STAMFORD, Conn. – While Lovesac Company expects consumer spending on furniture to remain depressed, its delayed Q2 financials and Q3 preview show steady growth on the top line.
For the second quarter ended July 30, net sales rose 4% to $154.5 million, on top of 45% sales growth in the year-ago quarter. The sales increase was primarily driven by growth in the company’s showroom and Internet sales.
The former, which include kiosks and mobile concierges, increased 6.4%. The company credited a 2.7% lift to comp showroom sales stemming from higher point of sale transactions with higher promotional discounting as well as the addition of 54 new showrooms during the period. The company also operated five fewer kiosks in Q2.
Internet sales jumped 16.6%, owing to the same promotional campaigns that boosted showroom revenue. Lovesac also opened three additional shop-in-shops at Best Buy during the quarter.
Gross profit fattened by $13.3 million, rising 16.8% to $92.4 million in the second quarter, from $79.1 million in the year-ago period. Gross margin increased 650 basis points to 59.8% of net sales from 53.3% of net sales in the prior-year period as the company shed approximately 720 basis points distribution and related tariff expenses. Promotional discounting sheared off another 70 basis points in product margin.
Still, Lovesac swung to a slim net loss of $635,000, or 4 cents per share, from net income of $5.8 million, or 37 cents per share in last year’s second quarter. The company recorded an income tax benefit of less than $100,000, compared with income tax expense of $2.3 million for the second quarter of fiscal 2023. Lovesac generated a net loss before taxes of $642,000 million and net income before taxes of $8.1 million in the second quarter of fiscal 2024 and fiscal 2023, respectively.
The second quarter performance “affirms the resilience of our brand and disruptive business model that has consistently delivered category outperformance and extraordinary customer love and loyalty,” said Shawn Nelson, CEO.
On Oct. 30, Lovesac shared preliminary results for the third quarter ended Oct. 29. The company said it expects sales to land in the range of $150 million to $152 million, up 11% to 13% from last year’s third quarter.
“Looking ahead, we expect consumer spending in our category to remain challenged. To that end, we will prudently control expenses with a focus on efficiency balanced against proactive investments in new products to drive consumer demand and further expand our market leadership,” Nelson said in announcing the financials this morning.