The Lovesac pany(US:LOVE)2019-09-13 21:25Sales Performance - Sactionals accounted for 79.6% and 79.9% of total sales for the thirteen and twenty-six weeks ended August 4, 2019, representing $38.3 million and $71.2 million respectively, compared to 76.1% and 72.0% for the same periods in 2018 [107]. - Sales of Sacs increased to $9.6 million and $15.5 million for the thirteen and twenty-six weeks ended August 4, 2019, up from $7.1 million and $15.1 million in the same periods of 2018 [106]. - Total net sales for the thirteen weeks ended August 4, 2019, were $48,146,000, a 44.8% increase from $33,249,000 for the same period in 2018 [122]. - Net sales increased by $14.9 million, or 44.8%, to $48.1 million in the thirteen weeks ended August 4, 2019 compared to $33.2 million in the same period of 2018 [136]. - Net sales increased by $29.1 million, or 48.5%, to $89.1 million in the twenty-six weeks ended August 4, 2019 compared to $60.0 million in the same period of 2018 [148]. Ecommerce Growth - Ecommerce sales represented 19.6% and 20.1% of total sales for the thirteen and twenty-six weeks ended August 4, 2019, an increase from 16.6% and 16.8% in the same periods of 2018 [111]. - Internet sales for the thirteen weeks ended August 4, 2019, reached $9,457,000, up 71.5% from $5,515,000 in the prior year [122]. Profitability and Losses - Net losses were $4.8 million and $13.9 million for the thirteen and twenty-six weeks ended August 4, 2019, compared to $7.0 million and $12.7 million for the same periods in 2018 [112]. - The company reported a net loss of $4,771,000 for the thirteen weeks ended August 4, 2019, an improvement from a net loss of $6,970,000 in the same period of 2018 [122]. - Adjusted EBITDA for the twenty-six weeks ended August 4, 2019, was $(7,962,000), compared to $(6,199,000) for the same period in 2018 [123]. Expenses - Selling, general and administrative expenses for the twenty-six weeks ended August 4, 2019, totaled $59,549,000, up from $45,081,000 in the same period of 2018 [122]. - Selling, general and administrative expenses increased by $1.5 million, or 7.3%, to $22.0 million in the thirteen weeks ended August 4, 2019, with expenses as a percentage of net sales decreasing to 45.6% from 61.5% [139][140]. - Selling, general and administrative expenses increased by $10.2 million, or 28.5%, to $45.8 million in the twenty-six weeks ended August 4, 2019 compared to $35.6 million in the same period of 2018 [151]. - Advertising and marketing expenses increased by $2.5 million, or 68.8%, to $6.1 million in the thirteen weeks ended August 4, 2019, representing 12.6% of net sales [143]. - Advertising and marketing expenses increased by $3.5 million, or 43.2%, to $11.5 million, representing 12.9% of net sales for the twenty-six weeks ended August 4, 2019, compared to 13.3% in the prior year [155]. Operational Metrics - The company hosted over 209 and 368 pop-up shop showrooms at Costco locations for the thirteen and twenty-six weeks ended August 4, 2019, up from 137 and 257 in the same periods of 2018 [117]. - Other sales, including pop-up shop sales, accounted for 15.4% and 14.6% of total sales for the thirteen and twenty-six weeks ended August 4, 2019, up from 14.2% and 13.9% in the same periods of 2018 [117]. - The company operates 80 showrooms across 32 states, designed to appeal to millennials and showcase the product range [110]. Future Outlook - The company expects fiscal 2020 net sales growth to be between 40% and 45% over fiscal 2019, with an increase in Internet sales as a percentage of total sales [127]. - The gross profit margin for fiscal 2020 is anticipated to be lower than in fiscal 2019 due to product and margin shifts, tariffs, and investments in warehousing and distribution [129]. - The company expects to maintain advertising and marketing investments at 10%-12% of net sales annually [134]. - The company plans to invest in infrastructure over the next 18 months to support growth, which will impact expense leveraging [141]. - The company anticipates that fiscal 2020 gross profit margin will be lower than fiscal 2019 due to ongoing tariff impacts and infrastructure investments [138][150]. Cash Flow and Financing - The company reported net cash used in operating activities of $(23,041,000) for the twenty-six weeks ended August 4, 2019, compared to $(13,295,000) in the prior year [123]. - Cash and cash equivalents at the end of the period were $44,202,000, down from $48,212,000 at the end of the same period in 2018 [124]. - Net cash used in operating activities was $23.0 million for the twenty-six weeks ended August 4, 2019, compared to $13.3 million in the same period of 2018, with significant increases in inventory and accounts receivable [163][164]. - Net cash provided by financing activities was $22.2 million for the twenty-six weeks ended August 4, 2019, a decrease from $58.6 million in the prior year [168][169]. - Capital expenditures for the twenty-six weeks ended August 4, 2019, were $4.1 million, down from $6.3 million in the same period of 2018, reflecting investments in new and remodeled showrooms [165][166]. Tax and Borrowing - The income tax provision was less than 0.04% of sales for both the twenty-six weeks ended August 4, 2019, and August 5, 2018 [158]. - As of August 4, 2019, the company's borrowing availability under its revolving line of credit was $15.8 million, with no borrowings outstanding [170]. - The company has no material off-balance sheet arrangements, except for operating leases and employment agreements [172].