The Lovesac Company (Nasdaq: LOVE) (“Lovesac” or the “Company”),
the home furnishing brand best known for its Sactionals, The
World's Most Adaptable Couch, today announced financial results for
the first quarter of fiscal 2024, which ended April 30, 2023.
Shawn Nelson, Chief Executive Officer, stated,
“We are very pleased with our first quarter performance, highlights
of which included 9% and 15% increases in total sales and
comparable sales, respectively, despite dampened consumer spending
and higher interest rates. Lovesac’s relative outperformance
reflects success executing our highly differentiated,
customer-centric business model, the loyalty commanded by our
Designed For Life product platforms, and our stellar operational
platform.”
Mr. Nelson continued, “While we expect
unfavorable macro-economic conditions to continue in the coming
quarters, Lovesac continues to operate from a position of strength
with a debt free balance sheet and a proven track record of cost
discipline and rigor. We believe that we are thus poised to
continue investing in the future with an accelerated pace of new
product innovation that will expect to drive further customer
enthusiasm and uptake.”
Key Measures for the First Quarter of
Fiscal 2024 Ending April 30, 2023:(Dollars in
millions, except per share amounts. Dollar and percentage changes
may not recalculate due to rounding.)
|
Thirteen weeks ended |
April 30, 2023 |
May 1, 2022 |
% Inc (Dec) |
Net Sales |
$141.2 |
$129.4 |
9.1% |
Gross Profit |
$70.7 |
$66.1 |
7.0% |
Gross Margin |
50.1% |
51.1% |
(100) bps |
Total Operating Expense |
$76.6 |
$63.5 |
20.7% |
SG&A |
$56.8 |
$44.9 |
26.6% |
SG&A as a % of Net Sales |
40.3% |
34.7% |
(560) bps |
Advertising & Marketing |
$16.9 |
$15.9 |
6.4% |
Advertising & Marketing as a % of Net Sales |
12.0% |
12.3% |
(30) bps |
Basic (loss) income per common share |
$(0.28) |
$0.13 |
(315.4%) |
Diluted (loss) income per common share |
$(0.28) |
$0.12 |
(333.3%) |
Net (Loss) Income |
$(4.2) |
$1.9 |
(323.2%) |
Adjusted EBITDA1 |
$(2.4) |
$6.4 |
(137.0%) |
Net Cash Provided by (Used in) Operating Activities |
$6.3 |
$(21.8) |
128.9% |
1 Adjusted EBITDA is a non-GAAP measure. See
“Non-GAAP Information” and “Reconciliation of Non-GAAP Financial
Measures” included in this press release.
Percent increase except showroom count |
|
Thirteen weeks ended |
April 30, 2023 |
May 1, 2022 |
Total Comparable Sales 2 |
15.1% |
42.2% |
Comparable Showroom Sales 3 |
8.4% |
53.2% |
Internet Sales |
28.7% |
24.1% |
Ending Showroom Count |
211 |
162 |
2 Total comparable sales include showroom
transactions through the point of sale and internet net sales.3
Comparable showroom sales reflect transactions through the point of
sale and not necessarily product that has shipped to the customer.
Product that has shipped to the customer is included in Net
Sales.
Highlights for the Quarter Ended
April 30, 2023:
- The net sales increase of 9.1% was
driven by growth across all channels. Showroom net sales, which
include kiosks and mobile concierges, increased 2.9%. Internet net
sales increased 28.7%, and our “Other” channel which principally
includes pop-up-shops and shop-in-shops increased 3.1%. The
increase in showroom net sales was driven by an increase of 8.4% in
comparable showroom sales related to higher point of sale
transactions with lower promotional discounting, the addition of 50
new showrooms and one less kiosk compared to the prior year period,
and strong promotion campaigns. The internet net sales increase was
driven by the same sales promotion campaigns. The Company also
opened one additional Best Buy shop-in-shop location compared to
the prior year period.
