The Lovesac Co (LOVE) Reports Notable Improvement in Net Loss and Strong Gross Profit Growth in Q3 Fiscal 2024

Net Sales Rise by 14.3% and Gross Profit Jumps 36.3% Year-Over-Year

  • Net sales increased to $154.0 million, marking a 14.3% growth compared to the same period last year.
  • Gross profit surged by 36.3% to $88.4 million, with gross margin expanding significantly by 920 basis points.
  • Net loss improved by 68.2%, with a reduced net loss per diluted share from $(0.48) to $(0.15).
  • Adjusted EBITDA turned positive at $2.5 million compared to a negative $6.9 million in the prior year.
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On December 6, 2023, The Lovesac Co (LOVE, Financial) released its 8-K filing, announcing its financial results for the third quarter of fiscal 2024, which ended on October 29, 2023. The company, renowned for its innovative and adaptable home furnishing products, reported a robust net sales growth and a substantial improvement in its net loss figures, signaling a strong performance amidst a challenging market environment.

Financial Performance Overview

The Lovesac Co (LOVE, Financial) showcased a solid financial performance in the third quarter of fiscal 2024. Net sales saw a notable increase of 14.3% year-over-year, reaching $154.0 million, driven by growth in both Showroom and Internet channels. The company's gross profit experienced a significant rise of 36.3%, amounting to $88.4 million, with gross margin expanding to 57.4% from 48.2% in the previous year. This margin expansion was primarily attributed to a decrease in total distribution and related tariff expenses, particularly inbound transportation costs.

Despite these gains, total operating expenses rose by 22.7% to $92.1 million, with selling, general, and administrative (SG&A) expenses increasing by 26.4% due to investments in payroll, selling related expenses, infrastructure, and other professional fees. Advertising and marketing expenses also went up by 10.8%, reflecting the company's continued investment in marketing initiatives to support sales growth.

However, The Lovesac Co (LOVE, Financial) reported a significant improvement in its net loss, which was reduced by 68.2% to $2.3 million, or $(0.15) per diluted share. This improvement in net loss was further supported by an income tax benefit of $1.0 million during the quarter.

Balance Sheet and Cash Flow Highlights

The company's balance sheet remained strong, with cash and cash equivalents totaling $37.7 million as of October 29, 2023. Total merchandise inventory decreased to $116.6 million from $154.5 million in the previous year, reflecting a strategic reduction in stock inventory and a decrease in freight capitalization.

Net cash used in operating activities for the thirty-nine weeks ended October 29, 2023, was $7.2 million, compared to $5.5 million for the same period last year. However, the year-to-date period showed a positive cash flow from operating activities of $20.1 million, a significant improvement from a cash use of $68.4 million in the prior year.

Outlook and Future Expectations

Looking ahead, The Lovesac Co (LOVE, Financial) provided guidance for the full fiscal year of 2024, anticipating net sales in the range of $710.0 million to $720.0 million and adjusted EBITDA between $54.0 million and $62.0 million. The company also expects net income to be in the range of $22.0 million to $26.0 million, with diluted income per common share projected to be between $1.35 and $1.60.

The Lovesac Co (LOVE, Financial) continues to focus on its Designed For Life philosophy, driving product innovation and customer engagement. With a strong balance sheet and effective execution, the company is well-positioned to navigate market challenges and capitalize on growth opportunities.

For more detailed information and to view the full financial tables, please refer to The Lovesac Co (LOVE, Financial)'s 8-K filing.

Explore the complete 8-K earnings release (here) from The Lovesac Co for further details.