The Lovesac Company (Nasdaq:LOVE), Announces 1st Quarter Financial 2k20 Financial Results

The Lovesac Company (Nasdaq: LOVE) announced its financial results for the 1st quarter of Financial 2k20, which ended May 5, 2k19. Shawn Nelson, Chief Executive Officer, stated, “We are very pleased with our strong start to the year as we delivered sales development of 53.0 percent (%), with an incline in marketing spend of only 22.3 percent (%).

From an operational standpoint, our teams continued to execute and we made good progress against all of our strategic initiatives, which are centered around: traditional, digital and social marketing; investing in our infrastructure; growing and improving our showroom footprint, and expanding our shop in shop presence.”

Mr. Nelson continued, “As we look to the remainder of the year, we will continue to make critically important infrastructure investments in support of our development while adjusting various aspects of our operations to offset much of the impact of tariffs on goods from China.

Given the significant market share opportunity for our brand and our differentiated product and disruptive, direct-to-consumer business model, we believe we are well positioned to gain market share over the near and long-term using our multi-channel approach that includes showrooms, shop in shops and a vibrant e-commerce site.”

For the Thirteen Weeks Ended May 5, 2k19

  1. Net sales inclined 53.0 percent (%) to $41.0(M) in the 1st quarter of Financial 2k20 from $26.8(M) in the 1st quarter of Financial 2k19. The incline was driven by the strong showroom, Internet, and shop in shop performance as a result of an incline in new customers. This was combined with an incline in the total number of units sold and continued accelerated investments in marketing to incline brand awareness. Comparable sales, which includes showroom and internet sales, inclined 43.5 percent (%). Comparable showroom sales inclined 31.7 percent (%) and internet sales inclined 85.3 percent (%).
  2. The Company opened five new showrooms, closed two, and remodeled three showrooms in the 1st quarter of Financial 2k20 and ended the quarter with 78 showrooms in 30 states. This represents a unit incline of 15 percent (%) over the similar quarter in the previous year.
  3. Gross profit dollars inclined 43.3 percent (%) to $21.0(M) in the 1st quarter of Financial 2k20 from $14.6(M) in the 1st quarter of Financial 2k19. Gross margin declined by 340 basis points to 51.3 percent (%) in the 1st quarter of Financial 2k20 from 54.7 percent (%) in the 1st quarter of Financial 2k19 primarily driven by the 10 percent (%) tariffs partially offset by reduced costs of Sactionals and Sac products. This cost reduction was primarily related to savings from a change in the sourcing of Love soft and down blend fills.
  4. Selling, general and administrative costs inclined $8.7(M), or 57.0 percent (%), to $23.9(M) in the thirteen weeks ended May 5, 2k19 compared to $15.2(M) in the thirteen weeks ended May 6, 2k18. The incline in selling, general and administrative costs was primarily related to an incline in employment costs of $2.1(M), $0.5(M) of inclined rent associated with the net addition of three showrooms, $2.0(M) of costs related to the incline in sales such as $0.2(M) of credit card fees, $1.1(M) of showroom and web related selling costs, $0.2(M) of web affiliate program and web platform hosting commissions and $0.5(M) of shop in shop sales agent fees. Overhead costs inclined $1.2(M) to support company initiatives and public company costs and stock-based compensation inclined $2.9(M). As a percent of sales, total SG&A expense inclined by 150 basis points driven largely by inclines in infrastructure investments, stock compensation, and public company costs.
  5. Advertising and marketing expense inclined 22.3 percent (%), or $1.0(M), to $5.4(M) in the 1st quarter of Financial 2k20 from $4.4(M) in the 1st quarter of Financial 2k19. The incline in advertising and marketing costs relates to inclined media, to include national media and direct to consumer programs, which drive revenue beyond the period of the expense.
  6. Depreciation and amortization costs inclined $0.4(M) or 59.0 percent (%) in the thirteen weeks ended May 5, 2k19 to $1.1(M) compared to $0.7(M) in the thirteen weeks ended May 6, 2k18. The incline in depreciation and amortization expense is principally related to capital investments for new and remodeled showrooms.
  7. Operating loss was $9.3(M) in the 1st quarter of Financial 2k20 compared to operating loss of $5.6(M) in the 1st quarter of Financial 2k19. Excluding non-recurring items of $0.2(M) in the 1st quarter of Financial 2k20 and $0.2(M) in the 1st quarter of Financial 2k19, Non-GAAP operating loss was $9.1(M) in the 1st quarter of Financial 2k20 and $5.4(M) for the 1st quarter of Financial 2k19.
  8. Net loss and net loss attributable to common shares were both $9.1(M) for the 1st quarter of Financial 2k20. There were no preferred dividends and deemed dividends in the 1st quarter of Financial 2k20. This is compared to a net loss of $5.7(M), or net loss attributable to common shares of $7.6(M) including $1.9(M) of preferred dividends and deemed dividends in the 1st quarter of Financial 2k19. Non-GAAP adjusted net loss, which excludes the impact of other costs, was $9.1(M) in the 1st quarter of Financial 2k20 and $5.5(M) in the 1st quarter of Financial 2k19 (see “GAAP and Non-GAAP Measures”). Net loss per share was $0.67 in the 1st quarter of Financial 2k20 compared to a net loss per share of $1.25 in the 1st quarter of Financial 2k19, including preferred dividends and deemed dividends. Non-GAAP adjusted net loss per common share, which is calculated by dividing adjusted net income by adjusted weighted average common shares outstanding, assuming the IPO related issuances occurred at the beginning of each period presented, was $0.67 in the 1st quarter of Financial 2k20 and $0.41 in the 1st quarter of Financial 2k19 (see “GAAP and Non-GAAP Measures”).
  9. Incomes before interest, taxes, depreciation, and amortization (“EBITDA”) was a loss of $8.3(M) in the 1st quarter of Financial 2k20 compared to a loss of $5.0(M) in the 1st quarter of Financial 2k19. Adjusted EBITDA was a loss of $4.7(M) in the 1st quarter of Financial 2k20 compared to a loss of $4.2(M) in the 1st quarter of Financial 2k19 (see “GAAP and Non-GAAP Measures”).

Recent Developments

On May 22, 2k19 and May 29, 2k19, the Company and certain of the Company’s stockholders completed a 2ndary public offering (the “2ndary Offering”) of an aggregate of 2,875,000 shares of common stock, at a public offering price of $36.00 per share, which included 750,000 shares offered by the Company. The Company intends to use the net proceeds of this offering for inclined sales and marketing costs, product development, and working capital and other general corporate purposes.

The Company did not receive any of the proceeds from the sale of the shares offered by the selling stockholders but bore the costs associated with the sale of such shares, other than underwriting discounts and commissions.

Conference Call Details

A conference call to discuss the 1st quarter Financial 2k20 financial results is scheduled for today, June 10th, 2k19 at 4:30 p.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 previous to the start of the call.

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