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Lovesac Co (LOVE)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 net sales rose 4.3% to $138.4M with positive omni-channel comp sales (+2.8%) and SG&A leverage; gross margin compressed 60bps to 53.7% on higher promotional discounting offset by transportation cost reductions .
  • Results were largely in line and modestly ahead of S&P Global consensus: revenue beat by ~$0.9M*, EPS beat by ~$0.06*, while EBITDA was slightly below consensus*. Management reaffirmed full-year FY26 guidance and issued Q2 outlook with expected sequential gross margin improvement drivers later in the year .
  • Strategic catalysts: launch of EverCouch (doubling the TAM), strong early traction of the Reclining Seat, rebalanced customer acquisition engines toward showrooms; exit of Best Buy (one-time ~$2M SG&A hit in Q2) and continued Costco roadshow expansion .
  • Balance sheet flexibility remains with $26.9M cash, $36M undrawn credit availability; inventory intentionally built ahead of tariff uncertainty with plans to reduce excess through Q2/Q3 .

What Went Well and What Went Wrong

What Went Well

  • Market share gains despite category headwinds; topline growth and SG&A leverage improved adjusted EBITDA and net loss YoY .
  • Product innovation momentum: Reclining Seat “huge success” with strong attachment and units per transaction; EverCouch launched May 7 with positive early feedback and planned scale to ~100 showrooms this summer .
  • Marketing and customer acquisition: social-first Recliner campaign generated 5B earned impressions; 25% web traffic increase; repeat purchases +20% YoY; improved CRM MyHub engagement .

What Went Wrong

  • Gross margin down 60bps YoY to 53.7% due to higher promotions (-230bps product margin), partly offset by lower inbound (-130bps) and outbound/warehousing (-40bps) costs .
  • Internet sales -8.9% YoY as mix intentionally skewed toward showrooms; “Other” channel -40.5% YoY on no barter transactions .
  • Working capital pressure: net cash used in operating activities of $(41.4)M tied to payment timing on Q4 inventory build; basic and diluted loss per share of $(0.73) .

Financial Results

Consolidated P&L vs Prior Quarters

MetricQ3 FY25Q4 FY25Q1 FY26
Revenue ($USD Millions)$149.9 $241.5 $138.4
Gross Margin (%)58.5% 60.4% 53.7%
Diluted EPS ($USD)$(0.32) $2.13 $(0.73)
Net Income ($USD Millions)$(4.93) $35.31 $(10.84)
Adjusted EBITDA ($USD Millions)$2.68 $53.87 $(8.45)
Operating Income (Loss) ($USD Millions)$(7.72) $47.60 $(14.95)

Channel Breakdown and Mix

Net Sales ($USD Millions)Q3 FY25Q4 FY25Q1 FY26
Showrooms$91.0 $154.5 $96.5
Internet$44.9 $70.5 $33.3
Other$14.0 $16.5 $8.6
Total$149.9 $241.5 $138.4

KPIs and Operating Metrics

KPIQ3 FY25Q4 FY25Q1 FY26
Omni-channel Comparable Net Sales (%)(8.3%) (9.4%) +2.8%
Internet Sales Growth (%)+12.1% (9.7%) (8.9%)
Ending Showroom Count258 257 267
Cash & Equivalents ($USD Millions)$61.7 $83.7 $26.9
Merchandise Inventory ($USD Millions)$113.4 $124.3 $124.9

Product Category Color (Q1 FY26)

  • Sactionals net sales +4.5%, Sacs +6.4%, Other accessories -17.1% YoY .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($M)FY 2026$700–$750 $700–$750 Maintained
Adjusted EBITDA ($M)FY 2026$48–$60 $48–$60 Maintained
Net Income ($M)FY 2026$13–$22 $13–$22 Maintained
Diluted EPS ($)FY 2026$0.80–$1.36 (~16.3M diluted WASO) $0.80–$1.36 (~16.3M) Maintained
FY26 Mix AssumptionsFY 2026—Gross margin ~59%; A&M ~12.5% of sales; SG&A ~41% of sales New detail
Net Sales ($M)Q2 2026—$157–$166 New
Adjusted EBITDA ($M)Q2 2026—$(2)–$(7) New
Net Loss ($M)Q2 2026—$(8)–$(12) New
Basic EPS ($)Q2 2026—$(0.58)–$(0.83) (~14.6M WASO) New
Q2 Mix AssumptionsQ2 2026—Gross margin ~55–56%; A&M ~15% of sales; SG&A ~47% of sales New
One-time ChargeQ2 2026—~$2M pre-tax (Best Buy exit); increases SG&A; excluded from adj. EBITDA guidance New

Earnings Call Themes & Trends

TopicQ3 FY25 (Nov 2024)Q4 FY25 (Apr 2025)Q1 FY26 (Jun 2025)Trend
Product innovation (Recliner, EverCouch)Reclining Seat soft launch signaled Most prolific year for new launches; EverCouch unveiled roadmap Reclining Seat “huge success”; EverCouch launched with positive feedback; scaling to ~100 showrooms Accelerating
Customer acquisition enginesOmnichannel model reiterated Codified long-term strategy and CRM enhancements Leaned into showrooms; social-first campaign; +25% web traffic; repeat +20%; MyHub engagement up Improving efficiency
Promotional environment & gross marginHeavy promos; GM up via freight savings Holiday conversion improved; GM +70bps Category discounts still high (40–45%); GM down 60bps on promos; mitigation planned Competitive pressure persists
Tariffs & supply chainFreight down; inventory stable Supply chain reinvented; tariff impact immaterial in Q1 outlook Four-pronged tariff mitigation: vendor concessions, diversify from China to ~13% avg, surgical pricing, cost efficiencies; inventory built ahead Mitigation underway
PartnershipsCostco roadshows ongoing Strategy optionality maintained Ending Best Buy partnership (one-time ~$2M charge); +15% Costco roadshow plan Refocusing
Legal/controlsRestatement and SEC settlement referenced Controls strengthened; governance emphasized Notice of settlement of shareholder derivative action; governance reforms De-risking
Regional/product mix——EverCouch resonating in urban markets; mix shift to showrooms Emerging positives

