The Lovesac Company Q3 FY2026 earnings call

Third Quarter Overview: Macro conditions were challenging, net sales slightly below guidance but with year-over-year growth. Adjusted EBITDA and net loss were within guidance. Pressured by tariff and transportation costs but offset by price increases, cost savings, etc. ### Product Innovations: Launched Snug platform, Pillow Sac Chair Junior, swept arm for sectionals, refreshed Sactionals covers, and limited edition fabrics. ### Brand Evolution and Strategy: Focus on secular growth initiatives, shifted marketing tactics (e.g., more personalized messaging, paid influencers), reduced customer purchase friction (e.g., new delivery options), reshoring manufacturing for Sactionals, and planning new high-end sectional and other product launches. ### Customer Acquisition Engine: Updating marketing and media strategy (e.g., shifting from linear TV to digital channels), enhancing showroom experiences, and expanding Costco partnerships. ### Resell and Trade-in Programs: Loved by Lovesac resell program expanded to 27 states, with trade-in program pilot planned for associates in Q1 next year and rollout to customers in Q2.

Net sales for the third quarter were $150.2 million, $1 million below guidance. Showroom net sales increased 12.8% to $102.7 million (driven by 17 new showrooms), internet net sales decreased 16.9% to $37.3 million, and other net sales (including pop-up shops, etc.) decreased 27.3% to $10.2 million. Product category-wise, Sactional net sales decreased 1%, SACS net sales decreased 9%, while other net sales (including Snug platform, etc.) increased 126.3%. Showroom contributed a larger revenue portion, with internet and other net sales having lower contributions.

Fiscal 2026: Net sales estimated $685M-$705M, adjusted EBITDA $37M-$43M, net income $2M-$8M. ### Fourth Quarter: Net sales estimated $230M-$256M, adjusted EBITDA $51M-$56M, net income $30M-$36M. ### Longer Term: Focus on reshoring manufacturing, new product launches (e.g., high-end sectional), and optimizing customer acquisition engines to drive growth and profitability.

Macro Conditions: Consumer uncertainty, choppy market conditions, tariff and transportation cost pressures. ### Competitive Landscape: Risk of copycats and competition affecting gross margins and market share. ### Execution Risks: Delays in reshoring manufacturing, challenges in implementing marketing and product strategies.

Q: Love by Lovesac ecommerce discount and gross margin?

A: Mary Fox stated the discount is around 20-25% to full price, with two tiers of condition, and Keith Siegner mentioned building infrastructure for resale and trade-in.

Q: Fiscal 2027 changes impact on P&L?

A: Keith Siegner and Shawn Nelson discussed prudent approach, pushing out new room launch, cutting back showrooms, focusing on core products, and expecting incremental promotional impact.

Q: Revenue weakness in quarter and drivers of improvement?

A: Eric DeLonier asked about revenue weakness in under $6,000 transactions; Mary Fox responded about shifts in marketing, website performance, and new innovations driving improvement.

Q: Reshoring benefits to Lovesac model?

A: Shawn Nelson explained reshoring brings more stable pricing, better product, efficient supply chain, reduced reliance on international shipping, and new IP.

Q: Gross margin strategy for new rooms?

A: Mary Fox and Shawn Nelson stated aim to maintain high fifties gross margins, focusing on domestic manufacturing and efficient production to sustain margins.