‘Everything worked’
City-based Lovesac benefits from furniture boom
STAMFORD — Millions of Americans are spending much more time at home due to the coronavirus crisis — and many are willing to spend to upgrade their interior space.
The rise of at-home working and learning has contributed to a surge in demand for furniture, with Stamford-based Lovesac ranking as one of the biggest beneficiaries. Its sales have spiked in recent months, with online business driving the increases. Now, the company is looking to turn that momentum into long-term growth to become an industry powerhouse.
“A simple way to put it is everything worked,”
Lovesac founder and CEO Shawn Nelson said in an interview. “We had a number of tactics — from discounts, to introduction of new products, to merchandising efforts — that all went really well and delivered results that we’re really proud of.”
Major growth
In the wake of factory shutdowns in China and Vietnam, many homefurnishing firms have scrambled to build up inventory.
Furniture retailers saw their sales for Nov. 27 to Nov. 30 — from Black Friday to Cyber Monday — grow an average of 30 percent year over year, according to a survey conducted by the Home Furnishings Association and investment bank and institutional-securities firm Piper Sandler.
“There was such pentup demand for product,” said Home Furnishings Association CEO Mark Schumacher. “It’s going to take a number of months for the supply chain to catch up.”
But such issues have not hampered Lovesac, according to Nelson.
“We feel really good on the supply side,” he said. “We’ve done a good job of preparing and not overextending ourselves.”
A signature line of couches — which are known as Sactionals — account for about 85 percent of sales, the company estimates. The seating arrangements can be reconfigured, the covers are washable, and the covers and seat filling are changeable.
The prices depend on their size. One seat and side sells for $770, while 10 seats and 12 sides go for $8,155, according to the company’s website.
Another mainstay are Sacs, which are beanbag seats filled with Durafoam and the source of the company’s name.
Lovesac has sought to build customer awareness with television and digital media marketing campaigns. Its Instagram account, for instance, has about 477,000 followers. The target audience is older members of the millennial generation who are in their 30s.
The growing customer base translated into a 44 percent sales increase in the quarter ending Nov. 1, for a total of $75 million. In the same period, it recorded a $2.5 million profit.
Spurring the growth, Lovesac’s internet sales jumped 125 percent in the past quarter.
“Most of our sales are effectively internet sales — just consummated at retail locations,” Nelson said. “Customers have done their research online and understand generally what they’re looking for.”
The results have encouraged investors in Lovesac, which became a publicly traded company in June 2018. Its shares closed Thursday at about $43, in line with a 52-week high of around $46.
Facing challenges
But pandemic-sparked store closings have been the company’s greatest challenge this year. To adhere with local and state regulations, Lovesac temporarily closed all of its showrooms in March and in April announced it was enacting a major costcutting plan.
The changes included a “reduction in workforce” of about 445 part-time employees, who represented 57 percent of the company’s headcount. In addition, it cut the cash compensation by 20 percent for Nelson, as well as for its chief operating officer and chief financial officer.
Since then, “we have already been hiring back aggressively and a significant portion of the parttime positions have been filled again,” Nelson said.
By the end of the past quarter, most showrooms had fully reopened for walk-in customers.
In the past quarter, “comparable” showroom sales increased 26 percent year over year, although the temporary closings resulted in a 14 percent decrease for the past nine months.
Within Connecticut, Lovesac has showrooms in downtown Greenwich, downtown Westport, at Danbury Fair mall and in Blue Back Square in West Hartford. The company operates 107 showrooms in total, compared with 84 a year ago.
It has further broadened its reach through partnerships with Macy’s and Costco. In November, the company announced its launch on BestBuy.com, complementing “shop-inshops” in Best Buy stores that opened in 2019.
“We know consumers still prefer to see touch and feel the product,” Nelson said. “As COVID lets up, we expect to see and have seen sales return to the retail channel.”
Optimistic outlook
Even as the coronavirus vaccines roll out, many employers are unlikely to soon abandon work-fromhome arrangements — which industry experts see as an auspicious sign for furniture sales.
“People looked around for the first time during this pandemic to their home environment, and as they tried to work in that environment, they realized there were a lot of things they needed to change,” Schumacher said. “The attention on home has never been more acute than now. I believe that is going to carry us for months ahead.”
The jump in home sales in Connecticut and across the country offers another boost.
“Buying homes furnished or including some of the furnishing is becoming more common, especially for larger properties where the homeowner is downsizing and no longer needs all their furniture,” said Tammy Felenstein, managing director of sales for real estate brokerage Brown Harris Stevens Connecticut.
“I can’t stress how important staging is to the sale of a home. Most buyers have a hard time envisioning a beautiful setting if the home is poorly decorated or is vacant. Additionally, when buyers come across a gorgeously staged home, they envision themselves there. It appeals to their emotions,” she said.
Lovesac is not alone in vying for the increased demand. Competitors that sell couches at similar prices include Pottery Barn, Crate & Barrel and Restoration Hardware.
“The upholstery category — the couch category — is a $30 billion category, in which we have between 1 percent and 2 percent market share,” Nelson said. “Yet in my humble opinion, we make the best product in the category. I believe that there’s still significant growth to be gained through the Sactionals platform.”