Management Commentary

  • “Our first quarter performance was inline with our expectations… we delivered topline growth and leveraged operating expenses… market share gains despite persistent category headwinds… launched our third Designed For Life Platform, EverCouch… effectively doubles our total addressable market.” – CEO Shawn Nelson .
  • “The Recline of Civilization campaign… generated 5 billion earned impressions… 25% increase in traffic… repeat purchases increased over 20%… Early indicators show a more engaged customer converting at a higher rate.” – President Mary Fox .
  • “We believe we can manage tariff impacts within the full-year ranges… potential for an upward bias to net sales and a downward bias to gross margin… both include the ~$2M Best Buy write-off.” – CFO Keith Siegner .
  • “EverCouch… lower price point… washable covers… easy assembly with no tools… initial feedback very positive… scaling to ~100 showrooms later this summer.” – CEO Shawn Nelson .

Q&A Highlights

  • Promotional environment and margins: Competitor discounts 40–45%; gross margin lower in Q1 vs prior guidance due to timing of mitigation; vendor concessions and pricing actions ramp through the year .
  • EverCouch ramp: Marketing to throttle up through summer with wider distribution (~100 showrooms); early sales exceeding internal goals; strong urban reception .
  • Working capital: Q1 cash use driven by payment timing for Q4 inventory build; expect inventory reduction later in FY26 even with EverCouch stock build; CapEx ~$25M FY26 .
  • Best Buy exit: Non-recurring ~$2M SG&A charge in Q2; confidence in own showroom + Costco ecosystems; targeting former Best Buy customers via CRM .
  • Tariffs and pricing: Surgical price increases executed; structurally higher gross margins vs peers reduce required price actions; diversified manufacturing away from China trending toward near-zero .

Estimates Context

MetricPeriodConsensus*Actual
Revenue ($USD)Q1 FY26$137.475M*$138.373M
Primary EPS ($)Q1 FY26$(0.7875)*$(0.73)
EBITDA ($USD)Q1 FY26$(10.49)M*$(11.34)M
Revenue ($USD)Q4 FY25$230.333M*$241.490M
Primary EPS ($)Q4 FY25$1.873*$2.13
EBITDA ($USD)Q4 FY25$48.231M*$51.384M

Values marked with an asterisk were retrieved from S&P Global.

  • Q1 FY26 showed a modest top-line and EPS beat, with EBITDA modestly below consensus; Q4 FY25 delivered notable beats across revenue, EPS, and EBITDA, reflecting strong holiday conversion and freight tailwinds .

Guidance Changes

(See table above; full-year FY26 ranges maintained; Q2 FY26 introduced with explicit mix assumptions and one-time Best Buy charge) .

Earnings Call Themes & Trends

(See table above; product platform expansion, tariff mitigation, partnership realignment, and improved customer acquisition efficiency) .

Key Takeaways for Investors

  • Product cadence and platform strategy (Recliner, EverCouch) are driving incremental demand and expanding TAM, supporting market share gains even in a mid-single-digit declining category .
  • Near-term margin pressure from promotions should ease as vendor concessions, pricing, supply-chain efficiencies, and lower China mix flow through; expect 2Q “perfect storm” before second-half improvement .
  • Channel mix favoring showrooms is intentional to showcase innovation, with internet softness offset by improved conversion; Costco roadshows expanding +15% to augment reach .
  • Working capital normalization expected after Q1 inventory cash outflows; inventory quality/quantity support in-stock positions and new launches .
  • Governance/legal overhangs continue to abate (shareholder derivative settlement reforms), reducing risk and distraction .
  • Full-year guidance reaffirmed with explicit margin/OpEx guardrails; one-time Best Buy exit charge excluded from adjusted EBITDA, limiting impact on non-GAAP profitability measures .
  • Tactical implication: Watch Q2 gross margin progression, EverCouch showroom scaling, pricing elasticity, and tariff implementation specifics; structurally higher gross margins and CRM-driven repeat purchases underpin medium-term margin resilience .

Management Commentary

  • Strategic focus on becoming “the most loved home brand in America by 2030” with new CMO in place and balanced investment across branding and performance marketing .
  • Clear four-lever tariff playbook and inventory prebuild position Lovesac to absorb policy volatility while maintaining guidance ranges .

Financial Notes and Non-GAAP

  • Adjusted EBITDA excludes equity-based compensation, certain non-recurring items (e.g., legal/professional fees, severance), and disposal losses; reconciliation provided in Q1 press release .
  • Q1 gross margin decline driven by promotional discounting (-230bps product margin) offset by lower inbound/outbound logistics costs; SG&A down 1.9% YoY with reductions in professional fees and overhead despite higher payroll/equity comp/rent .

Additional Relevant Press Releases (Q1 FY26 context)

  • PillowSac Chair line expanded with new frame finishes (Brown, Black), enhancing customization; supports continued momentum of viral product .
  • Notice of settlement of shareholder derivative action outlining governance reforms, contributing to risk mitigation narrative .