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Lovesac Co (LOVE)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY26 delivered modest top-line growth and mixed profitability: net sales rose 2.5% year over year to $160.5M, gross margin fell 260 bps to 56.4%, and GAAP diluted EPS was $(0.45) versus $(0.38) in Q2 FY25 .
  • Versus S&P Global consensus, revenue was a slight beat ($160.53M vs $160.42M*) and Primary EPS was a material beat (actual -$0.151* vs -$0.705*), while GAAP diluted EPS was a loss of $(0.45) .
  • Full-year FY26 guidance was tightened on net sales ($710–$740M) and reduced for profitability (Adjusted EBITDA $42–$55M; EPS $0.52–$1.05) due to tariff and promotional pressures; Q3 guide calls for net sales $151–$161M and gross margin 56–57% .
  • Management highlighted gross margin mitigation (vendor concessions, diversification from China, selective price increases, logistics optimization) and a brand evolution anchored by the launch of Snugg (ex-EverCouch) with a Brittany Snow campaign as near-term demand catalysts .

What Went Well and What Went Wrong

What Went Well

  • Showroom sales grew 10.4% YoY to $109.1M on omnichannel comp +0.9% and net addition of 16 showrooms; Sactionals sales rose 4.6% YoY .
  • SG&A leverage: SG&A fell 2.1% YoY to $72.1M and as a % of net sales declined 210 bps to 44.9% driven by lower professional and credit card fees despite Best Buy exit charges .
  • Strategic & marketing momentum: formal launch of Snugg with Brittany Snow across 100+ showrooms; improved digital navigation, higher ROAS, and brand evolution work under new CMO—all cited as positioning the brand for multi-year secular growth .

What Went Wrong

  • Gross margin compression: down 260 bps YoY to 56.4% on higher inbound (110 bps), outbound/warehousing (50 bps) and promotional discounting (100 bps), pressuring Adjusted EBITDA to $0.8M (vs $1.5M YoY) .
  • Internet and “Other” sales declined: Internet -4.1% YoY to $42.5M and Other -33.6% to $9.0M (no BARTO transactions in the period) .
  • Tariffs and competitive discounting intensified vs prior expectations, prompting lowered full-year margin/EBITDA/EPS ranges; management noted reciprocal rates in key sourcing countries rising to ~19–20% (from ~10%) and timing of China sourcing reduction later than planned .

Financial Results

Key metrics vs prior quarters (GAAP)

MetricQ4 FY25Q1 FY26Q2 FY26
Revenue ($USD Millions)$241.5 $138.4 $160.5
Gross Profit ($USD Millions)$145.8 $74.4 $90.6
Gross Margin (%)60.4% 53.7% 56.4%
Net Income ($USD Millions)$35.3 $(10.8) $(6.7)
Diluted EPS ($USD)$2.13 $(0.73) $(0.45)
EBITDA ($USD Millions)$51.4 $(11.3) $(5.0)
Adjusted EBITDA ($USD Millions)$53.9 $(8.4) $0.8

Q2 FY26 vs Wall Street (S&P Global consensus)

MetricConsensusActualSurprise
Revenue ($USD Millions)$160.42*$160.53 +$0.11M (beat)
Primary EPS ($USD)-$0.705*-$0.151*+$0.554 (beat)
EBITDA ($USD Millions)-$5.43*-$4.99 +$0.44M (beat)

Values marked with * retrieved from S&P Global.

Segment breakdown (Q2 FY26 vs Q2 FY25)

Segment Net Sales ($USD Millions)Q2 FY25Q2 FY26YoY Change
Showrooms$98.8 $109.1 +10.4%
Internet$44.3 $42.5 -4.1%
Other$13.5 $9.0 -33.6%
Total$156.6 $160.5 +2.5%

KPIs and Operating metrics

KPIQ1 FY26Q2 FY26
Omnichannel Comparable Net Sales (%)+2.8% +0.9%
SG&A ($USD Millions)$67.1 $72.1
SG&A as % of Net Sales48.5% 44.9%
Advertising & Marketing ($USD Millions)$18.6 $23.5
Ad & Marketing as % of Net Sales13.4% 14.6%
Ending Showroom Count267 270
Adjusted EBITDA ($USD Millions)$(8.4) $0.8
Net Cash from Operating Activities ($USD Millions)$(41.4) $12.2
Cash & Equivalents ($USD Millions)$26.9 $34.2
Merchandise Inventory ($USD Millions)$124.9 $124.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Millions)FY26$700–$750 $710–$740 Maintained/tightened range
Adjusted EBITDA ($USD Millions)FY26$48–$60 $42–$55 Lowered
Net Income ($USD Millions)FY26$13–$22 $8–$17 Lowered
Diluted EPS ($USD)FY26$0.80–$1.36 $0.52–$1.05 Lowered
Gross Margin (%)FY26—57%–58% (plan) New disclosure
Advertising & Marketing (% of sales)FY26—~12% New disclosure
SG&A (% of sales)FY26—~40%–41% New disclosure
Net Sales ($USD Millions)Q3 FY26—$151–$161 New
Adjusted EBITDA ($USD Millions)Q3 FY26—$(1)–$(7) New
Net Loss ($USD Millions)Q3 FY26—$(8)–$(12) New
Basic EPS ($USD)Q3 FY26—$(0.51)–$(0.83) New
Gross Margin (%)Q3 FY26—56%–57% New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY25, Q1 FY26)Current Period (Q2 FY26)Trend
Tariffs/MacroHoliday 2024 required heavier promos; FY26 outlook initially excluded April 2, 2025 new tariffs beyond Q1; macro category down mid-single digits Reciprocal rates in Vietnam/Malaysia/Indonesia ~19–20% vs ~10% previously; lowered gross margin ranges due to tariffs and competitive discounting; category still down mid-single digits Worsening near-term pressure
Gross Margin PlanFY25 saw structural reset to high-50s via inbound logistics; Q1 margin 53.7% 56.4% in Q2; levers: outbound logistics, origin diversification, new delivery tiers/returns, variable promotion strategy; expect improvement in Q4 YoY due to lap of heavy promos and lower China exposure Improving into Q4
Product & Brand EvolutionEverCouch announced; strategy to expand platforms; showroom buildout EverCouch rebranded to Snugg; national campaign with Brittany Snow; expanded to 100+ showrooms; digital UX enhancements; new CMO leading Brand Evo Accelerating
Supply Chain DiversificationReinvented supply chain; credit facility amended/availability maintained Four-point tariff mitigation plan (vendor concessions, diversification, strategic pricing, cost efficiency); aim mid-teens China exposure FY26 with lower exit rate Progressing
PartnershipsCostco roadshows; Best Buy presence historically Best Buy exit completed Sept 2 ahead of plan/under budget; enhanced Costco display/StealthTech demos Refocused
Re-commerce—“Loved by Lovesac” expanded from TX to five more states; trade-in pilot later this year Scaling
Domestic Manufacturing—CEO highlighted pursuit of domestic manufacturing over coming quarters leveraging component approach Emerging initiative