- Gross profit increased
$4.6 million, or 7.0%, to $70.7 million in the first
quarter of fiscal 2024 from $66.1 million in the first quarter
of fiscal 2023. Gross margin decreased 100 basis points to 50.1% of
net sales in the first quarter of fiscal 2024 from 51.1% of net
sales in the prior year period primarily driven by a decrease of
120 basis points in product margin driven by higher promotional
discounting partially offset by a decrease of approximately 20
basis points in total distribution and related tariff expenses. The
slight decrease in total distribution and related tariff expenses
over prior year is principally related to the positive impact of
the 170 basis points decrease in inbound transportation costs
partially offset by 150 basis points in higher outbound
transportation and warehousing costs.
- SG&A expense as a percent of net
sales increased by 560 basis points due to investments in payroll,
selling related expenses, and rent, partially offset by
equity-based compensation and travel.
- Advertising and
marketing expense increased 6.4% due to continued investments in
marketing spend to support our net sales growth. As a percent of
net sales, advertising and marketing decreased by 30 basis
points.
- Operating loss was
$5.9 million in the first quarter of fiscal 2024 compared to
operating income of $2.6 million in the first quarter of
fiscal 2023. Operating margin was (4.2)% of net sales in the first
quarter of fiscal 2024 compared to 2.0% of net sales in the first
quarter of fiscal 2023.
- Net loss was $4.2 million in
the first quarter of fiscal 2024 or $0.28 loss per diluted
share compared to a net income of $1.9 million or $0.12
per diluted share in the first quarter of fiscal 2023. During the
first quarter of fiscal 2024, the Company recorded an income tax
benefit of $1.3 million, compared to income tax expense of
$0.7 million, for the first quarter of fiscal 2023. The change
in provision is primarily driven by the Company generating net loss
before taxes of $5.5 million and net income before taxes of $2.6
million in the first quarter of fiscal 2024 and fiscal 2023,
respectively.
Other Financial Highlights as of
April 30, 2023:
- The cash and cash equivalents
balance as of April 30, 2023 was $45.1 million as compared to
$64.4 million as of May 1, 2022. There was no balance on the
Company’s line of credit as of April 30, 2023 and May 1,
2022. The Company’s availability under the line of credit was $36.0
million and $31.2 million as of April 30, 2023 and May 1,
2022, respectively. As previously announced, on March 24, 2023, we
amended our existing credit agreement with Wells Fargo Bank, N.A.
to extend the maturity date to September 30, 2024. All other terms
of the credit agreement remain unchanged.
- Total merchandise inventory was
$106.8 million as of April 30, 2023 as compared to $123.0
million as of May 1, 2022 principally related to a stock
inventory increase of $7.6 million coupled with a decrease in
freight capitalization of $24.1 million related to the decrease in
inbound freight expense.
Outlook:
The Company provides guidance of select
information related to the Company’s financial and operating
performance, and such measures may differ from year to year. The
projections are as of this date and the Company assumes no
obligation to update or supplement this information.
The Company continues to expect the following
for the full year of fiscal 2024:
- Net sales in the range of $700.0
million to $740.0 million.
- Adjusted EBITDA4 in the range of
$55.0 million to $66.0 million.
- Net income in the range of $30.0
million to $36.0 million.
- Diluted income per common share in
the range of $1.83 to $2.24 on approximately 16.4 million estimated
diluted weighted average shares outstanding.
- Fiscal 2024 will contain an
additional “53rd week” in the fourth quarter versus 52 weeks in
fiscal 2023.
The Company currently expects the following for
the second quarter of fiscal 2024:
- Net sales in the range of $149.0
million to $151.0 million.
- Adjusted EBITDA4 in the range of
$1.0 million to $1.5 million.
- Net loss in the range of $2.0
million to $2.5 million.
- Diluted loss per common share in
the range of $0.12 to $0.16 on approximately 15.2 million estimated
weighted average shares outstanding.
4 Adjusted EBITDA is a non-GAAP measure. See
“Non-GAAP Information” and “Reconciliation of Non-GAAP Financial
Measures” included in this press release.
Conference Call
Information:
A conference call to discuss the financial
results for the first quarter ended April 30, 2023 is
scheduled for today, June 7, 2023, at 8:30 a.m. Eastern Time.
