The Lovesac Company LOVE reported better-than-expected fourth-quarter fiscal 2025 (ended Feb. 2, 2025) results, with earnings and net sales beating the Zacks Consensus Estimate. On a year-over-year basis, earnings increased but revenues declined.
This downside was due to a 9.4% drop in omnichannel comparable net sales. The negative impact was partially offset by the net addition of 27 showrooms during the fiscal. However, in the fourth quarter of fiscal 2025, the company did not open any new showrooms and closed one.
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Nonetheless, lower inbound transportation costs and savings in outbound transportation and warehousing contributed to the improvement in the bottom line. Following a slow start to the holiday season, stronger execution helped LOVE improve the conversion of customer quotes into sales during the rest of the quarter.
In fiscal 2025, the company gained momentum through several product launches, including the Reclining Seat and PillowSac Accent Chair. LOVE also introduced the EverCouch, targeting the large couch market. With its long-term strategy in place, the company aims to expand its offerings further. Owing to upcoming product launches and a stronger position, the company expects net sales to rise in fiscal 2026 compared with fiscal 2025, despite ongoing macro challenges.
Following the earnings release, Lovesac’s shares appreciated 16.1% during yesterday’s trading hours.
Inside LOVE’s Q4 Numbers
For the fiscal fourth quarter, the company reported adjusted earnings of $2.13 per share, beating the Zacks Consensus Estimate of $1.80. Lovesac reported adjusted earnings per share of $1.87 in the prior-year quarter.
The Lovesac Company Price, Consensus and EPS Surprise
The Lovesac Company price-consensus-eps-surprise-chart | The Lovesac Company Quote
Net sales of $241.5 million topped the consensus estimate of $228.7 million by 5.6%. However, the metric decreased 3.6% from the year-ago quarter’s figure. Showroom sales fell 1.6% year over year, while internet sales dropped 9.7%.
Operating Highlights of LOVE
The gross margin expanded 70 basis points (bps) year over year to 60.4%, mainly due to a 90-bps drop in inbound transportation costs and a 30-bps decline in outbound transportation and warehousing costs. This was partly offset by a 50-bps decrease in product margin due to higher promotional discounts.
Selling, general and administrative expenses, as a percentage of net sales, decreased 250 bps to 28% year over year. Advertising & marketing expenses, as a percentage of net sales, depreciated 70 bps year over year to 11.1%.
Adjusted EBITDA was $53.9 million, up from $48.4 million reported a year ago.
Fiscal 2025 Highlights
For the fiscal year, Lovesac reported net sales of $680.6 million, down from $700.3 million reported in fiscal 2024. Adjusted EPS of 69 cents was down from $1.45 reported a year ago.
Adjusted EBITDA in fiscal 2025 was $47.8 million, down from $54 million reported in fiscal 2024. Net income of $11.6 million was down from $23.9 million reported a year ago.
Lovesac’s Financial Highlights
As of Feb. 2, 2025, Lovesac had cash and cash equivalents of $83.7 million compared with $87 million at the end of fiscal 2024.
Net cash provided by operating activities totaled $39 million in fiscal 2025 compared with $76.4 million reported in the year-ago period.
LOVE’s Q1 Guidance
For first-quarter fiscal 2026, LOVE expects net sales to be in the range of $136-$142 million and adjusted EBITDA loss in the band of $8-$12 million. In first-quarter fiscal 2025, it reported net sales of $132.6 million and an adjusted EBITDA loss of $10.3 million.
The company expects net loss to be in the range of $10-$13 million. In the year-ago period, it reported a net loss of $13 million.
LOVE’s Fiscal 2026 Guidance Updated
For fiscal 2026, the company now expects net sales to be in the range of $700-$750 million. Adjusted EBITDA is expected to be in the range of $48-$60 million. Net income is expected to be in the band of $13-$22 million.
Diluted income per common share is expected to be between 80 cents and $1.36, on approximately 16.3 million estimated diluted weighted average shares outstanding.
LOVE’s Zacks Rank & Key Picks
Lovesac currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Retail-Wholesale sector are BJ's Restaurants, Inc. BJRI, Cracker Barrel Old Country Store, Inc. CBRL and Sprouts Farmers Market, Inc. SFM.
BJ's Restaurants currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company delivered a trailing four-quarter negative earnings surprise of 84.7%, on average. The stock has declined 4.4% in the past six months. The Zacks Consensus Estimate for BJ's Restaurants’ 2025 sales and earnings per share (EPS) indicates growth of 3.2% and 13.6%, respectively, from the year-ago period’s levels.
Cracker Barrel currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 22.5%, on average. The stock has declined 10.4% in the past six months.
The Zacks Consensus Estimate for Cracker Barrel’s 2026 sales and EPS indicates a rise of 2.3% and 13.8%, respectively, from the year-ago period’s level.
Sprouts Farmers currently carries a Zacks Rank #2. The company delivered a trailing four-quarter earnings surprise of 15.1%, on average. The stock has gained 33.5% in the past six months.
The Zacks Consensus Estimate for Sprouts Farmers’ 2025 sales and EPS indicates a rise of 11.9% and 24.3%, respectively, from the year-ago period’s level.
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The Lovesac Company (LOVE) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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