Management Commentary

  • “We…are evolving our brand positioning to support our growth into a multi-faceted home brand…we remain confident…to deliver meaningful long-term value as we aim to build the most loved home brand in America.”
  • “We have lowered our gross margin range…with incremental worsening in the tariff backdrop and continued pressure on competitive discounting…we have identified additional measures that will benefit gross margins beginning later this year.”
  • “Thanks to [our team’s] efforts, we believe that this four-point plan will mitigate the majority of the current tariff pressures.”
  • “We ended the second quarter with…$34.2 million in cash…$36 million in committed availability and no borrowings…we believe we can end Fiscal 2026 with lower dollars of inventory…than [Q2 and FY25 year-end].”
  • “A significant portion of our manufacturing will be moving domestic over the next number of quarters…our component basis gives us economies of scale.”

Q&A Highlights

  • Marketing/Brand Evo: Expect a shift from linear TV to more digital; Snugg campaign with Brittany Snow is emblematic; management expects efficiency rather than higher spend .
  • Tariffs/Gross Margin: Reciprocal rates in several sourcing countries rose to ~19–20%; gross margin headwinds in Q3 from promos and tariffs should ease in Q4 due to laps and lower China exposure .
  • Distribution Strategy for Snugg: Simpler demo requirements enable broader online/offline channels beyond owned showrooms; website positioned as primary channel .
  • Re-commerce/Trade-in: “Loved by Lovesac” scaled to more states; trade-in pilot later this year ahead of broader rollout in 2026 .
  • Expense Profile: SG&A % expected higher in Q4 FY26 vs prior-year Q4 due to absence of incentive comp unwind; otherwise no structural change .

Estimates Context

  • Q2 FY26 revenue was a slight beat versus S&P consensus ($160.53M vs $160.42M*); Primary EPS was a material beat (-$0.151* vs -$0.705*). GAAP diluted EPS was $(0.45), reflecting non-GAAP differences versus Primary EPS definitions .
  • Q3 guidance ($151–$161M revenue; gross margin 56–57%; basic EPS $(0.51)–$(0.83)) brackets S&P revenue consensus ($154.17M*) and suggests Primary EPS consensus (-$0.688*), with management pointing to tariff and promo headwinds most pronounced in Q3 .
  • FY26 guidance revision implies consensus recalibration for Adjusted EBITDA, net income, and EPS given gross margin assumptions (57–58%) and SG&A/Ad % mixes .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Q2 showed resilient top-line with moderated margin headwinds; showroom expansion and omnichannel comp gains continue to offset category softness .
  • Profitability guide lowered on tariffs and promotions; watch Q3 for trough margins, then Q4 improvement as heavy promo laps and China exposure declines .
  • Brand evolution and Snugg launch are credible near-term catalysts; early read-throughs include improved digital conversion and broader showroom rollout .
  • Operational discipline (SG&A leverage, vendor concessions, pricing actions) is visible; Best Buy exit completed ahead of plan/under budget reduces costs and focus shifts to Costco and owned channels .
  • Balance sheet flexibility intact ($34.2M cash, $36M availability, no revolver borrowings); inventory quality/levels managed to support new product weeks of stock while targeting lower year-end dollars .
  • Re-commerce and potential domestic manufacturing provide medium-term margin/working capital optionality; monitor execution milestones over coming quarters .
  • Near-term trading: stock likely sensitive to tariff headlines, promo intensity, and Snugg uptake; medium-term thesis hinges on gross margin recovery to high-50s, multi-platform expansion, and comp acceleration as category normalizes .

Appendix: Additional Data Points and Explanations

  • YoY Gross Margin drivers: +110 bps inbound transportation costs, +50 bps outbound/warehousing, -100 bps product margin (promotions) .
  • Other net sales decline: no BARTO transactions in the quarter .
  • Non-recurring expenses: ~$1.9M tied to Best Buy exit in Q2 .
  • Q3 mix assumptions: Ad & marketing ~14% of net sales; SG&A 47–49% of net sales .
  • FY26 mix assumptions: Ad & marketing ~12%; SG&A ~40–41% of net sales .