Lovesac’s second quarter results met Wall Street’s revenue expectations but were met with a negative market reaction, reflecting investor concerns about persistent industry headwinds and margin pressures. Management cited continued category softness and promotional intensity as major factors impacting profitability, though they highlighted market share gains and the rollout of new products such as the rebranded Snug collection. CEO Shawn Nelson emphasized that, despite a challenging macro backdrop, Lovesac’s omnichannel sales strategy and ongoing cost controls helped offset declines in certain sales channels.
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Lovesac (LOVE) Q2 CY2025 Highlights:
- Revenue: $160.5 million vs analyst estimates of $160.3 million (2.5% year-on-year growth, in line)
- EPS (GAAP): -$0.45 vs analyst estimates of -$0.71 (35.5% beat)
- Adjusted EBITDA: $837,000 vs analyst estimates of -$5.43 million (0.5% margin, significant beat)
- The company reconfirmed its revenue guidance for the full year of $725 million at the midpoint
- EPS (GAAP) guidance for the full year is $0.79 at the midpoint, missing analyst estimates by 21.6%
- EBITDA guidance for the full year is $48.5 million at the midpoint, below analyst estimates of $50.18 million
- Operating Margin: -5.5%, in line with the same quarter last year
- Locations: 270 at quarter end, up from 254 in the same quarter last year
- Market Capitalization: $264.2 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Lovesac’s Q2 Earnings Call
- Maria Ripps (Canaccord Genuity) asked whether the brand evolution would alter customer acquisition or marketing effectiveness. CEO Shawn Nelson and President Mary Fox responded that the new brand and product hierarchy will enable more targeted, efficient marketing and channel strategies, with early results from the Snug campaign already visible.
- Michael Baker (D.A. Davidson) inquired about the relative impact of tariffs versus promotions on EBITDA guidance changes. Fox explained that tariffs nearly doubled in key sourcing countries, while Siegner emphasized that both tariff and promotional pressures were more punitive than previously expected.
- Eric DeLonier (Craig Hallum Capital Group) sought clarity on the levers available to expand gross margin in upcoming quarters. Siegner outlined multiple initiatives, including logistics optimization, further country-of-origin shifts, new delivery options, and evolving the promotion strategy to reduce discounting.
- Thomas Forte (Maxim Group) asked about the potential for U.S.-based manufacturing. Nelson stated that while not imminent, the company is actively pursuing domestic production, enabled by its unique component-based product design.
- Matt Koranda (ROTH Capital Partners) questioned customer response to pricing actions and the sustainability of market share gains amid continued promotions. Fox noted no evidence of customer trade-down and emphasized that Lovesac’s value proposition and premium product attributes remain intact.
Catalysts in Upcoming Quarters
In the upcoming quarters, our analysts will be tracking (1) the sales ramp and consumer response to the Snug product line and related marketing campaigns, (2) progress in mitigating tariff and promotional margin pressures as new sourcing and logistics strategies are implemented, and (3) the effectiveness of the ongoing brand evolution in supporting omnichannel growth and customer acquisition. The timing and execution of announced product launches and digital engagement initiatives will also be critical markers for assessing Lovesac’s trajectory.
Lovesac currently trades at $18.50, down from $20.77 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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