The Lovesac Company (LOVE) 2025 Q2 Earnings Call Summary

Optimistic Highlights

• Q2 Results

Delivered results in line or slightly favorable to expectations with total net sales of $156.6 million and adjusted EBITDA of $1.5 million.

• Product Innovation

Successful launch of the PillowSac Accent Chair Frame (PACF), which sold out quickly and drove significant engagement and sales.

• New Product Launches

Launched AnyTable, expanding into the table and case goods category, and redesigned Sactionals accessories.

• Market Share Gains

Continued market share gains despite challenging industry conditions, driven by product innovation and omnichannel strategy.

• Share Buyback

Announced first-ever share buyback authorization, reflecting confidence in long-term growth and financial health.

Pessimistic Highlights

• Omnichannel Comparable Net Sales

Decreased by 5.4%, although offset by new and non-comp touch point contributions.

• Gross Margin

Slight decline in gross margins due to higher promotional discounting and increased outbound transportation and warehousing costs.

• SG&A Expenses

Increased as a percentage of net sales due to investments in payroll, equity-based compensation, professional fees, and rent.

• Net Loss

Reported a net loss of $5.9 million, or negative $0.38 per common share, compared to a net loss of $0.6 million in the prior year period.

• Promotional Environment

Intensified promotional activity in the industry, requiring careful management of discount levels.

Company Outlook

• Fiscal 2025 Guidance

Tightened guidance range for net sales to $700 million to $735 million, reflecting growth despite a challenging macro environment.

• Adjusted EBITDA

Expected to be between $52 million and $59 million, with gross margins of 58% to 59%.

• Strategic Focus

Continued focus on product innovation, omnichannel experience, and disciplined infrastructure investments to drive long-term growth.

• Market Conditions

Conservative outlook on industry recovery, with expectations of a 10% category decline for the full year.

• Investor Day

Plans to share more on long-term vision during an Investor Day in the fourth quarter.

Q & A Highlights

• Q: Fourth Quarter Ramp and Pent-up Demand (Michael Baker, D.A. Davidson)

A: Impact started in Q2, with millions of dollars in single-digit millions expected to recover in Q4. Confident in visibility into lead times and shipments. (Keith Siegner)

• Q: Industry Data and Green Shoots (Michael Baker, D.A. Davidson)

A: Promotional environment remains intense. No meaningful green shoots yet, but innovation like the PillowSac Chair Accent Frame is driving resilience. (Shawn Nelson)

• Q: Buyback Guidance (Michael Baker, D.A. Davidson)

A: No buybacks built into the forecast yet. Initial estimate to offset equity compensation dilution, less than $10 million a year. (Keith Siegner)

• Q: Full-year Guidance and Promotional Environment (Maria Ripps, Canaccord Genuity)

A: Tightened range due to lingering macro uncertainty and intensified promotional activity. No major changes in outlook. (Keith Siegner)

• Q: Optimal Number of Showrooms (Maria Ripps, Canaccord Genuity)

A: Runway of just over 400 showrooms, with around 30 new openings planned for Fiscal '25. Showrooms drive awareness and digital business. (Mary Fox)

• Q: New Product Development Strategy (Tom Forte, Maxim Group)

A: Focus on products built to last a lifetime and designed to evolve. Innovation in living room products with potential to expand into other home categories. (Shawn Nelson)

• Q: Gross Margins and Contribution Margins on New Products (Tom Forte, Maxim Group)

A: Disciplined approach to maintaining gross margins. Marketing focused on selling more core products like Sactionals. (Keith Siegner, Mary Fox)

• Q: Innovation Contribution to Top-line Growth (Brian Nagel, Oppenheimer & Company)

A: Innovation enhances overall value proposition, driving sales of core products. (Keith Siegner)

• Q: Demand Trends and Q3 Guidance (Matt Koranda, ROTH Capital Partners)

A: Stable underlying trends with week-to-week variability. Q3 guidance in line with Q2 performance. (Mary Fox)

• Q: Implied Ramp in EBITDA Margin in Q4 (Matt Koranda, ROTH Capital Partners)

A: Leverage to top line, outbound logistics savings, and reduced professional fees contribute to higher EBITDA margin. (Keith Siegner)

• Q: Financing Program and Penetration (Matt Koranda, ROTH Capital Partners)

A: Testing different financing offers to optimize customer engagement. (Keith Siegner)

• Q: Contribution from New Products (Alex Fuhrman, Craig-Hallum Capital Group)

A: Difficult to quantify exact contribution, but new products drive overall brand engagement and sales. (Keith Siegner, Shawn Nelson)