The Lovesac pany(LOVE) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third-quarter net sales were $150.2 million, slightly below guidance by about $1 million, but still reflecting a year-over-year growth despite a challenging macro environment [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 period [37] - 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 [37][38] - Gross margin decreased by 240 basis points to 56.1% due to increased transportation and tariff costs [34] 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 [32] - Internet net sales decreased by $7.6 million, or 16.9%, to $37.3 million [32] - 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% [33] Market Data and Key Metrics Changes - The overall category is estimated to have declined approximately 2% for the comparable quarter and 4% year to date, while the company achieved modest market share gains [5][16] - The company noted a slight improvement in category trends, with low to mid-single-digit declines recently compared to previous months [15] Company Strategy and Development Direction - The company is focusing on optimizing its brand positioning and marketing strategies to enhance customer acquisition and retention [8][20] - Plans to slow the expansion of physical stores in the coming year to refine its omnichannel strategy [15] - The company aims to launch a new high-end sectional sofa platform in mid-2026, targeting higher-end consumers [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding consumer spending and macroeconomic conditions, particularly in lower dollar volume transactions [4][15] - Despite challenges, management is optimistic about the upcoming holiday season and has seen strong growth during Black Friday and Cyber Monday [16][40] - The company anticipates fiscal 2026 to be a year of modest market share gains, with net sales estimated between $685 million and $705 million [40][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 [44][45] Q&A Session Summary Question: Can you talk about the discount to the consumer for the Loved by Lovesac re-commerce efforts? - The discount is around 20%-25% compared to buying new products, with two grades for the condition of items [44][45] Question: Can you provide insights on the revenue weakness in the quarter? - Revenue weakness primarily came from smaller setups of Sactionals, with a noted improvement in lower-end transaction sizes [56] Question: What are the expected impacts on P&L for fiscal 2027? - The company is focusing on leveraging existing infrastructure and products to enhance profitability while preparing for a significant new product launch [48][49]