Lovesac reported third‑quarter fiscal 2026 net sales of $150.2 million, a modest 0.2 % increase from $149.9 million in the same quarter a year earlier. The company’s gross margin fell to 56.1 % from 58.5 % in Q3 FY25, a compression of 240 basis points driven largely by a 320‑basis‑point rise in inbound transportation and tariff costs, partially offset by a modest lift in product‑level margins.
Showroom sales grew 12.8 % year‑over‑year to $73.4 million, the strongest channel performance in the quarter, while sales through other touchpoints—including pop‑up shops, shop‑in‑shop sales, open‑box inventory, and the Love‑by‑Lovesac program—declined 27.3 % to $76.8 million. Segment‑level data show Sactionals net sales down 1 % to $58.6 million and Sacs net sales down 9 % to $41.6 million, underscoring a shift toward higher‑margin product lines.
Earnings per share were $‑0.72, missing the consensus estimate of $‑0.70 and widening the net loss compared with the $‑0.32 loss reported in Q3 FY25. The miss reflects the combined impact of higher cost inflation, intensified promotional discounting, and consumer uncertainty that has led to choppy lower‑price transactions. Revenue also missed the consensus estimate of $153.81 million, falling $3.61 million (2.4 %) short of expectations.
Management reiterated its focus on margin improvement and cautious growth. CEO Shawn Nelson said the company is “temporarily slowing the expansion of physical stores” and will not base future plans on a near‑term recovery in consumer demand. CFO Keith Siegner highlighted that gross margin compression is primarily due to the 320‑basis‑point increase in inbound transportation and tariff costs, and that a step‑up in promotions will further pressure Q4 margins.
Guidance for the remainder of fiscal 2026 remains unchanged: full‑year net sales are projected at $685–$705 million, adjusted EBITDA at $37–$43 million, and net income at $2–$8 million. Q4 guidance calls for net sales of $236–$256 million, adjusted EBITDA of $51–$56 million, and net income of $30–$36 million, reflecting management’s concern about macro‑economic headwinds and the need to preserve margin in a competitive furniture market.
Investors reacted negatively to the earnings release, with the market citing the revenue and EPS misses, widening net loss, and margin compression as key concerns. The company’s guidance, while modestly optimistic, signals a cautious outlook amid rising costs and consumer uncertainty, underscoring the challenges Lovesac faces in maintaining profitability while pursuing growth through new product launches and domestic manufacturing initiatives.
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