Investors and analysts interested in participating in the call are
invited to dial (877) 407-3982 (international callers please dial
(201) 493-6780) approximately 10 minutes prior to the start of the
call. A live audio webcast of the conference call will be available
online at investor.lovesac.com.
A recorded replay of the conference call will be
available within two hours of the conclusion of the call and can be
accessed online at investor.lovesac.com for 90 days.
About The Lovesac Company:
Based in Stamford, Connecticut, The Lovesac
Company is a technology driven company that designs, manufactures
and sells unique, high quality furniture derived through its
proprietary Designed for Life approach which results in products
that are built to last a lifetime and designed to evolve as our
customers’ lives do. Our current product offering is comprised of
modular couches called Sactionals, premium foam beanbag chairs
called Sacs, and their associated home decor accessories.
Innovation is at the center of our design philosophy with all of
our core products protected by a robust portfolio of utility
patents. We market and sell our products primarily online directly
at www.lovesac.com, supported by direct-to-consumer touch-feel
points in the form of our own showrooms as well as through
shop-in-shops and pop-up-shops with third party retailers. LOVESAC,
SACTIONALS, SAC, DESIGNED FOR LIFE, and THE WORLD'S MOST ADAPTABLE
COUCH are trademarks of The Lovesac Company and are Registered in
U.S. Patent and Trademark Office.
Non-GAAP Information:
Adjusted EBITDA is defined as a non-GAAP
financial measure by the Securities and Exchange Commission (the
“SEC”) that is a supplemental measure of financial performance not
required by, or presented in accordance with, GAAP. We define
“Adjusted EBITDA” as earnings before interest, taxes, depreciation
and amortization, adjusted for the impact of certain non-cash and
other items that we do not consider in our evaluation of ongoing
operating performance. These items include management fees,
equity-based compensation expense, write-offs of property and
equipment, deferred rent, financing expenses and certain other
charges and gains that we do not believe reflect our underlying
business performance. We have reconciled this non-GAAP financial
measure with the most directly comparable GAAP financial measure
within the schedules attached hereto. Statements regarding our
expectations as to fiscal 2024 Adjusted EBITDA do not include
certain charges and costs. We define “Adjusted EBITDA” as
EBITDA adjusted for the impact of certain non-cash and other items
that we do not consider in our evaluation of ongoing operating
performance. These items include equity-based compensation expense
and certain other charges and gains that we do not believe reflect
our underlying business performance. We are not able to provide a
reconciliation of our non-GAAP financial guidance to the
corresponding GAAP measures without unreasonable effort because of
the uncertainty and variability of the nature and amount of these
future charges and costs. This is due to the inherent difficulty of
forecasting the timing of certain events that have not yet occurred
and are out of the Company’s control.
We believe that these non-GAAP financial
measures not only provide its management with comparable financial
data for internal financial analysis but also provide meaningful
supplemental information to investors. Specifically, these non-GAAP
financial measures allow investors to better understand the
performance of our business, facilitate a more meaningful
comparison of our actual results on a period-over-period basis and
provide for a more complete understanding of factors and trends
affecting our business. We have provided this information as a
means to evaluate the results of our ongoing operations alongside
GAAP measures such as gross profit, operating income (loss) and net
income (loss). Other companies in our industry may calculate these
items differently than we do. These non-GAAP measures should not be
considered as a substitute for the most directly comparable
financial measures prepared in accordance with GAAP, such as net
income (loss) or net income (loss) per share as a measure of
financial performance, cash flows from operating activities as a
measure of liquidity, or any other performance measure derived in
accordance with GAAP. Non-GAAP financial measures have limitations
as analytical tools, and investors should not consider them in
isolation or as a substitute for analysis of the Company’s results
as reported under GAAP.
