Showroom Expansion Drives Modest Sales Growth for Lovesac, but Profitability Pressures Remain

Net Sales Growth Led by New Showrooms Amid Online Sales Decline

The Lovesac Company delivered a 0.2% increase in total net sales for its third fiscal quarter ended November 2, 2025, as new showroom openings helped offset declining internet and 'other' channel revenues. This quarter, Lovesac added five new showrooms, bringing the total to 275, with 17 added over the past year. In contrast, online sales dropped 16.9% compared to Q3 2024, and the 'other' sales category fell 27.3%. Despite these headwinds, strong showroom performance enabled a slight topline improvement—evidence of continued in-store consumer engagement even as broader furniture retail remains pressured.

Profitability Squeezed by Higher Expenses and Input Costs

Gross margin contracted to 56.1% (from 58.5% a year earlier), primarily due to increased transportation and tariff costs, only partly offset by cost reductions from suppliers. Gross profit slipped 3.9% to $84.2 million for the quarter. Operating expenses rose 4.9%, largely tied to payroll, rent, and the launch of a new marketing campaign, pushing the operating loss to $15.8 million, compared to $7.7 million in the same period last year. Adjusted EBITDA also swung negative at -$6.0 million versus a positive $2.7 million a year ago. The company reported a net loss of $10.6 million for the quarter, translating to a loss of $0.72 per share.

Year-to-Date Trends Show Similar Pattern

For the first thirty-nine weeks of fiscal 2026, Lovesac posted 2.3% higher net sales versus last year, but gross profit declined by 1.1%. Operating loss deepened to $39.6 million, with net loss for the period totaling $28.0 million. Cash and cash equivalents decreased substantially to $23.7 million (from $61.7 million the year before), partly reflecting a planned inventory build and continued capital investment in showrooms and marketing.

Full-Year Outlook Calls for Strong Q4 Rebound

Lovesac's management remains focused on achieving longer-term household penetration and innovation goals, despite short-term pressures. The company’s guidance anticipates a much stronger fourth quarter, with projected net income between $30 million and $36 million and diluted EPS of $1.88 to $2.22. For the full year, sales are expected in the $685–$705 million range, with positive net income ($2 million to $8 million) and a significant improvement in adjusted EBITDA ($37 million to $43 million) versus the year-to-date performance. Management attributes confidence to improved marketing strategy, successful Black Friday and Cyber Monday sales, and ongoing expansion in physical retail.

Key Takeaway: Expansion Offers Sales Stability, but Efficiency Remains Under Pressure

Lovesac’s latest results underline a familiar narrative across consumer retail: showroom and product innovation investments can help steady topline results, but operational cost control and channel optimization are crucial as margin pressures mount. If management’s Q4 forecasts hold true, investors could see a notable swing to profitability as the company leverages its physical retail momentum. Still, efficiency and balance sheet trends merit close attention, particularly with net losses deepening in a highly competitive and inflationary market.

With an investor call scheduled for 8:30 a.m. ET today and ambitious goals for household penetration by 2030, all eyes will be on whether operational improvements and targeted marketing can power a true earnings recovery heading into next year.

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