The Lovesac Co (LOVE) Reports Notable Improvement in Net Loss and Strong Gross Profit Growth in ...
Net sales increased to $154.0 million, marking a 14.3% growth compared to the same period last year.
Gross profit surged by 36.3% to $88.4 million, with gross margin expanding significantly by 920 basis points.
Net loss improved by 68.2%, with a reduced net loss per diluted share from $(0.48) to $(0.15).
Adjusted EBITDA turned positive at $2.5 million compared to a negative $6.9 million in the prior year.
On December 6, 2023, The Lovesac Co (NASDAQ:LOVE) released its 8-K filing, announcing its financial results for the third quarter of fiscal 2024, which ended on October 29, 2023. The company, renowned for its innovative and adaptable home furnishing products, reported a robust net sales growth and a substantial improvement in its net loss figures, signaling a strong performance amidst a challenging market environment.
Financial Performance Overview
The Lovesac Co (NASDAQ:LOVE) showcased a solid financial performance in the third quarter of fiscal 2024. Net sales saw a notable increase of 14.3% year-over-year, reaching $154.0 million, driven by growth in both Showroom and Internet channels. The company's gross profit experienced a significant rise of 36.3%, amounting to $88.4 million, with gross margin expanding to 57.4% from 48.2% in the previous year. This margin expansion was primarily attributed to a decrease in total distribution and related tariff expenses, particularly inbound transportation costs.
Despite these gains, total operating expenses rose by 22.7% to $92.1 million, with selling, general, and administrative (SG&A) expenses increasing by 26.4% due to investments in payroll, selling related expenses, infrastructure, and other professional fees. Advertising and marketing expenses also went up by 10.8%, reflecting the company's continued investment in marketing initiatives to support sales growth.
However, The Lovesac Co (NASDAQ:LOVE) reported a significant improvement in its net loss, which was reduced by 68.2% to $2.3 million, or $(0.15) per diluted share. This improvement in net loss was further supported by an income tax benefit of $1.0 million during the quarter.
Balance Sheet and Cash Flow Highlights
The company's balance sheet remained strong, with cash and cash equivalents totaling $37.7 million as of October 29, 2023. Total merchandise inventory decreased to $116.6 million from $154.5 million in the previous year, reflecting a strategic reduction in stock inventory and a decrease in freight capitalization.
Net cash used in operating activities for the thirty-nine weeks ended October 29, 2023, was $7.2 million, compared to $5.5 million for the same period last year. However, the year-to-date period showed a positive cash flow from operating activities of $20.1 million, a significant improvement from a cash use of $68.4 million in the prior year.
Outlook and Future Expectations
Looking ahead, The Lovesac Co (NASDAQ:LOVE) provided guidance for the full fiscal year of 2024, anticipating net sales in the range of $710.0 million to $720.0 million and adjusted EBITDA between $54.0 million and $62.0 million. The company also expects net income to be in the range of $22.0 million to $26.0 million, with diluted income per common share projected to be between $1.35 and $1.60.
The Lovesac Co (NASDAQ:LOVE) continues to focus on its Designed For Life philosophy, driving product innovation and customer engagement. With a strong balance sheet and effective execution, the company is well-positioned to navigate market challenges and capitalize on growth opportunities.
For more detailed information and to view the full financial tables, please refer to The Lovesac Co (NASDAQ:LOVE)'s 8-K filing.
Explore the complete 8-K earnings release (here) from The Lovesac Co for further details.
This article first appeared on GuruFocus.
