Lovesac (LOVE) Q1 2026 Earnings Call Transcript

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EDTCALL PARTICIPANTSChief Executive Officer — Shawn NelsonPresident — Mary FoxChief Financial Officer — Keith SiegnerNeed a quote from one of our analysts. [ tected]TAKEAWAYSTotal Net Sales: $138. 4 million for Q1 FY2026, up 4. 3%, indicating gains in a category management said declined 5% year-over-year

Other Net Sales: Fell 40. 6 million in Q1 FY2026, primarily because the company "chose not to engage in any barter transactions during the current period. "Sactionals Net Sales: Increased 6. 4% in Q1 FY2026, while sack net sales climbed 4. 5%; other category sales decreased by 17

Gross Margin: Declined 60 basis points to 53. 7% in Q1 FY2026, due to "a decrease of 230 basis points in duct margin driven by higher motional discounting," offset by lower transportation and warehousing costs

Inventory Position: "somewhat higher than necessary" to build ahead of tariff uncertainty, with plans to reduce excess inventory in the next quarter

Customer Acquisition Engine: Drove 5 billion earned impressions in Q1 FY2026 and a "600% increase in engagements" from their Recline of Civilization campaign

EverCouch: Officially launched May 7 online and in 27 showrooms; back described as "very positive," with plans to expand to 100 showrooms later in the summer

SUMMARYLovesac (LOVE -0. 52%) reported topline growth and imved operating metrics in Q1 FY2026 amid challenging category conditions, highlighting its ability to gain as competitors face declining sales

Management dered strategic clarity on showroom-led growth, digital engagement, and the innovation roadmap led by the EverCouch launch, which broadens the addressable market and leverages physical and digital retail investments

The company outlined substantial gress on tariff mitigation, inventory management, and cost containment

Management's ary underscored a focus on execution over macro uncertainty, with multiple pathways to guidance achievement not dependent on outsized success from any single duct launch

Chief Executive Officer Nelson emphasized that "adjusted EBITDA, net loss, and net loss per common all imved by double-digit percentages year over year," and called the Reclining Seat launch a "huge success. "President Fox said, "The campaign generated 5 billion earned impressions, and over 600% increase engagements across all digital channels and almost 700 PR. "Chief Financial Officer Siegner stated, "we can achieve the full-year guidance with the core ducts basically being flat," and described multiple mitigation levers for tariff risk

The company reiterated plans to "allocate excess capital opportunistically," highlighted by significant repurchases

Initial EverCouch sales exceeded "internal goals" despite limited distribution, with additional marketing investment and showroom expansion planned in the coming months

Supply chain diversification was described as "mostly done that in real time now," with management expressing confidence in a path to essentially manufacture nothing in China

The launch of the “loved by Lovesac” resale platform in Texas was described as a key step toward building circularity and enabling future trade-in service rollouts

INDUSTRY GLOSSARYOmnichannel Comparable Net Sales: Sales growth measured across both physical and digital channels, including all comparable retail locations and platforms for year-over-year comparison

Sactionals: Lovesac’s modular furniture system, combining seats and sides to create customizable couches and sectionals

Stealth : Embedded nology platform in select Lovesac ducts, integrating audio and connectivity features discreetly into furniture

Roadshow: Temporary retail setups, such as pop-up shops or display events, used to reach new customers—here, specifically in Costco locations

EverCouch: Lovesac's new duct platform focused on fixed sofas, loveseats, and armchairs, distinct from modular Sactionals

Full Conference Call TranscriptOperator: Greetings

At this time, all participants will be in listen-only mode

A question-and-answer session will the formal presentation

If anyone today should require operator assistance, please press 0 from your telephone keypad

Please note this conference is being recorded

At this time, I'll turn the conference over to Caitlin Churchill, Investor Relations for The Lovesac Company

Caitlin, you may begin

Caitlin Churchill: Thank you

Good morning, everyone

With me on the call is Shawn Nelson, Chief Executive Officer, Mary Fox, President, and Keith Siegner, Chief Financial Officer

Before we get started, I would to remind you that some of the information discussed will include forward-looking statements regarding future events and our future financial performance

These include statements our future expectations, financial, and our plans and spects

Actual results may differ materially from those set in such statements

For a discussion of these risks and uncertainties, you should review the company's filings with the SEC, which includes today's press release

You should not rely on our forward-looking statements as predictions of future events

All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to them except as required by applicable law

Our discussion today will include non-GAAP financial measures, including EBITDA and adjusted EBITDA

These non-GAAP measures should be considered in addition to and not a substitute for or in isolation from our GAAP results

