Lovesac (LOVE) is a Zacks Rank #5 (Strong Sell) that is a furniture company best known for its modular seating system called Sactionals and its large beanbag-style chairs called Sacs.
The company emphasizes sustainability, with many products made from recycled materials.
Despite the niche that the company has, the numbers have been coming up short. Recent earnings brought heavy selling into the name and with analyst lowering estimates, investors might want to sit this one out.
About the Company
Lovesac was founded in 1995 and is based in Stamford, Connecticut.
The company operates a direct-to-consumer model, selling through its website, showrooms, and some retail partners. It has a premium positioning, targeting customers who want high-quality, adaptable furniture.
LOVE is valued at $380 million and has a Forward PE of 25. The stock holds Zacks Style Scores of “D” in Value and Momentum. It also has an “F” in Growth.
Q3 Earnings
In December, Lovesac reported Q3 earnings that missed expectations, posting a net loss of $0.32 per share versus the expected $0.15 loss, and $150 million in revenue, slightly below last year's $154 million.
The company lowered its Q4 guidance to $1.67-$2.14 EPS (vs. $2.36 estimate) and $221-241 million in revenue (vs. $263 million estimate).
For FY25, Lovesac revised its guidance to $0.27-$0.74 EPS (vs. $1.09 estimate) and $660-$680 million in revenue (vs. $707 million estimate).
Despite these weaker results, the company grew its showroom count to 258 locations (vs. 230 y/y) and gained market share in a category facing challenges.
CEO remarks highlighted continued innovation and a strong product pipeline, including the Sactionals recliner and Any Table, both of which contributed to market share gains. Lovesac ended Q3 with $61.7 million in cash and no debt, positioning it for future investments and share buybacks. The company is confident in its long-term prospects, with plans to share a detailed strategic roadmap at an upcoming investor day.
The optimism did not convince investors, as the stock fell over 25% on the earnings news.
Annual ICR Conference 2025
At the 27th Annual ICR Conference 2025, Lovesac reported lower conversion rates during the holiday season, impacted by shorter shipping timelines and heightened competitor promotions.
Despite challenges, it saw double-digit growth in its quote pipeline during Black Friday and maintained 30% promotional discounts to protect brand value and margins. Lovesac is focusing on aggressive strategies to convert its pipeline and enhance customer engagement through improved CRM capabilities, staying optimistic about growth through product innovation and market expansion.
While the company seems motivated, analysts and investors want more proof.
Earnings Estimates Falling
Big drop in estimates after the guidance back in December.
For the current quarter, forecasts have dropped 24% over the past 60 days, from $2.36 to $1.80.
Looking at the current year, estimates have declined 64% in that same period, down from $1.09 to $0.39.
For the next year, projections have been adjusted downward by 43%, now at $1.77 from $1.01.
Technical Take
The stock looked to be back on track late last year as it went from $22 to $39 in just a matter of months. However, the stock was crushed after earnings and is now trading at $24.
There is likely support at the $20 area, but if that area cracks, look out for $15. For the bulls to take back momentum, they need price above the 200-day at $26.60 and the 50-day at $28.80.
In Summary
Lovesac has positioned itself as an innovative player in the furniture industry, but its recent financial performance and revised guidance have raised significant concerns.
With analysts lowering earnings estimates and investor sentiment remaining cautious, Lovesac faces a challenging road ahead.
For those interested in the furniture space, a better option might be Temper Sealy (TPX). The stock is a Zacks Rank #2 (Buy) that is coming off an earnings beat and trading at 2025 highs.
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