Lovesac Company Reports Financial Results for Third Quarter

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

Shawn Nelson, CEO, stated, “Our focus on secular growth initiatives such as new products and the beginnings of a major evolution in our marketing, enabled slight year-over-year growth in net sales in the third quarter, reflecting market share gains as compared to our category. As we transitioned into our fiscal fourth quarter, we adjusted our marketing strategies and have seen solid growth quarter-to-date, inclusive of the Black Friday and Cyber Monday holiday events. Lovesac is inventing and investing steadily, even through these tough times for our category, while balancing cash flow generation and profitability. Our tall ambitions begin with reaching our goal of three million Lovesac households by 2030: Households that will have ever-more Designed For Life products across ever-more rooms of the house. We are totally focused and committed to this goal that we believe can produce meaningful growth over the next few years—regardless of what happens in the macro environment.”

Highlights for the Quarter Ended November 2, 2025:

—Net sales increased $0.3 million, or 0.2%, in the third quarter of fiscal 2026 compared to the prior year period primarily driven by the net addition of 17 new showrooms, partially offset by a decrease of 1.2% in omni-channel comparable net sales. During the third quarter of fiscal 2026, we opened 5 additional showrooms and did not close any showrooms.

—Gross profit decreased $3.4 million, or 3.9% in the third quarter of fiscal 2026 compared to the prior year period. Gross margin decreased 240 basis points to 56.1% of net sales in the third quarter of fiscal 2026 from 58.5% of net sales in the prior year period primarily driven by increases of 320 basis points in inbound transportation and tariff costs and 20 basis points in outbound transportation and warehousing costs, partially offset by an increase of 100 basis points in product margin driven by cost reduction initiatives from our vendors in response to changes in the tariff environment.

—SG&A expense increased $3.2 million, or 4.5%, in the third quarter of fiscal 2026 compared to the prior year period primarily due to increases in payroll, including an out-of-period expense pertaining to prior periods employee benefits, licenses and registrations, rent, and other overhead costs, partially offset by decreases in legal and professional fees, and equity-based compensation.

-Advertising and marketing expense increased $1.1 million, or 5.7% in the third 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 $15.8 million in the third quarter of fiscal 2026 compared to $7.7 million in the prior year period. Operating margin was (10.5)% of net sales in the third quarter of fiscal 2026 compared to (5.1)% of net sales in the prior year period.
 

-Net loss was $10.6 million in the third quarter of fiscal 2026 or $(0.72) net loss per common share compared to $4.9 million or $(0.32) net loss per common share in the prior year period. During the third quarter of fiscal 2026, the Company recorded an income tax benefit of $5.0 million, compared to $2.1 million in the prior year period. The change in benefit was primarily driven by a higher net loss before taxes.

Highlights for the Year-to-date Period Ended November 2, 2025:

—Net sales increased $9.9 million, or 2.3%, in the year-to-date period ended November 2, 2025 compared to the prior year period primarily driven by an increase of 0.4% in omni-channel comparable net sales and the net addition of 17 new showrooms compared to the prior year period.

—Gross profit decreased $2.8 million, or 1.1%, in the year-to-date period ended November 2, 2025 compared to the prior year period. Gross margin decreased 190 basis points to 55.5% of net sales in the year-to-date period ended November 2, 2025 from 57.4% of net sales in the prior year period primarily driven by increases of 110 basis points in inbound transportation and tariff costs and 10 basis points in outbound transportation and warehousing costs, and a decrease of 70 basis points in product margin driven by higher promotional discounting.

—SG&A expense increased $0.4 million, or 0.2%, in the year-to-date period ended November 2, 2025 compared to the prior year period primarily due to increases in payroll, including an out-of-period expense pertaining to prior periods employee benefits, rent, equity-based compensation, and impairment charges related to the Best Buy partnership discontinuation, partially offset by decreases in legal and professional fees, credit card fees, and other overhead costs.

—Advertising and marketing expense increased $1.9 million, or 3.1% in the year-to-date period ended November 2, 2025 compared to the prior year period primarily driven by costs associated with the launch of a new product marketing campaign.

—Operating loss was $39.6 million in the year-to-date period ended November 2, 2025 compared to $34.0 million in the prior year period. Operating margin was (8.8)% of net sales in the year-to-date period ended November 2, 2025 compared to (7.7)% of net sales in the prior year period.

—Net loss was $28.0 million in the year-to-date period ended November 2, 2025 or $(1.91) net loss per diluted share compared to $23.8 million or $(1.53) net loss per diluted share in the prior year period. During the year-to-date period ended November 2, 2025, the Company recorded an income tax benefit of $10.9 million, compared to $8.1 million for the prior year period. The change in benefit was primarily driven by a higher net loss before taxes.

Other Financial Highlights as of November 2, 2025:

—The cash and cash equivalents balance as of November 2, 2025 was $23.7 million as compared to $61.7 million as of November 3, 2024. There was no balance on the Company’s line of credit as of November 2, 2025 and November 3, 2024. The Company’s availability under the line of credit was $36.0 million as of November 2, 2025 and November 3, 2024.

—Total merchandise inventory was $129.7 million as of November 2, 2025 as compared to $113.4 million as of November 3, 2024 primarily related to an increase in freight capitalization of $10.7 million coupled with a planned stock inventory increase of $5.5 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 $685 million to $705 million.

—Adjusted EBITDA¹ in the range of $37 million to $43 million.

—Net income in the range of $2 million to $8 million.

—Diluted income per common share in the range of $0.15 to $0.49 on approximately 16.2 million estimated diluted weighted average shares outstanding.

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

—Net sales in the range of $236 million to $256 million.

—Adjusted EBITDA¹ in the range of $51 million to $56 million.

—Net income in the range of $30 million to $36 million.

—Diluted income per common share in the range of $1.88 to $2.22 on approximately 16.2 million estimated diluted 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.