Lovesac (LOVE) Q3 Earnings & Revenues Beat Estimates, Up Y/Y
The Lovesac Company LOVE posted better-than-expected results in third-quarter fiscal 2024 (ended Oct 29, 2023), with earnings and net sales surpassing the Zacks Consensus Estimate. On a year-over-year basis, net sales increased and the adjusted loss improved.
The company's disruptive Designed For Life platform, product innovation, compelling marketing and highly-productive omnichannel footprint drove the performance.
LOVE anticipates its strong balance sheet and proactive investments in new products to drive consumer demand and expand market leadership in the upcoming periods.
Following the earnings release, shares of Lovesac rose 12.3% during the trading hours on Dec 6.
Inside the Numbers
In the fiscal third quarter, the company reported an adjusted loss of 15 cents per share, narrower than the Zacks Consensus Estimate of an adjusted loss of 31 cents. Lovesac reported an adjusted loss per share of 48 cents in the prior year's quarter.
The Lovesac Company Price, Consensus and EPS Surprise
The Lovesac Company price-consensus-eps-surprise-chart | The Lovesac Company Quote
Net sales of $154 million topped the consensus estimate of $153.7 million by 0.2%. The metric increased 14.3% from the year-ago figure. The upside was driven by new showroom openings and a 2.0% increase in omni-channel comparable net sales, attributed to higher promotional discounting and marketing campaigns.
Operating Highlights
The gross margin expanded 920 basis points (bps) year over year to 57.4%. The upside can be attributed to a contraction of approximately 1,070 bps in total distribution and related tariff expenses, partially offset by a 150 bps decline in product margin due to higher promotional discounting.
Selling, general and administrative expenses, as a percent of net sales, increased 420 bps to 43.9% from the prior-year quarter’s levels. The increase was due to investments in payroll, selling-related expenses, infrastructure, restatement-related costs and other professional fees.
Advertising & marketing expenses, as a percentage of net sales, declined 40 bps year over year to 13.7%.
Adjusted EBITDA was $2.5 million against the Adjusted EBITDA loss of $6.9 million reported in the prior-year period.
Financial Highlights
As of Oct 29, 2023, the company had cash and cash equivalents of $37.7 million compared with $43.5 million at the end of fiscal 2023. Net cash from operating activities totaled $20.1 million in the first nine months of fiscal 2024, against net cash used of $588.5 million reported in the year-ago period.
Q4 Guidance
For the fourth quarter of fiscal 2024, the company expects net sales in the range of $260 to $270 million and adjusted EBITDA in the range of $48 million and $56 million. In fourth-quarter fiscal 2023, the company reported net sales of $238.8 million and an adjusted EBITDA of $48.3 million.
The company expects net income in the range of $29-$33 million. In the year-ago period, the company reported net income of $27.6 million.
Diluted income per common share is expected in the range of $1.77-$2.02 on approximately 16.6 million estimated diluted weighted average shares outstanding.
Fiscal 2024 Guidance Revised
For the fiscal 2024, the company expects net sales in the range of $710-$720 million. Earlier, it expected net sales between $710 million and $730 million.
Adjusted EBITDA is now expected to be in the range of $54-$62 million compared with the previous expectation of $51-$63 million.
The company expects net income of $22-$26 million compared with the previous estimation of $20-$29 million.
Diluted income per common share is expected to be $1.35 to $1.60 compared with the previous expectation of $1.21-$1.75 on approximately 16.5 million estimated diluted weighted average shares outstanding.
Zacks Rank and Key Picks
Lovesac currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks from the Zacks Retail-Wholesale sector are:
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The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) suggests a rise of 5.1% and 26.2%, respectively, from the year-ago period’s levels.
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The Zacks Consensus Estimate for ANF’s 2024 sales and EPS suggests increases of 12.8% and 2,088%, respectively, from the year-ago period’s levels.
Beacon Roofing Supply, Inc. BECN sports a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 11.1%, on average. Shares of BECN have increased 41.9% in the past year.
The Zacks Consensus Estimate for BECN’s 2023 sales and EPS indicates 7.2% and 8.2% growth, respectively, from the year-ago period’s levels.a
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