Lovesac Company Reports First Quarter Fiscal 2026 Results

June 16, 2025  by Karen Parrish in Business Strategy, Industry   

Shawn Nelson, CEO, stated, “Our first quarter performance was in line with our expectations to capitalize on secular initiatives to drive growth. Notably, we delivered topline growth and leveraged operating expenses as we have begun to reap the benefits of previous investments in core capabilities to bolster our infinity flywheel and accelerate our pace of product innovation.

Our first quarter also reflected another period of market share gains despite persistent category headwinds and an evolving macroeconomic backdrop, thereby reinforcing our unique competitive advantages driven by our Designed for Life product platforms and efficient customer acquisition engines. As we enter the second quarter, we are thrilled to have launched our third Designed For Life Platform, EverCouch.

This expansion into the armchair, loveseat and sofa category effectively doubles our total addressable market. While we remain cautious given the dynamic environment, we have high conviction in our long-term growth trajectory as we execute against our strategic roadmap and unlock the tremendous growth potential ahead.”

Highlights for the Quarter Ended May 4, 2025:

— Net sales increased $5.8 million, or 4.3%, in the first quarter of fiscal 2026 compared to the prior year period primarily driven by an increase of 2.8% in omni-channel comparable net sales and the net addition of 21 new showrooms. During the first quarter of fiscal 2026, we opened 11 additional showrooms and closed 1 showroom.

— Gross profit increased $2.4 million, or 3.2% in the first quarter of fiscal 2026 compared to the prior year period. Gross margin decreased 60 basis points to 53.7% of net sales in the first quarter of fiscal 2026 from 54.3% of net sales in the prior year period primarily driven by a decrease of 230 basis points in product margin driven by higher promotional discounting, partially offset by decreases of 130 basis points in inbound transportation costs and 40 basis points in outbound transportation and warehousing costs.

— SG&A expense decreased $1.3 million, or 1.9%, in the first quarter of fiscal 2026 compared to the prior year period due to decreases in professional fees, insurance matters, credit card fees, computer expense, and other overhead costs, partially offset by increases in payroll, equity-based compensation, and rent.

— Advertising and marketing expense increased $0.6 million, or 3.3% in the first quarter of fiscal 2026 compared to the prior year period, primarily driven by costs associated with the launch of a new product marketing campaign.

— Operating loss was $15.0 million in the first quarter of fiscal 2026 compared to $17.9 million in the prior year period. Operating margin was (10.8)% of net sales in the first quarter of fiscal 2026 compared to (13.5)% of net sales in the prior year period.

— Net loss was $10.8 million in the first quarter of fiscal 2026 or $(0.73) net loss per common share compared to $13.0 million or $(0.83) net loss per common share in the prior year period. During the first quarter of fiscal 2026, the Company recorded an income tax benefit of $3.8 million, compared to $4.2 million in the prior year period. The change in benefit is primarily driven by a lower net loss before taxes.

Other Financial Highlights as of May 4, 2025:

— The cash and cash equivalents balance as of May 4, 2025, was $26.9 million as compared to $72.4 million as of May 5, 2024. There was no balance on the Company’s line of credit as of May 4, 2025, and May 5, 2024. The Company’s availability under the line of credit was $36.0 million and $33.7 million as of May 4, 2025, and May 5, 2024, respectively.

— Total merchandise inventory was $124.9 million as of May 4, 2025, as compared to $94.7 million as of May 5, 2024, primarily related to a planned stock inventory increase of $25.9 million coupled with an increase in freight capitalization of $5.1 million.

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 currently expects the following for the full year of fiscal 2026:

— Net sales in the range of $700 million to $750 million.

— Adjusted EBITDA¹ in the range of $48 million to $60 million.

— Net income in the range of $13 million to $22 million.

— Diluted income per common share in the range of $0.80 to $1.36 on approximately 16.3 million estimated diluted weighted average shares outstanding.

The Company currently expects the following for the second quarter of fiscal 2026:

— Net sales in the range of $157 million to $166 million.

— Adjusted EBITDA¹ loss in the range of $2 million to $7 million.

— Net loss in the range of $8 million to $12 million.

— Basic loss per common share in the range of $0.58 to $0.83 on approximately 14.6 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 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.