Cautionary Statement Concerning
Forward-Looking
Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and other legal authority. Forward-looking
statements can be identified by words such as “may,” “continue(s),”
“believe,” “anticipate,” “could,” “should,” “intend,” “plan,”
“will,” “aim(s),” “can,” “would,” “expect(s),” “expectation(s),”
“estimate(s),” “project(s),” “forecast(s)”, “positioned,”
“approximately,” “potential,” “goal,” “pro forma,” “strategy,”
“outlook” or the negative of these words or other similar terms or
expressions that concern our expectations, strategy, plans, or
intentions. All statements, other than statements of historical
facts, included in this press release under the heading “Outlook”
and all statements regarding strategy, future operations, the pace
and success of new products, future financial position or
projections, future revenue, projected expenses, sustainability
goals, prospects, plans and objectives of management are
forward-looking statements. These statements are based on
management’s current expectations, beliefs and assumptions
concerning the future of our business, anticipated events and
trends, the economy and other future conditions. We may not
actually achieve the plans, carry out the intentions or meet the
expectations disclosed in the forward-looking statements and you
should not rely on these forward-looking statements. Actual results
and performance could differ materially from those projected in the
forward-looking statements as a result of many factors. Among the
key factors that could cause actual results to differ materially
from those expressed or implied in the forward-looking statements
include: business disruptions or other consequences of economic
instability, political instability, civil unrest, armed hostilities
(including the conflict in Ukraine), natural and man-made
disasters, pandemics or other public health crises, such as the
COVID-19 pandemic and related variants, or other catastrophic
events; the impact of changes or declines in consumer spending and
increases in interest rates and inflation on our business, sales,
results of operations and financial condition; our ability to
manage and sustain our growth and profitability effectively,
including in our ecommerce business, forecast our operating
results, and manage inventory levels; our ability to improve our
products and develop new products; our ability to successfully open
and operate new showrooms; our ability to advance, implement or
achieve the goals set forth in our ESG Report; our ability to
realize the expected benefits of investments in our supply chain
and infrastructure; disruption in our supply chain and dependence
on foreign manufacturing and imports for our products; our ability
to acquire new customers and engage existing customers;
reputational risk associated with increased use of social media;
our ability to attract, develop and retain highly skilled
associates; system interruption or failures in our technology
infrastructure needed to service our customers, process
transactions and fulfill orders; any inability to implement and
maintain effective internal control over financial reporting or
inability to remediate any internal controls deemed ineffective;
unauthorized disclosure of sensitive or confidential information
through breach of our computer system; the ability of third-party
providers to continue uninterrupted service; the impact of tariffs,
and the countermeasures and tariff mitigation initiatives; the
regulatory environment in which we operate, our ability to
maintain, grow and enforce our brand and intellectual property
rights and avoid infringement or violation of the intellectual
property rights of others; and our ability to compete and succeed
in a highly competitive and evolving industry, as well as those
risks and uncertainties disclosed under the sections entitled “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our most recent Form 10-K
and in our Form 10-Qs filed with the Securities and Exchange
Commission, and similar disclosures in subsequent reports filed
with the SEC, which are available on our investor relations website
at investor.lovesac.com and on the SEC website at www.sec.gov. Any
forward-looking statement made by us in this press release speaks
only as of the date on which we make it. We disclaim any intent or
obligation to update these forward-looking statements to reflect
events or circumstances that exist after the date on which they
were made.
