Financial Data and Key Metrics Changes - Third-quarter net sales were $150.2 million, slightly below guidance by about $1 million, but showed a year-over-year growth reflecting market share gains despite a category decline of approximately 2% [4][5] - Adjusted EBITDA loss for the quarter was $6.0 million compared to an adjusted EBITDA of $2.7 million in the prior year [38] - Net loss for the quarter was $10.6 million, or -$0.72 per share, compared to a net loss of $4.9 million, or -$0.32 per share in the prior year [38][39] - Gross margin decreased by 240 basis points to 56.1% due to increased transportation and tariff costs, partially offset by price increases and vendor concessions [36][39] Business Line Data and Key Metrics Changes - Showroom net sales increased by $11.7 million, or 12.8%, to $102.7 million, driven by the addition of 17 new showrooms [34] - Internet net sales decreased by $7.6 million, or 16.9%, to $37.3 million, reflecting challenges in the online segment [34] - Sactionals net sales decreased by 1.0%, while Sacs' net sales decreased by 9.0%, but other net sales, including the new Snugg platform, increased by 126.3% [35] Market Data and Key Metrics Changes - The overall category experienced low to mid-single-digit declines, with the high-end segment down 11% [15][60] - The company noted a slight improvement in category trends, but the weakness in lower dollar volume transactions persisted [15][16] Company Strategy and Development Direction - The company is focusing on optimizing its brand positioning and marketing strategies to enhance customer acquisition and retention [9][21] - Plans to slow the expansion of physical stores in the coming year to refine the omnichannel strategy [15] - The company aims to launch a new high-end sectional sofa platform in mid-2026, distinct from existing products, to target higher-end consumers [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding consumer spending and macroeconomic conditions, emphasizing the need for prudence in planning [15][60] - The company anticipates fiscal 2026 to be a year of modest market share gains despite a challenging category environment [16][42] - Management highlighted the importance of leveraging the brand's existing strengths while preparing for future product launches [19][20] Other Important Information - The company welcomed a new Chief Technology Officer to support digital transformation initiatives [17] - The "Loved by Lovesac" re-commerce program is being rolled out, offering discounts of 20%-25% compared to new products [46][47] Q&A Session Questions and Answers Question: Can you talk about the discount to the consumer for the Loved by Lovesac re-commerce efforts? - The discount level is around 20%-25% compared to full-price purchases, with two grades for the products [46] Question: Can you provide insights on the revenue weakness in the quarter? - The weakness primarily came from smaller Sactionals setups, with a noted improvement in lower-end transaction sizes as the quarter progressed [64][65] Question: What are the expected impacts of the marketing overhaul? - The marketing shifts are already showing real-time impacts, with further improvements expected in the coming quarters as the brand storytelling evolves [70][71]

Financial Data and Key Metrics Changes - Third-quarter net sales were $150.2 million, slightly below guidance by about $1 million, but showed a year-over-year growth despite a declining market [4][5] - Adjusted EBITDA loss for the quarter was $6.0 million compared to an adjusted EBITDA of $2.7 million in the prior year [38] - Net loss for the quarter was $10.6 million, or -$0.72 per share, compared to a net loss of $4.9 million, or -$0.32 per share in the prior year [38][39] - Gross margin decreased by 240 basis points to 56.1% due to increased tariffs and transportation costs [5][36] Business Line Data and Key Metrics Changes - Showroom net sales increased by $11.7 million, or 12.8%, to $102.7 million, driven by the addition of 17 new showrooms [34] - Internet net sales decreased by $7.6 million, or 16.9%, to $37.3 million [34] - Sactionals net sales decreased by 1.0%, while Sacs' net sales decreased by 9.0%, but other net sales, including the new Snug platform, increased by 126.3% [35] Market Data and Key Metrics Changes - Total omnichannel comparable net sales decreased by 1.2% for the quarter, offset by contributions from new and non-comparable touchpoints [6] - The overall market category is estimated to have declined approximately 2% for the comparable quarter and 4% year to date [5] Company Strategy and Development Direction - The company is focusing on brand evolution and optimizing its marketing strategy to better position itself in the market [9][10] - Plans to slow the expansion of physical stores in the coming year to refine the omnichannel strategy [15] - The company aims to launch a new high-end sectional sofa platform in mid-2026, targeting higher-end consumers [12][13] Management's Comments on Operating Environment and Future Outlook - Management noted that macro conditions are challenging, with consumer uncertainty affecting lower dollar volume transactions [4][16] - Despite a strong performance during Black Friday and Cyber Monday, management remains cautious due to tough comparisons in the upcoming months [16][60] - The company expects fiscal 2026 to be a year of modest market share gains despite a down category [16][41] Other Important Information - The company welcomed a new Chief Technology Officer to support digital transformation initiatives [17][18] - The "Loved by Lovesac" re-commerce program is being rolled out, offering discounts of 20%-25% compared to new products [46][47] Q&A Session Summary Question: Can you talk about the discount to the consumer for the Loved by Lovesac re-commerce efforts? - The discount level is around 20%-25% compared to buying at full price, with two grades for the products [46] Question: Can you provide insights on the P&L impacts for fiscal 2027? - The company is focusing on harvesting the brand and making more money off existing infrastructure while preparing for a significant launch in early 2027 [51][54] Question: Where is the revenue weakness coming from? - Revenue weakness is primarily from smaller setups of Sactionals, with a noted improvement in lower-end transaction sizes [64][65] Question: How long do you expect the marketing overhaul to take to see impacts? - Immediate impacts are being seen in Q4, with ongoing improvements expected in Q1 and Q2 next year [69][71]