A reconciliation of the most directly comparable GAAP financial measure to such non-GAAP financial measure has been vided as supplemental financial information in our press release

Now I'd to turn the call over to Shawn Nelson, Chief Executive Officer of The Lovesac Company

Shawn Nelson: Good morning, everyone, and thank you for joining us

I'll start by sharing a high-level overview of our first quarter results, vide an on our design for life duct platforms, and touch on our views for the remainder of the year before passing the discussion over to Mary Fox, our President

Mary will discuss our tailored customer acquisition engines and key growth enablers

Turning to our first quarter, overall, we are pleased to have dered results in line with our expectations and consistent with our plan to capitalize on secular initiatives and return to growth

Notably, 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 and accelerate our pace of duct innovation

As a result, adjusted EBITDA, net loss, and net loss per common all imved by double-digit percentages year over year

Our balance sheet also remains very healthy with inventory levels and net cash viding substantial flexibility to weather tariff distractions, accelerate growth, and enhance returns on capital

Now for the exciting part, innovation on our design for life duct platforms

With a full quarter of a reclining seat in market, we can say that it has been a huge success

Backed by the launch of the Recline of Civilization marketing campaign mid-quarter, we've seen increases in new customer attachment coupled with healthy units per transaction, all while maintaining the strong repeat customer purchases we spoke of last quarter

Our customers love the recliner and see it as a tremendous value compared to competitor offerings, giving us optimism for continued meaningful contributions for many years to come

The EverCouch, our new duct platform in over a decade, this elegant and sophisticated entry into the armchair, loveseat, and sofa category effectively doubles Lovesac's total addressable market

EverCouch is a true, designed-for-life duct platform, constructed to the highest standards out of the best materials

We believe that it is the best couch on the market, period

EverCouch vides a solution for customers whose needs differ from those of a Sactional customer, deemphasizing modularity but with more of a focus on style, comfort, maintainability, and ease of use

It has a lower price point as a result of this engineering

EverCouch is beautiful with washable covers, exchangeable arm styles, rapid shipping capabilities, and easy assembly with no tools, of course

Even better is that it leverages Lovesac's established brand equity in couches and comfort seating

Well, after a six-week test and learn campaign in suburban Boston, we officially launched EverCouch on lovesac

Com and in 27 showrooms on May 7

Initial back has been very positive, and our showroom team members are excited

We have not yet turned on the marketing engine since we are refining the sales training based on our learnings

Shawn Nelson: As well as building inventories to support a broader sales push

But it is selling, and we are ud of this new invention from Lovesac

Marketing, expansion into additional showrooms, and potentially select use of partner channels are all in the works to bolster awareness and appreciation for this exciting new platform from Lovesac

While we tend to focus on the larger duct launches, rest assured, we expect to have incremental enhancements to existing ducts on an basis as well

For example, as we reach the anniversary of the launch of our wildly successful pillow sack chair in May, we added new wood frame colors, including a darker brown and a gorgeous black

These additions came out of consumer insights and data collected from our current and potential customers

It's a perfect example of how we let re and data inform our innovation to increase our hit rate for success

There is plenty more to come along these lines this year and

Expansion of our addressable and expansion of our brand, this should deepen the relationship that we have with our customers and drive expansion of our and value creation

We're not quite ready to all the details yet, but stay tuned

We are working on some really exciting stuff

We get a lot of questions the consumer, including monthly or even weekly trends to try to glean some insight into a fundamental change in trend

It's only been two months since our last earnings call, and, honestly, it's too early to make a call on any trend change from the data that we're seeing today

The category got a little better in March, weakened a little in April, and the quarter right up in line with the average trend since the fall, which is down mid-single digits

That remains our baseline planning for now, but we'll you when things become more

What I can say is that we remain focused on what we can control

Just I said earlier, we aim to leverage our secular growth initiatives to drive growth here at Lovesac

We grew in the fiscal first quarter, and as Keith will detail later, we forecast growth for the fiscal second quarter and for the full year even without the category supporting us

As for tariffs, we are actively working to mitigate the potential impact, and we believe we can leverage all of the available tools at our disposal to manage that impact

Mary will vide more details momentarily

But given our unique model with high duct margins, geographic redundancy, and strong vendor relationships, we believe we can cover the impact within our existing full-year guidance barring any new wildcard scenarios, of course

In summary, we are committed to dering on our objectives, leveraging Lovesac's innovative duct offerings, strong customer relationships, and operational excellence to grow irrespective of the category in the near term while maintaining clarity around long-term thinking and value creation

We believe that when the replacement cycle for comfort seating ramps up and housing turnover reaccelerates, we will be ready to capitalize on it immediately