Lovesac Reports Financial Results for Second Quarter

September 14, 2026  by Karen Parrish in Business Strategy, Industry   

Lovesac CEO Shawn David Nelson stated, “Second quarter results reflected a record Q2 performance and came in within our guidance range against a choppy category backdrop. We continued to do what Lovesac has done throughout this cycle: execute with discipline, build the brand, and invest in innovation to drive long-term results. The high end of our business remained a clear source of strength, with resilience building as customers configure larger setups and add value enhancers like Reclining Seat, Lovesoft and Storage. While the environment remains dynamic, we are appropriately measured in our outlook for the balance of the year. We enter the back half in a position of real financial strength, with no debt and a strong cash position. In addition, we are underway with our most prolific year of new product introductions – a roadmap we believe will build through the second half and meaningfully strengthen our position entering fiscal 2028.”

Highlights for the Quarter Ended August 2, 2026:

Net sales increased $0.7 million, or 0.4%, in the second quarter of fiscal 2027 compared to the prior year period primarily driven by 14 net new showrooms, partially offset by a 1.9% decrease in omni-channel comparable net sales and the closure of the Company's Best Buy shop-in-shop locations. During the second quarter of fiscal 2027, we opened 5 additional showrooms and closed 2 showrooms.

Gross profit increased $19.7 million, or 21.7% in the second quarter of fiscal 2027 compared to the prior year period. Gross margin increased 1,200 basis points to 68.4% of net sales in the thirteen weeks ended August 2, 2026 from 56.4% of net sales in the prior year period. Gross margin increased primarily due to recoveries of IEEPA tariffs, which contributed 1,240 basis points, and a 250 basis point improvement in product margin driven primarily by price increases, partially offset by higher promotional discounting. These favorable impacts were partially offset by increases of 160 basis points in inbound transportation and tariff costs and 130 basis points in outbound transportation and warehousing costs. Excluding IEEPA tariff recoveries, gross margin in the second quarter of fiscal 2027 was 56.0%, representing a 40 basis point reduction in gross margin compare to the prior year period.

SG&A expense increased $0.2 million, or 0.3%, in the second quarter of fiscal 2027 compared to the prior year period primarily due to increases in payroll associated with severance and higher incentive compensation and other overhead costs, partially offset by impairment charges related to the Best Buy partnership termination that were recognized in the prior year period and a decrease in equity-based compensation.

Advertising and marketing expense decreased $0.7 million, or 2.9% in the second quarter of fiscal 2027 compared to the prior year period, primarily due to the strategic timing of marketing investments and continued emphasis on efficiency.

Operating income was $10.9 million in the second quarter of fiscal 2027 compared to operating loss of $8.8 million in the prior year period. Operating margin was 6.9% of net sales in the second quarter of fiscal 2027 compared to (5.5)% of net sales in the prior year period.

Net income was $7.4 million in the second quarter of fiscal 2027 or $0.51 net income per diluted share compared to net loss of $6.7 million or $(0.45) net loss per diluted share in the prior year period. Net income per diluted share in the second quarter of fiscal 2027 includes $0.86 of net benefit from tariff refunds. During the second quarter of fiscal 2027, the Company recorded an income tax expense of $4.7 million, compared to an income tax benefit of $2.1 million in the prior year period. The change in the tax provision was primarily attributable to the Company's generation of pre-tax income in the current quarter compared to a pre-tax loss in the prior-year period, and an increase in the effective tax rate.

Highlights for the Year-to-date Period Ended August 2, 2026:

Net sales increased $0.5 million, or 0.2%, in the year-to-date period ended August 2, 2026 compared to the prior year period primarily driven by the net addition of 14 new showrooms, partially offset by the closure of the Company's Best Buy shop-in-shop locations and a 1.3% decrease in omni-channel comparable net sales.

Gross profit increased $17.3 million, or 10.5%, in the year-to-date period ended August 2, 2026 compared to the prior year period. Gross margin increased 570 basis points to 60.9% of net sales in the twenty-six weeks ended August 2, 2026 from 55.2% of net sales in the prior year period. Gross margin increased primarily due to recoveries of IEEPA tariffs, which contributed 670 basis points, and a 280 basis point improvement in product margin driven primarily by price increases, partially offset by higher promotional discounting. These favorable impacts were partially offset by increases of 260 basis points in inbound transportation and tariff costs and 120 basis points in outbound transportation and warehousing costs. Excluding IEEPA tariff recoveries, gross margin in the twenty-six weeks ended August 2, 2026 was 54.2%, representing a 100 basis point reduction in gross margin compared to the prior year period.

SG&A expense increased $1.7 million, or 1.2%, in the year-to-date period ended August 2, 2026 compared to the prior year period primarily due to increases in payroll associated with severance and higher incentive compensation, new product innovation costs, and other overhead expenses, partially offset by impairment charges related to the Best Buy partnership termination that were recognized in the prior year period, and a decrease in equity-based compensation.

Advertising and marketing expense decreased $2.7 million, or 6.4% in the year-to-date period ended August 2, 2026 compared to the prior year period primarily due to the strategic timing of marketing investments and continued emphasis on efficiency.

Operating loss was $6.4 million in the year-to-date period ended August 2, 2026 compared to $23.8 million in the prior year period. Operating margin was (2.1)% of net sales in the year-to-date period ended August 2, 2026 compared to (8.0)% of net sales in the prior year period.

Net loss was $3.7 million in the year-to-date period ended August 2, 2026 or $(0.25) net loss per diluted share compared to $17.5 million or $(1.19) net loss per diluted share in the prior year period. Net loss per diluted share in the year-to-date period ended August 2, 2026 includes $0.86 of net benefit from tariff refunds. During the year-to-date period ended August 2, 2026, the Company recorded an income tax benefit of $0.9 million, compared to $5.9 million for the prior year period. The change in benefit was primarily driven by lower pre-tax loss and a decrease in the effective tax rate.

Other Financial Highlights as of August 2, 2026:

The cash and cash equivalents balance as of August 2, 2026 was $68.8 million as compared to $34.2 million as of August 3, 2025. There was no balance on the Company’s line of credit as of August 2, 2026 and August 3, 2025. The Company’s availability under the line of credit was $34.0 million and $36.0 million as of August 2, 2026 and August 3, 2025, respectively.

Total merchandise inventory was $130.2 million as of August 2, 2026 as compared to $124.0 million as of August 3, 2025 primarily related to a planned stock inventory increase of $7.2 million, partially offset by a decrease in freight capitalization of $0.5 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’s outlook continues to reflect the latest backdrop for tariffs for the remainder of the year, without speculating as to incremental changes that might arise. The Company’s outlook for Net Income and Earnings per Share has been updated to reflect approximately $21.0 million of refunds collected related to IEEPA tariffs, including interest.

The Company currently expects the following for the full year of fiscal 2027:

- Net sales in the range of $690 million to $710 million.

- Net income in the range of $14.5 million to $18.5 million.

- Adjusted EBITDA in the range of $31.5 million to $35.5 million.

- Diluted income per common share in the range of $0.98 to $1.26 on approximately 14.6 million estimated diluted weighted average shares outstanding.

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

- Net sales in the range of $140 million to $150 million.

- Net loss in the range of $9 million to $12 million.

- Adjusted EBITDA loss in the range of $7 million to $10 million.

- Basic loss per common share in the range of $0.62 to $0.83 on approximately 14.5 million estimated basic weighted average shares outstanding.

Conference Call Information:

A conference call to discuss the financial results for the second quarter ended August 2, 2026 took place on Sept 10, 2026

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.