Lovesac Company Reports Fourth Quarter & Full Year Results

March 26, 2026  by Karen Parrish in Business Strategy, Industry   

Shawn Nelson, chief executive officer, stated, “Fiscal 2026 was a pivotal year for Lovesac. We made substantial progress on our evolution from a product-driven company into a multi-platform, multi-room, lifestyle brand. A brand that we believe can be the most loved home brand in America in short order, and one day, the most loved brand in America full stop. First, we reinforced our already strong position in the living room by launching a new seating platform called Snugg, reengineering and then announcing the onshoring of our Sactionals platform and developing a new high-end sectional-sofa platform that we plan to bring to market later this year. Second, we set the stage for a calendar 2027 launch of a full suite of Designed For Life products for an entirely new room in the house. Third, we successfully began the evolution of our marketing strategies and digital capabilities to effectively support these grand ambitions.”

Mr. Nelson continued, “Despite a challenging macro environment in fiscal 2026 marked by tariff pressures, economic uncertainty, and intense promotional activity across our category, we adapted effectively and drove meaningful progress on our strategic goals. We also achieved market share gains, full year profitability, positive free cash flow, and a record year-end cash balance with no debt. Lovesac enters fiscal 2027 from a position of strength, highlighted by a clear strategic roadmap and a world-class team focused on generating profitable growth and tremendous long-term value creation for all stakeholders.”

Highlights for the Fourth Quarter Ended February 1, 2026:

- Net sales increased $6.6 million, or 2.7%, in the fourth quarter of fiscal 2026 compared to the prior year period primarily driven by the net addition of 21 new showrooms period over period and an increase of 0.6% in omni-channel comparable net sales. During the fourth quarter of fiscal 2026, we opened 6 additional showrooms and we closed 3 showrooms.

- Gross profit decreased $1.8 million, or 1.2%, in the fourth quarter of fiscal 2026 compared to the prior year period. Gross margin decreased 230 basis points to 58.1% of net sales in the fourth quarter of fiscal 2026 from 60.4% of net sales in the prior year period. The decrease was primarily driven by increases of 300 basis points in inbound transportation costs and tariff costs and 90 basis points in outbound transportation and warehousing costs, partially offset by an increase of 160 basis points in product margin driven by price increases, cost reduction initiatives and concessions from our vendors in response to changes in the tariff environment, partially offset by higher promotional discounting.

- SG&A expense increased $2.2 million, or 3.2%, in the fourth quarter of fiscal 2026 compared to the prior year period primarily due to increases in payroll costs related to higher incentive compensation, new product innovation costs, and other overhead costs, partially offset by decreases in professional fees, equity-based compensation, and credit card fees.

- Advertising and marketing expense decreased $1.3 million, or 4.7%, in the fourth quarter of fiscal 2026 compared to the prior year period primarily due to the timing and costs associated with the launch of a new product marketing campaign.

- Operating income was $44.9 million in the fourth quarter of fiscal 2026 compared to $47.6 million in the prior year period. Operating margin was 18.2% of net sales in the fourth quarter of fiscal 2026 compared to 19.7% of net sales in the prior year period.

- Net income was $32.1 million in the fourth quarter of fiscal 2026, or $2.19 net income per diluted share, compared to $35.3 million, or $2.13 net income per diluted share, in the prior year period. During the fourth quarter of fiscal 2026, the Company recorded an income tax expense of $13.5 million, compared to $13.0 million in the prior year period. The increase is primarily driven by an increase in the effective tax rate.

Highlights for the Fiscal Year Ended February 1, 2026:

- Net sales increased $16.5 million, or 2.4%, in fiscal 2026 compared to fiscal 2025, primarily driven by the net addition of 21 new showrooms compared to the prior year and an increase of 0.5% in omni-channel comparable net sales.

- Gross profit decreased $4.6 million, or 1.2%, in fiscal 2026 compared to fiscal 2025. Gross margin decreased 210 basis points to 56.4% of net sales in fiscal 2026 from 58.5% of net sales in fiscal 2025. The decrease was primarily driven by increases of 180 basis points in inbound transportation and tariff costs and 40 basis points in outbound transportation and warehousing costs, partially offset by an increase of 10 basis points in product margin driven by price increases, cost reduction initiatives and concessions from our vendors in response to changes in the tariff environment, partially offset by higher promotional discounting.

- SG&A expense increased $2.5 million, or 0.9%, in fiscal 2026 compared to fiscal 2025 primarily due to increases in payroll costs related to higher incentive compensation and an out-of-period expense pertaining to prior periods employee benefits, rent, impairment charges related to the Best Buy partnership discontinuation, and other overhead costs. These increases were partially offset by decreases in legal and professional fees, equity-based compensation, and credit card fees.

- Advertising and marketing expense increased $0.6 million, or 0.7%, primarily driven by costs associated with the launch of a new product marketing campaign.

- Operating income was $5.4 million in fiscal 2026 compared to $13.6 million in fiscal 2025. Operating margin was 0.8% of net sales in fiscal 2026 compared to 2.0% of net sales in fiscal 2025.

- Net income was $4.1 million in fiscal 2026, or $0.28 net income per diluted share, compared to $11.6 million, or $0.69 net income per diluted share, in fiscal 2025. During fiscal 2026, the Company recorded an income tax expense of $2.6 million, compared to $4.9 million in fiscal 2025. The decrease is primarily driven by lower net income before taxes, partially offset by an increase in the effective tax rate.

Other Financial Highlights as of February 1, 2026:

- The cash and cash equivalents balance as of February 1, 2026 was $101.9 million as compared to $83.7 million as of February 2, 2025. There was no balance on the Company’s line of credit as of February 1, 2026 and February 2, 2025. The Company’s availability under the line of credit was $36.0 million and $32.6 million as of February 1, 2026 and February 2, 2025, respectively.

- Total merchandise inventory was $106.3 million as of February 1, 2026 as compared to $124.3 million as of February 2, 2025 primarily related to a planned stock inventory decrease of $22.1 million, partially offset by an increase in freight capitalization of $4.2 million.

- The Company also announced that its Board of Directors has authorized an increase in the Company’s share repurchase program by up to an additional $40 million of Lovesac’s common stock. Repurchases may be made through open market purchases, privately negotiated transactions, and accelerated share repurchases. The increase is on top of the approximately $14.1 million of repurchase authority remaining under the $40 million originally announced in June 2024, bringing total availability to approximately $54.1 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 2027:

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

- Adjusted EBITDA¹ in the range of $33 million to $44 million.

- Net income in the range of $5 million to $14 million.

- Diluted income per common share in the range of $0.34 to $0.95 on approximately 14.7 million estimated diluted weighted average shares outstanding.

The Company currently expects the following for the first quarter of fiscal 2027:

- Net sales in the range of $133 million to $139 million.

- Adjusted EBITDA¹ loss in the range of $12 million to $16 million.

- Net loss in the range of $14 million to $18 million.

- Basic loss per common share in the range of $0.95 to $1.22 on approximately 14.7 million estimated weighted average shares outstanding.

Conference Call Information:

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.