms and 5 kiosks.
   
• Gross profit increased $1.4 million, or 2.1%, in the first quarter of fiscal 2025 compared to the prior year period. Gross margin increased 430 basis points to 54.3% of net sales in the first quarter of fiscal 2025 from 50.0% of net sales in the prior year period primarily driven by a decrease of 790 basis points in inbound transportation costs, partially offset by an increase of 240 basis points in outbound transportation and warehousing costs and a decrease of 120 basis points in product margin driven by higher promotional discounting.
   
• SG&A expense increased $11.9 million, or 21.0%, in the first quarter of fiscal 2025 compared to the prior year period due to investments in payroll, professional fees, rent, infrastructure, selling related expenses, and equity based compensation. Selling related expenses include customer financing fees which increased $0.6 million, or 8.6%, to $6.7 million in the first quarter of fiscal 2025 from $6.1 million in the first quarter of fiscal 2024.
• Advertising and marketing expense increased $1.1 million, or 6.4% in the first quarter of fiscal 2025 compared to the prior year period.
• Operating loss was $17.9 million in the first quarter of fiscal 2025 compared to $5.7 million in the prior year period. Operating margin was (13.5)% of net sales in the first quarter of fiscal 2025 compared to (4.0)% of net sales in the prior year period.
   
• Net loss was $13.0 million in the first quarter of fiscal 2025 or $(0.83) net loss per common share compared to $4.1 million or $(0.27) net loss per common share in the prior year period. During the first quarter of fiscal 2025, the Company recorded an income tax benefit of $4.2 million, compared to $1.3 million in the prior year period. The change in benefit is primarily driven by higher net loss before taxes and an increase in the effective tax rate.

Other Financial Highlights as of May 5, 2024:

• The cash and cash equivalents balance as of May 5, 2024, was $72.4 million as compared to $45.1 million as of April 30, 2023. There was no balance on the Company’s line of credit as of May 5, 2024, and April 30, 2023. The Company’s availability under the line of credit was $33.7 million and $36.0 million as of May 5, 2024, and April 30, 2023, respectively. As previously announced, on March 24, 2023, we amended our existing credit agreement with Wells Fargo Bank, N.A. to extend the maturity date to September 30, 2024. All other terms of the credit agreement remain unchanged.
   
• Total merchandise inventory was $94.7 million as of May 5, 2024, as compared to $104.5 million as of April 30, 2023, principally related to a planned stock inventory decrease of $10.2 million coupled with a decrease in freight capitalization of $1.4 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 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 second quarter of fiscal 2025:

• Net sales in the range of $152 million to $160 million.
• Adjusted EBITDA¹ loss in the range of $2 million to $5 million.
• Net loss in the range of $6 million to $8 million.
• Basic loss per common share in the range of $0.37 to $0.53 on approximately 15.6 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 conference call to discuss the financial results for the first quarter ended May 5, 2024, is scheduled for June 13. A live audio webcast of the conference call will be available online at investor.lovesac.com.

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