Investor Relations
Contact:Rachel Schacter, ICR(203)
682-8200InvestorRelations@lovesac.com
THE LOVESAC COMPANYCONDENSED BALANCE
SHEETS(unaudited) |
|
|
April 30,2023 |
|
January 29,2023 |
(amounts in thousands, except
share and per share amounts) |
|
|
|
Assets |
|
|
|
Current
Assets |
|
|
|
Cash and cash equivalents |
$ |
45,125 |
|
|
$ |
43,533 |
|
Trade accounts receivable |
|
18,447 |
|
|
|
9,469 |
|
Merchandise inventories,
net |
|
106,819 |
|
|
|
119,962 |
|
Prepaid expenses and other
current assets |
|
17,306 |
|
|
|
21,077 |
|
Total Current
Assets |
|
187,697 |
|
|
|
194,041 |
|
Property and equipment,
net |
|
59,219 |
|
|
|
52,904 |
|
Operating lease right-of-use
assets |
|
142,463 |
|
|
|
138,271 |
|
Other
Assets |
|
|
|
Goodwill |
|
144 |
|
|
|
144 |
|
Intangible assets, net |
|
1,445 |
|
|
|
1,411 |
|
Deferred tax asset |
|
10,750 |
|
|
|
9,420 |
|
Other assets |
|
26,318 |
|
|
|
21,863 |
|
Total Other
Assets |
|
38,657 |
|
|
|
32,838 |
|
Total
Assets |
$ |
428,036 |
|
|
$ |
418,054 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current
Liabilities |
|
|
|
Accounts payable |
$ |
32,165 |
|
|
$ |
24,576 |
|
Accrued expenses |
|
16,765 |
|
|
|
23,392 |
|
Payroll payable |
|
6,582 |
|
|
|
6,783 |
|
Customer deposits |
|
15,372 |
|
|
|
6,760 |
|
Current operating lease
liabilities |
|
22,160 |
|
|
|
21,898 |
|
Sales taxes payable |
|
3,878 |
|
|
|
5,430 |
|
Total Current
Liabilities |
|
96,922 |
|
|
|
88,839 |
|
Operating Lease
Liabilities, long-term |
|
141,868 |
|
|
|
135,955 |
|
Line of
Credit |
|
— |
|
|
|
— |
|
Total
Liabilities |
|
238,790 |
|
|
|
224,794 |
|
Commitments and
Contingencies |
|
|
|
Stockholders’
Equity |
|
|
|
Preferred Stock $0.00001 par
value, 10,000,000 shares authorized, no shares issued or
outstanding as of April 30, 2023 and January 29,
2023. |
|
— |
|
|
|
— |
|
Common Stock $.00001 par
value, 40,000,000 shares authorized, 15,217,120 shares issued and
outstanding as of April 30, 2023 and 15,195,698 shares issued
and outstanding as of January 29, 2023. |
|
— |
|
|
|
— |
|
Additional paid-in
capital |
|
182,770 |
|
|
|
182,554 |
|
Accumulated earnings |
|
6,476 |
|
|
|
10,706 |
|
Stockholders’
Equity |
|
189,246 |
|
|
|
193,260 |
|
Total Liabilities and
Stockholders’ Equity |
$ |
428,036 |
|
|
$ |
418,054 |
|
THE LOVESAC COMPANYCONDENSED STATEMENTS OF
OPERATIONS(unaudited) |
|
|
Thirteen weeks ended |
(amounts in thousands, except per share data and share
amounts) |
April 30,2023 |
|
May 1,2022 |
Net sales |
$ |
141,193 |
|
|
$ |
129,380 |
|
Cost of merchandise sold |
|
70,489 |
|
|
|
63,272 |
|
Gross profit |
|
70,704 |
|
|
|
66,108 |
|
Operating expenses |
|
|
|
Selling, general and administration expenses |
|
56,838 |
|
|
|
44,901 |
|
Advertising and marketing |
|
16,913 |
|
|
|
15,901 |
|
Depreciation and amortization |
|
2,822 |
|
|
|
2,661 |
|
Total operating expenses |
|
76,573 |
|
|
|
63,463 |
|
|
|
|
|
Operating (loss) income |
|
(5,869 |
) |
|
|
2,645 |
|
Interest income (expense), net |
|
341 |
|
|
|
(35 |
) |
Net (loss) income before taxes |
|
(5,528 |
) |
|
|
2,610 |
|
Benefit from (provision for) income taxes |
|
1,298 |
|
|
|
(715 |
) |
Net (loss) income |
$ |
(4,230 |
) |
|
$ |
1,895 |
|
|
|
|
|
Net (loss) income per common share: |
|
|
|
Basic |
$ |
(0.28 |
) |
|
$ |
0.13 |
|
Diluted |
$ |
(0.28 |
) |
|
$ |
0.12 |
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
