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Lovesac Co. (NASDAQ:LOVE) reported fiscal first-quarter results that slightly exceeded expectations, with revenue approximately 1% above consensus and adjusted EBITDA aligning with the upper end of the guidance range. The furniture retailer returned to growth after two consecutive quarters of modest year-over-year declines, while the broader category was estimated to decline 5% year-over-year, indicating continued market share gains for the company. With trailing twelve-month revenue of $686 million and a healthy gross margin of 58.3%, the company maintains strong operational efficiency despite market challenges. According to InvestingPro analysis, Lovesac currently appears undervalued based on its Fair Value estimate.
Showroom net sales accelerated to 18% year-over-year growth, marking the highest growth rate for this channel since the third quarter of fiscal 2024. This performance partly reflected the company’s strategic decision to emphasize showrooms to support product demonstrations and personalized customer offers. On May 7, Lovesac officially launched its EverCouch product line with "very positive" initial feedback, and plans to expand the product’s presence to approximately 100 showrooms later this summer. The company’s solid current ratio of 1.6 and manageable debt-to-equity ratio of 0.9 provide financial flexibility for this expansion.For deeper insights into Lovesac’s expansion strategy and financial health metrics, InvestingPro subscribers can access exclusive analysis and 10+ additional ProTips.
The company implemented select price increases in May, its first since 2023, with management indicating potential opportunities for additional targeted price increases in the future. Second-quarter revenue guidance aligned broadly with expectations, though profitability guidance fell below consensus, partly due to softer-than-expected gross margins as the company works through China-based inventory.
Despite these challenges, Lovesac maintained its fiscal year 2026 outlook for both revenue and profitability, implying several hundred basis points of gross margin expansion in the second half of fiscal 2026 as tariff-related costs diminish and vendor concessions increase. The company’s shares faced pressure following the earnings announcement despite the stable quarter and outlook, with the stock declining 15% over the past week. Analysts maintain optimism with price targets ranging from $24 to $38, suggesting significant potential upside from current levels.Get comprehensive valuation analysis and access to the full Pro Research Report for Lovesac, along with 1,400+ other stocks, exclusively on InvestingPro.
Canaccord Genuity reiterated its Buy rating and $30.00 price target on Lovesac, with the firm viewing the share price decline as a buying opportunity given the company’s continued market share gains, evolving product portfolio, stabilizing global trade environment, and valuation at less than 1 times fiscal year 2026 revenue and 4 times adjusted EBITDA.
In other recent news, Lovesac reported its first-quarter fiscal year 2026 earnings, revealing a loss of $0.73 per share, which was better than the expected $0.80 loss. Revenue for the quarter was $138.37 million, slightly below the consensus estimate of $138.61 million but marking a 4.3% increase from the previous year. The company’s full-year guidance, however, fell short of analyst expectations, with projected earnings per share between $0.80 and $1.36 and revenue ranging from $700 million to $750 million. For the second quarter, Lovesac anticipates revenue between $157 million and $166 million, aligning with the consensus, but expects a larger loss per share than analysts predicted.
Despite these challenges, Lovesac reported positive developments, including a 2.8% increase in omni-channel comparable net sales and the opening of 10 new showrooms. The company also launched its EverCouch line, expanding its product offerings into armchairs, loveseats, and sofas. Lovesac ended its partnership with Best Buy (NYSE:BBY) to focus on showrooms and its relationship with Costco (NASDAQ:COST). Analysts from firms like D.A. Davidson noted concerns over strategic challenges and net losses, contributing to a decline in stock value post-earnings. However, the company remains optimistic about future growth, with CEO Sean Nelson emphasizing product innovation and brand expansion as key strategies moving forward.
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