Lovesac (NASDAQ:LOVE) reported nearly flat first-quarter fiscal 2027 revenue as management said the company continued to gain share in a pressured furniture market while investing in product expansion, marketing efficiency and domestic manufacturing.
Chief Executive Officer Shawn Nelson said net sales decreased approximately $0.2 million, or 0.1%, from the prior-year period, compared with a 2.2% decline in the overall furniture category and a 5% decline in high-end furniture. He said the company’s results were in line with guidance and reflected continued traction for its “Designed for Life” product strategy.
Revenue Holds Steady as E-Commerce Grows
Chief Financial Officer Keith Siegner said first-quarter net sales were $138.2 million, down 0.1% from the prior-year quarter. Showroom net sales rose $0.6 million, or 0.6%, to $97.1 million, driven by the net addition of 14 showrooms. Internet sales increased $2.4 million, or 7.1%, to $35.7 million.
Other net sales, which include pop-up shops, shop-in-shop sales, open-box inventory transactions and the Loved by Lovesac resale program, fell $3.1 million, or 36.3%, to $5.5 million. Siegner said the decline was primarily due to the closure of Best Buy shop-in-shop locations following the discontinuation of that partnership.
By product category, Sactional net sales declined 1.4%, Sacs net sales decreased 22.5%, and other net sales, which include the company’s Snug platform, decorative pillows, blankets and accessories, increased 228.1% from the prior year.
Nelson said reclining seats continued to outperform expectations, with attachment rates remaining strong at nearly one out of every three configurations including a recliner. He also said Snug, which is less than a year old, is expanding Lovesac’s reach into comfort seating and smaller-space living. According to Nelson, 80% of Snug customers are new to Lovesac, and nearly half of Snug sales are coming through e-commerce channels.
Margins Pressured by Freight and Tariffs
Gross margin declined 160 basis points to 52.1% of net sales, compared with 53.7% in the prior-year period. Siegner said the decrease was primarily driven by a 380-basis-point increase in inbound transportation and tariff costs and a 110-basis-point increase in outbound transportation and warehousing costs. These pressures were partially offset by a 330-basis-point increase in product margin, driven by price increases and cost reduction initiatives, partly offset by higher promotional discounting.
SG&A expense was 49.6% of net sales, up from 48.5% a year earlier. Advertising and marketing expenses decreased $2.0 million, or 10.7%, to $16.6 million, representing 12.0% of net sales versus 13.4% in the prior-year quarter.
The company reported an operating loss of $17.4 million, compared with a $15.0 million operating loss in the first quarter of last year. Net loss was $11.1 million, or $0.76 per share, compared with a net loss of $10.8 million, or $0.73 per share, in the prior-year period. Adjusted EBITDA loss was $10.5 million, compared with an adjusted EBITDA loss of $8.4 million a year earlier.
Management Points to High-Ticket Strength and Marketing Efficiency
President Mary Fox said Lovesac continues to see softness in transactions below $6,000, which she attributed in part to weak consumer sentiment. At the same time, she said higher-value transactions remain stronger, with mid-double-digit growth in transactions over $6,000. Fox said premium add-ons such as Lovesoft Fill, storage and reclining seats helped offset pressure at lower price points.
Fox said the company is focused on leaning into higher-dollar transaction growth while improving accessibility and competitiveness at opening price points. During the question-and-answer session, Siegner said the company had begun testing promotions around its Range Chenille fabric and expects more initiatives in the second and third quarters aimed at improving attractiveness at lower price points.
Fox also highlighted Lovesac’s marketing transition away from a linear-heavy media model toward a digital-first ecosystem built around social, search, influencer and creator content. She said revenue attributed directly to media grew an estimated 13% in the quarter, while return on ad spend improved by double digits.
The company’s “Here for Life” campaign is running across paid, owned, site, store and retail channels through July, Fox said. She also cited the “Ditch the Situationship” campaign around Valentine’s Day and Presidents’ Day, which generated 1.2 billion earned impressions and a 33% increase in paid search.
Onshoring and Product Expansion Remain Key Priorities
Nelson said Lovesac remains on track to begin domestic manufacturing of Sactional seats this summer. He said the initiative is intended to reduce cost volatility, improve fulfillment speed, reduce dependency on long international freight cycles and strengthen the customer experience. During the Q&A session, Nelson said the company is not expecting a material margin benefit from the onshoring initiative in fiscal 2027, as the program will take time to scale.
Fox said Lovesac has received $3.4 million in tariff refunds quarter to date. In response to an analyst question, Siegner said the company applied for and was accepted for $20.8 million of total refunds, but management is only including refunds already received in guidance because timing and recovery of the remaining balance are uncertain.
Management also discussed future product launches. Nelson said Lovesac plans to introduce a larger-format sectional sofa in the second half of the year, though only limited sales are built into the current-year plan. He also reiterated plans to launch products for a new room of the home in calendar 2027, which corresponds to the company’s fiscal 2028.
Lovesac Issues Fiscal 2027 Outlook
For fiscal 2027, Lovesac expects net sales of $700 million to $740 million and adjusted EBITDA of $35 million to $46 million. The company forecast gross margin of 56% to 57%, advertising and marketing expense of about 12% of net sales, and SG&A expense of approximately 40% to 41% of net sales.
Lovesac expects full-year net income of $5 million to $12 million and diluted earnings per share of $0.34 to $0.81, based on approximately 14.8 million diluted weighted average shares outstanding.
For the fiscal second quarter, the company expects net sales of $157 million to $166 million, adjusted EBITDA between a loss of $4 million and positive $2 million, and a net loss of $3 million to $7 million. Basic loss per share is expected to range from $0.20 to $0.48.
Siegner said Lovesac is planning for continued low-single-digit category declines through the rest of the year. He said first-quarter demand was up “a couple of percent” and revenue was roughly flat, both of which he described as better than the category. He also noted that demand outpaced revenue partly because of the expansion of white-glove delivery, which has led customers to schedule deliveries further out than the company’s traditional one- to two-week delivery window.
The company ended the quarter with $57.0 million in cash and cash equivalents, $35 million in committed availability and no borrowings on its amended credit facility. Lovesac repurchased $2.4 million of common stock during the quarter and had approximately $51.7 million remaining under its existing share repurchase authorization.
About Lovesac (NASDAQ:LOVE)
Lovesac, trading on NASDAQ under the symbol LOVE, is an American furniture company known for its modular seating systems and distinctive foam-filled “Sacs.” Founded in 1995 by Shawn Nelson, the company has built a reputation for innovative design that emphasizes comfort, durability and adaptability. Its core offerings include Sactionals—customizable sectional sofas assembled from individual “Sactional” cubes—and the original Lovesac Sacs, large fabric-covered bean bag chairs available in a variety of sizes and materials.
In addition to seating solutions, Lovesac has expanded into home entertainment products with the introduction of the Stage, a modular soundbar system designed to integrate seamlessly with Sactionals.
