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Nicholas Kitonyi
Nicholas Kitonyi
Articles (409)  | Author's Website |

Lovesac Shares Rise on 3rd-Quarter Results

The stock is up nearly 20%

On Wednesday morning, The Lovesac Co. (NASDAQ:LOVE) posted revenue and earnings that outperformed analysts' expectations. Shares responded by rallying nearly 20%. The stock is now up 876% since bottoming in March and 166% year to date.

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The furniture and fittings manufacturer has witnessed significant growth in its top line this year as sales across its 91 outlets continued to improve. Analysts were expecting Lovesac to post a net loss for its third-quarter 2021 results, but it surprised with a positive bottom line.

Highlights from recent quarterly results

Lovesac's earnings per share grew nearly 135% to 16 cents per share on a year-over-year basis. This was significantly better than the consensus analyst expectation of a net loss of 88 cents per share.

The company also posted impressive top-line growth of 43.5% to $74.74 million for the three months ended Nov. 1, versus $52.1 million in the prior-year quarter.

The gross margin improved to 55.3%, up from 50.4%, while the adjusted Ebitda was up nearly 260%.

The diluted loss per share for the nine-month period came in at 48 cents compared to a net loss per share of $1.45 reported for the same period a year ago. Revenue for the same period grew 35.5% to $191.1 million, up from $141.2 million.

CEO Shawn Nelson said the company expects 50% to 60% adjusted Ebitda growth during the fiscal fourth quarter. This could help push the company back to profitability within the next few quarters. He also pointed out the new partnership with Best Buy Co Inc. (NYSE:BBY) as key to broadening its reach.

"Our business fundamentals are strong, and our recently expanded partnership with Best Buy broadens our audience and expands Sactionals adoption," Nelson said. He now feels that the company is well positioned to capitalize on product demand going into the final quarter of the year.

Valuation

From a valuation perspective, the company has yet to net a profit based on the trailing 12 months. However, things could change as the company's third-quarter results showed a positive bottom line.

Lovesac's current price-sales ratio of 1.74 is relatively in line with Wayfair Inc.'s (NYSE:W) multiple of 1.78. However, several other close peers appear to trade at relatively impressive price-sales ratios, which suggests that at the current price, there may not be much room left to run.

La-Z-Boy Inc. (NYSE:LZB) trades at a price-sales ratio of 1.11, while Bassett Furniture Industries Inc. (NASDAQ:BSET) and Haverty Furniture Co Inc.'s (NYSE:HVT) equivalents are 0.86 and 0.68.

Therefore, given Lovesac's gain since March, it may be prudent to wait and see how it performs in the fourth quarter.

Disclosure: No positions in the stocks mentioned.

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About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website


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