Lovesac Company Announces Financial Results for Second Quarter

September 11, 2025  by Karen Parrish in Business Strategy, Industry   

Shawn Nelson, CEO, stated, “We're pleased to have delivered another quarter of market share gains underpinned by our secular growth initiatives across Designed for Life product platforms and efficient customer acquisition engines. Our operational discipline continues to drive operating expense leverage even as we maintain an investment stance for innovation and long-term growth. Our financial and operational performance, despite ongoing category headwinds, further bolsters our confidence as we move forward and transition from a product-focused company to a true brand. With this as our focus, we have refined our strategic roadmap and are evolving our brand positioning to support our growth into a multi-faceted home brand with an organized and prioritized product hierarchy and merchandising strategy. Looking ahead, while we balance near-term industry dynamics amidst the evolving tariff landscape with our ongoing secular tailwinds, we remain confident in our objective to deliver meaningful long-term value as we aim to build the most loved home brand in America.”

Highlights for the Quarter Ended August 3, 2025:

— Net sales increased $3.9 million, or 2.5%, in the second quarter of fiscal 2026 compared to the prior year period primarily driven by an increase of 0.9% in omni-channel comparable net sales and the net addition of 16 new showrooms. During the second quarter of fiscal 2026, we opened 6 additional showrooms and closed 3 showrooms.

— Gross profit decreased $1.8 million, or 1.9% in the second quarter of fiscal 2026 compared to the prior year period. Gross margin decreased 260 basis points to 56.4% of net sales in the second quarter of fiscal 2026 from 59.0% of net sales in the prior year period primarily driven by increases of 110 basis points in inbound transportation costs and 50 basis points in outbound transportation and warehousing costs and a decrease of 100 basis points in product margin driven by higher promotional discounting.

— SG&A expense decreased $1.6 million, or 2.1%, in the second quarter of fiscal 2026 compared to the prior year period primarily due to decreases in professional fees, credit card fees, and other overhead costs, partially offset by impairment charges related to the Best Buy partnership termination, and increases in payroll, equity-based compensation, and rent.

— Advertising and marketing expense increased $0.2 million, or 0.7% in the second 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 $8.8 million in the second quarter of fiscal 2026 compared to $8.4 million in the prior year period. Operating margin was (5.5)% of net sales in the second quarter of fiscal 2026 compared to (5.3)% of net sales in the prior year period.

— Net loss was $6.7 million in the second quarter of fiscal 2026 or $(0.45) net loss per common share compared to $5.9 million or $(0.38) net loss per common share in the prior year period. During the second quarter of fiscal 2026, the Company recorded an income tax benefit of $2.1 million, compared to $1.8 million in the prior year period. The change in benefit is primarily driven by a higher net loss before taxes.

Highlights for the Year-to-date Period Ended August 3, 2025:

— Net sales increased $9.7 million, or 3.3%, in the year-to-date period ended August 3, 2025, compared to the prior year period primarily driven by an increase of 1.4% in omni-channel comparable net sales and the net addition of 16 new showrooms compared to the prior year period.

— Gross profit increased $0.6 million, or 0.3%, in the year-to-date period ended August 3, 2025, compared to the prior year period. Gross margin decreased 160 basis points to 55.2% of net sales in the year-to-date period ended August 3, 2025, from 56.8% of net sales in the prior year period primarily driven by a decrease of 150 basis points in product margin driven by higher promotional discounting and an increase of 10 basis points in outbound transportation and warehousing costs.

— SG&A expense decreased $2.8 million, or 2.0%, in the year-to-date period ended August 3, 2025, compared to the prior year period primarily due to decreases in legal and professional fees, credit card fees, computer expense, and other overhead costs, partially offset by increases in payroll, equity-based compensation, impairment charges related to the Best Buy partnership termination, and rent.

— Advertising and marketing expense increased $0.8 million, or 1.9% in the year-to-date period ended August 3, 2025, compared to the prior year period primarily driven by costs associated with the launch of a new product marketing campaign.

— Operating loss was $23.8 million in the year-to-date period ended August 3, 2025, compared to $26.2 million in the prior year period. Operating margin was (8.0)% of net sales in the year-to-date period ended August 3, 2025, compared to (9.1)% of net sales in the prior year period.

— Net loss was $17.5 million in the year-to-date period ended August 3, 2025, or $(1.19) net loss per diluted share compared to $18.8 million or $(1.21) net loss per diluted share in the prior year period. During the year-to-date period ended August 3, 2025, the Company recorded an income tax benefit of $5.9 million, compared to $6.0 million for the prior year period. The change in benefit is primarily driven by a lower net loss before taxes.

Other Financial Highlights as of August 3, 2025:

— The cash and cash equivalents balance as of August 3, 2025, was $34.2 million as compared to $72.1 million as of August 4, 2024. There was no balance on the Company’s line of credit as of August 3, 2025, and August 4, 2024. The Company’s availability under the line of credit was $36.0 million as of August 3, 2025, and August 4, 2024.

— Total merchandise inventory was $124.0 million as of August 3, 2025, as compared to $88.3 million as of August 4, 2024, primarily related to a planned stock inventory increase of $24.4 million coupled with an increase in freight capitalization of $10.7 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 $710 million to $740 million.

- Adjusted EBITDA1 in the range of $42 million to $55 million.

- Net income in the range of $8 million to $17 million.

- Diluted income per common share in the range of $0.52 to $1.05 on approximately 16.3 million estimated diluted weighted average shares outstanding.

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

- Net sales in the range of $151 million to $161 million.

- Adjusted EBITDA1 loss in the range of $1 million to $7 million.

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

- Basic loss per common share in the range of $0.51 to $0.83 on approximately 14.7 million estimated weighted average shares outstanding.

Conference Call Information:

A conference call to discuss the financial results for the second quarter ended August 3, 2025, is scheduled for today, September 11, 2025, at 8:30 a.m. Eastern Time. 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.