Furniture maker Lovesac grows despite ‘challenging’ economy
STAMFORD – As it navigates economic pressures including inflation, the fast-growing furniture company known for its Sactional adaptable couches has continued to expand in the past few months and anticipates a robust holiday season.Highlighting that optimism, Stamford-based Lovesac reported Wednesday sales of about $135 million for the quarter ending Oct. 30, up 15.5 percent year over year. The rising revenues reflected growth across its showrooms and other channels, with the company benefiting from the addition of 41 showrooms and 13 kiosks compared with the same period last year. Sales were also boosted by the reintroduction of pop-up shops at Costco stores and additional “shop-in-shops” at BestBuy stores.
The company incurred, however, a quarterly loss of $8.4 million, as its effective tax rate jumped year over year from 5.9 percent to 27.8 percent. The company said that the rate increase was primarily due to its previous fiscal year “having the benefit from the release of the valuation allowance on the company’s net deferred tax assets.”
“During the third quarter, the industry backdrop remained challenging, given the significant inflationary pressures the U.S. consumer is facing,” Shawn Nelson, Lovesac’s founder and CEO, said during an earnings call Wednesday. “We observed that the furniture category overall is down of late in the mid-teens, percent-wise, versus last year. Despite this operating environment,
we again delivered strong results against tough comparisons from our record-setting Q3 last year.”
Many investors, however, were unconvinced by the results. Lovesac shares were trading around 1:30 p.m. Wednesday at about $19, tumbling 16 percent from Tuesday. The company’s shares have reached a 52-week high of about $85 and fallen to a 52-week low of around $18.
Executives said that they were encouraged by the first few weeks of the current holiday season.
“Black Friday was super strong, then (the following) Saturday and Sunday were ok, and Cyber Monday was strong,” President and Chief Operating Officer Mary Fox said during the earnings call.
Nelson said that the company was taking a number of steps to offset “inflationary pressures,” as it looks to keep growing during the remainder of the holiday season and into next year.
“Those levers include adjusting promotional campaigns and managing our merchandising and mix across our channels, which the team has done really well to date, as reflected in our results,” Nelson said. “They also include tight expense management and careful prioritization of spend to ensure we are investing in the most-critical areas to solidify our foundation for growth.”
As of the end of the past quarter, Lovesac operated 189 showrooms. In Connecticut, it has establishments in downtown Greenwich, downtown Westport, downtown West Hartford and at Danbury Fair mall.
At the same time, other furniture retailers based or operating in Connecticut have also shown their resilience.
For the quarter ending Sept. 30, Danburybased Ethan Allen reported revenues of about $215 million, up 18 percent year over year.
Earlier this week, Jordan’s Furniture announced plans to open in early 2024 a showroom at Westfarms mall. Among other new stores, Ashley is planning to hold a grand opening on Dec. 16 for its showroom at 2213 Summer St., in Stamford.