The Lovesac Company (NASDAQ: LOVE) Q1 2026 Earnings Call | 06/12/2025

Q1 2026 Highlights

• Net Sales: Increased 4.3% year-over-year to $138.4 million, reflecting market share gains despite an estimated 5% category decline.
• Omnichannel Comparable Net Sales: Increased 2.8%.
• Profitability: Adjusted EBITDA, net loss, and net loss per common share all improved by double-digit percentages year-over-year.
• Product Innovation:
  • Reclining Seat: Successful launch with increased new customer attachment.
  • EverCouch: New product platform (armchair, loveseat, sofa) launched, expanding Lovesac's total addressable market. Initial feedback is positive.
• Category Trends: The category declined mid-single digits. The company is focused on its own initiatives to drive growth.
• Tariffs: Actively working to mitigate potential impacts.
• Chief Marketing Officer: Heidi Cooley joined to support brand growth and profitable sales.

Strategic Priorities

• Customer Acquisition Engines:
  • Brand and Performance Marketing: Successful "Recline of Civilization" campaign. Adjusted marketing allocations to enhance top-of-funnel awareness.
  • Digital Configurations: Re-platforming to Adobe Edge improved SEO. Improved customer re-engagement center (MyHub).
  • Showroom Experience: Evolved product demo to include EverCouch. Performance-based compensation model updated for field teams.
  • Partnership Model: Ended Best Buy partnership to focus on owned channels and Costco.
• Customer-Facing Services: Launched "Lovesac to Buy Lovesacs," a resale platform in Texas, to promote sustainability and circularity. Trade-in services are planned for later in the year.
• Supply Chain: Optimized network strategy and carrier model. Working on warehouse and outbound logistics programs.

Financial Performance (Q1 2026)

• Net Sales: $138.4 million (up 4.3%).
  • Showroom net sales: Increased 18.2%.
  • Internet net sales: Decreased 8.9%.
  • Other net sales: Decreased 40.5%.
• Gross Margin: 53.7% of net sales (down 60 basis points).
• SG&A Expenses: 48.5% of net sales (decreased).
• Operating Loss: $15 million (compared to $17.9 million last year).
• Net Loss: $10.8million($-0.73 per share) compared to $13million($-0.83 per share) last year.
• Adjusted EBITDA Loss: $8.4 million (compared to $10.3 million last year).
• Cash and Cash Equivalents: $26.9 million.
• Inventory: Higher than necessary due to intentional build ahead of tariff uncertainty.
• Share Repurchase: Repurchased approximately 306,000 shares for $6 million.

Outlook

• Full Year Fiscal 26:
  • Net sales: $700 million to $750 million.
  • Adjusted EBITDA: $48 million to $60 million.
  • Gross margin: Approximately 59%.
  • Advertising and marketing: Approximately 12.5% of net sales.
  • SG&A: Approximately 41% of net sales.
  • Net income: $13 million to $22 million.
  • Diluted income per common share: $0.80 to $1.36.
• Fiscal Second Quarter:
  • Net sales: $157 million to $166 million (low single-digit revenue growth).
  • Adjusted EBITDA loss: $2 million to $7 million.
  • Gross margin: Approximately 55% to 56%.
  • Advertising and marketing: Approximately 15% of net sales.
  • SG&A: Approximately 47% of net sales.
  • Net loss: $8 million to $12 million.
  • Basic loss per common share: $0.58 to $0.83.
• Guidance includes a $2 million non-recurring charge associated with ending the Best Buy relationship.