Lovesac (NASDAQ:LOVE) executives said the company closed fiscal 2026 with sales growth, market share gains and a strengthened balance sheet, while continuing to navigate a challenging promotional environment and tariff-driven cost pressure. Management also outlined a product and operational roadmap aimed at evolving Lovesac from a product-led business into a “multi-platform, multi-room lifestyle brand,” alongside an outlook that assumes continued category softness in fiscal 2027.
Fourth-quarter results show continued sales growth and digital strength
For the fourth quarter of fiscal 2026, Lovesac reported net sales of $248.0 million, up 2.7% year over year, with omnichannel comparable net sales increasing 0.6%. Chief Executive Officer Shawn Nelson said the company’s positive comps and new showroom contributions outpaced the broader category, which he characterized as declining during the period.
“Other” net sales fell 45.4% to $9.0 million, primarily reflecting the closure of Lovesac’s Best Buy shop-in-shop locations after the partnership ended.
Margins pressured by transportation and tariffs; marketing mix shifted
Fourth-quarter gross margin was 58.1%, down 230 basis points from 60.4% a year earlier. Chief Financial Officer Keith Siegner attributed the decline primarily to increases in inbound transportation and tariff costs and higher outbound transportation and warehousing costs, partially offset by improved product margin driven by price increases, cost reduction initiatives, and vendor concessions tied to tariff changes. He noted promotional discounting also weighed on product margin.
SG&A was 28.1% of net sales, roughly flat with the prior year, though expense dollars rose due to higher incentive compensation, new product innovation costs, and overhead, partially offset by declines in professional fees and equity-based compensation.
Advertising and marketing expense declined 4.7% to $25.5 million and represented 10.3% of net sales versus 11.1% a year earlier. President Mary Fox said the company modernized its marketing approach in the quarter by pivoting toward a “digital and social first” media mix and away from a historically “channel-led” approach that included substantial television spend. She said Black Friday delivered significant year-over-year growth and Cyber Monday “more than doubled,” marking the strongest Cyber Monday performance in company history.
Operating income was $44.9 million, down from $47.6 million a year earlier. Net income was $32.1 million, or $2.19 per diluted share, compared with $35.3 million, or $2.13 per diluted share, in the prior-year quarter. Adjusted EBITDA was $49.6 million versus $53.9 million a year ago.
Full-year fiscal 2026: sales growth, profitability, and strong liquidity
For fiscal 2026, Lovesac reported revenue of $697.1 million, up from $680.6 million in fiscal 2025, driven by new showroom openings and higher omnichannel comparable net sales. Gross margin was 56.4%. Net income was $4.1 million, down year over year, which Siegner attributed to higher tariffs, freight, and operating costs.
Management emphasized balance sheet strength. Lovesac ended the year with $101.9 million in cash and cash equivalents, $36.0 million of committed availability under its credit facility, and no borrowings. Inventory declined 14% year over year, which Siegner said aligned with the company’s goal to reduce excess inventory while maintaining “industry-leading in-stock positions and delivery times.”
On capital allocation, Siegner said Lovesac did not repurchase shares in the fourth quarter due to macro uncertainty, but repurchased 6.0 million shares during fiscal 2026. The board authorized an additional repurchase of up to 40 million shares, bringing total remaining authorization to approximately 54.1 million shares.
Strategy updates: product platforms, Made in America initiative, and services
Nelson highlighted several strategic developments from fiscal 2026, including a brand evolution effort completed mid-year that management said clarified product hierarchy, naming and merchandising strategy, and how Lovesac can expand into new categories while staying selective on SKU proliferation.
On product platforms, management discussed:
- Snug: a newer seating platform positioned to expand into a fuller entry-level sectional offering, with additional accessories planned, including a swivel armchair.
- Sactionals: a reengineered platform with plans to begin onshoring manufacturing of core components, starting with seat inserts this summer.
- A new high-end sectional platform: consumer-tested and planned for launch later in the year to broaden living room offerings.
Looking further out, Nelson said Lovesac is preparing for a “planned calendar 2027 launch” of a full suite of Designed For Life products for an “entirely new room in the home,” supported by what he described as a “significant splash” in the first half of next year.
Fox detailed Lovesac’s “platform” model and repeat-customer dynamics, saying 85% of customers evolve or add to their initial Sactional purchase and that nearly half of transactions come from existing customers. She also said one-third of new Sactional setups sold in fiscal 2026 included a reclining seat, and that repeat customers made up nearly 40% of reclining seat sales.
Operationally, Fox said Lovesac exited fiscal 2026 with zero production coming from China, compared with nearly 50% a few years ago. She added that early progress on domestic production of Sactional seat inserts suggests gross margins could be neutral to current levels excluding tariffs, though executives cautioned the onshoring program will take time to scale and flow through inventory.
On customer services, Fox said Lovesac added room-of-choice delivery and pilot-tested white-glove delivery and assembly for a fee, with plans to roll out both nationally in fiscal 2027. She also discussed the company’s resale initiative, Loved by Lovesac, which had expanded to 29 states by year-end and, according to management, draws new customers into the ecosystem. Executives said they are also beginning to pilot a trade-in program.
Fiscal 2027 outlook assumes continued category pressure
Management said it is not planning for a macro rebound and is assuming the category continues to decline in fiscal 2027. Siegner said the outlook factors in current expectations for tariffs, potential shipping cost pressure tied to oil prices, and does not assume any benefit from a potential recovery of previously paid IEEPA tariffs.
For fiscal 2027, Lovesac guided to:
- Net sales: $700 million to $750 million
- Adjusted EBITDA: $33 million to $44 million
- Gross margin: 56% to 57%
- Net income: $5 million to $14 million
- Diluted EPS: $0.34 to $0.95
- Showrooms: approximately eight net new (plus or minus a couple)
- Capital expenditures: approximately $20 million
For the first quarter, the company forecast net sales of $133 million to $139 million and an adjusted EBITDA loss of $12 million to $16 million, with gross margin of 51.5% to 52.5%.
Executives also noted a timing dynamic related to new delivery options: some customers may schedule delivery further out than Lovesac’s typical fast delivery window, potentially increasing backlog at quarter-end and creating a short-term shift between demand and recognized revenue in the first quarter.
About Lovesac (NASDAQ:LOVE)
Lovesac, trading on NASDAQ under the symbol LOVE, is an American furniture company known for its modular seating systems and distinctive foam-filled “Sacs.” Founded in 1995 by Shawn Nelson, the company has built a reputation for innovative design that emphasizes comfort, durability and adaptability. Its core offerings include Sactionals—customizable sectional sofas assembled from individual “Sactional” cubes—and the original Lovesac Sacs, large fabric-covered bean bag chairs available in a variety of sizes and materials.
In addition to seating solutions, Lovesac has expanded into home entertainment products with the introduction of the Stage, a modular soundbar system designed to integrate seamlessly with Sactionals.
