Lovesac’s first quarter results were met with a sharp negative market reaction, despite sales coming in above Wall Street’s expectations. Management pointed to increased showroom conversions and the launch of new seating options as key drivers of growth, even as the broader home furnishings category remained under pressure. CEO Shawn Nelson highlighted success from the new reclining seat and noted, “Our results reflect not only top-line growth but also SG&A leverage, as we've begun to reap the benefits of previous investments aimed to bolster core capabilities.” Persistent high promotional activity across the sector and ongoing tariff concerns were acknowledged as significant challenges.
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Lovesac (LOVE) Q1 CY2025 Highlights:
- Revenue: $138.4 million vs analyst estimates of $137.5 million (4.3% year-on-year growth, 0.7% beat)
- EPS (GAAP): -$0.73 vs analyst estimates of -$0.81 (9% beat)
- Adjusted EBITDA: -$8.45 million vs analyst estimates of -$10.86 million (-6.1% margin, 22.2% beat)
- The company reconfirmed its revenue guidance for the full year of $725 million at the midpoint
- EPS (GAAP) guidance for the full year is $1.08 at the midpoint, missing analyst estimates by 7.5%
- EBITDA guidance for the full year is $54 million at the midpoint, above analyst estimates of $49.38 million
- Operating Margin: -10.8%, up from -13.5% in the same quarter last year
- Locations: 267 at quarter end, up from 246 in the same quarter last year
- Market Capitalization: $253.7 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Lovesac’s Q1 Earnings Call
- Michael Baker (D.A. Davidson) asked about the promotional environment and gross margin trajectory. President Mary Fox cited persistent competitor discounting, while CFO Keith Siegner detailed timing-related margin pressures and outlined cost-saving levers expected to benefit margins later in the year.
- Maria Ripps (Canaccord Genuity) inquired about the exit from the Best Buy partnership and future distribution strategy. CEO Shawn Nelson explained the shift was due to an expanded showroom presence and the potential for deeper engagement through Costco and new channel partners.
- Brian Nagel (Oppenheimer) questioned how much upside from new products is included in guidance. Siegner clarified that guidance is not overly reliant on any single product’s performance, providing flexibility should core or new products under- or out-perform.
- Eric DeLonier (Craig Hallum) asked about the scale and timing of EverCouch’s rollout and supporting marketing. Fox confirmed a phased expansion to more showrooms and a gradual increase in marketing spend to support the product’s growth.
- Matt Koranda (ROTH Capital) sought details on gross margin drivers and recent pricing actions. Siegner explained that second-quarter margins will reflect greater tariff costs and evolving product mix, while Fox described the favorable reception of selective price increases and ongoing adjustments based on market response.
Catalysts in Upcoming Quarters
In the next few quarters, our team will closely watch (1) the scaling and customer adoption of EverCouch as it expands to more showrooms and receives increased marketing support, (2) the effectiveness of Lovesac’s multi-faceted tariff mitigation strategy and its impact on gross margins, and (3) whether the company can maintain share gains and sales momentum despite a highly promotional environment and weak category trends. Execution on supply chain shifts and the success of new marketing initiatives will also be critical indicators.
Lovesac currently trades at $17.67, down from $20.55 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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