Basic |
|
15,230,763 |
|
|
|
15,155,378 |
|
Diluted |
|
15,230,763 |
|
|
|
16,173,339 |
|
THE LOVESAC COMPANYCONDENSED STATEMENT OF
CASH FLOWS(unaudited) |
|
|
Thirteen weeks ended |
(amounts in thousands) |
April 30,2023 |
|
May 1,2022 |
Cash Flows from Operating Activities |
|
|
|
Net (loss) income |
$ |
(4,230 |
) |
|
$ |
1,895 |
|
Adjustments to reconcile net income to net cash used in operating
activities: |
|
|
|
Depreciation and amortization of property and equipment |
|
2,697 |
|
|
|
2,575 |
|
Amortization of other intangible assets |
|
125 |
|
|
|
86 |
|
Amortization of deferred financing fees |
|
42 |
|
|
|
29 |
|
Equity based compensation |
|
686 |
|
|
|
1,163 |
|
Non-cash operating lease cost |
|
5,308 |
|
|
|
4,184 |
|
Deferred income taxes |
|
(1,330 |
) |
|
|
523 |
|
Changes in operating assets and liabilities: |
|
|
|
Trade accounts receivable |
|
(8,978 |
) |
|
|
2,134 |
|
Merchandise inventories |
|
13,143 |
|
|
|
(14,515 |
) |
Prepaid expenses and other current assets |
|
5,971 |
|
|
|
270 |
|
Other assets |
|
(4,455 |
) |
|
|
— |
|
Accounts payable and accrued expenses |
|
(5,785 |
) |
|
|
(10,359 |
) |
Operating lease liabilities |
|
(5,515 |
) |
|
|
(4,062 |
) |
Customer deposits |
|
8,612 |
|
|
|
(5,709 |
) |
Net Cash Provided by (Used in) Operating
Activities |
|
6,291 |
|
|
|
(21,786 |
) |
Cash Flows from Investing Activities |
|
|
|
Purchase of property and equipment |
|
(4,177 |
) |
|
|
(5,893 |
) |
Payments for patents and trademarks |
|
— |
|
|
|
(125 |
) |
Net Cash Used in Investing Activities |
|
(4,177 |
) |
|
|
(6,018 |
) |
Cash Flows from Financing Activities |
|
|
|
Payment of deferred financing costs |
|
(52 |
) |
|
|
(161 |
) |
Taxes paid for net share settlement of equity awards |
|
(470 |
) |
|
|
(47 |
) |
Net Cash Used in Financing Activities |
|
(522 |
) |
|
|
(208 |
) |
Net Change in Cash and Cash Equivalents |
|
1,592 |
|
|
|
(28,012 |
) |
Cash and Cash Equivalents - Beginning |
|
43,533 |
|
|
|
92,392 |
|
Cash and Cash Equivalents - Ending |
$ |
45,125 |
|
|
$ |
64,380 |
|
THE LOVESAC COMPANYRECONCILIATION OF
NON-GAAP FINANCIAL
MEASURES(unaudited) |
|
|
Thirteen weeks ended |
(amounts in thousands) |
April 30,2023 |
|
May 1,2022 |
Net (loss) income |
$ |
(4,230 |
) |
|
$ |
1,895 |
|
Interest (income) expense, net |
|
(341 |
) |
|
|
35 |
|
Income tax (benefit) expense |
|
(1,298 |
) |
|
|
715 |
|
Depreciation and amortization |
|
2,822 |
|
|
|
2,661 |
|
EBITDA |
|
(3,047 |
) |
|
|
5,306 |
|
Equity-based compensation (a) |
|
744 |
|
|
|
1,172 |
|
Other non-recurring expenses (b) |
|
(53 |
) |
|
|
(105 |
) |
Adjusted EBITDA |
$ |
(2,356 |
) |
|
$ |
6,373 |
|
(a) Represents expenses, such as
compensation expense and employer taxes related to RSU equity
vesting and exercises associated with stock options and restricted
stock units granted to our associates and board of directors.
Employer taxes are included as part of selling, general and
administrative expenses on the Statements of Operations.
(b) Other non-recurring expenses in the
thirteen weeks ended April 30, 2023 represents business loss
proceeds received from an insurance settlement. Other non-recurring
expenses in the thirteen weeks ended May 1, 2022 represents a
legal settlement.
Lovesac (NASDAQ:LOVE)
Historical Stock Chart
From Jun 2024 to Jul 2024
Lovesac (NASDAQ:LOVE)
Historical Stock Chart
From Jul 2023 to Jul 2024