Lovesac 2Q sales jump 60.3%

Loss nearly triples on IPO costs

STAMFORD, Conn. — Lovesac, a maker and retailer of specialty upholstery, posted double-digit increases in fiscal second quarter sales, same-store sales and Internet business but a larger loss in its first reported quarter as a public company.

Net sales for the period ended Aug. 5, increased 60.3% to $33.2 million, up from $20.7 million for the same period a year ago. The growth was driven by strength in showroom, online and shop-in-shop business resulting from more new customers, more goods sold and accelerated marketing and brand awareness investments, the company said.

Comparable sales, which the company said includes both showroom and Internet sales, were up 41%. Broken down, comparable showroom sales grew 34.2% and Internet sales were up 71.3%. (The company ships its patented modular “sactionals” directly to customers, regardless of where they place the orders.)

Lovesac’s net loss nearly tripled to $7 million from $2.4 million a year ago due in part to costs associated with its public offering and other one-time expenses. On a per-share basis, the loss was $3.71 vs. a loss of 45 cents a year ago. Adjusted to exclude the IPO and other one-time costs, the loss was $3.6 million, or 27 cents per share, compared to a loss of $2.2 million, or 16 cents, a year ago.

The company’s operating loss for the quarter was $6.8 million, up from a loss of $2.3 million in the second quarter last year.

In a release, Lovesac CEO Shawn Nelson said the company’s strong performance “speaks to the strength of our differentiated and disruptive direct-to-consumer business model that leverages both Internet and traditional media combined with small, highly productive showrooms along with shop-in-shop showrooms to drive a robust digital sales model.

“We believe we have captured only a sliver of the addressable market to-date, and with extremely attractive customer acquisition costs to lifetime value economics that are unique to our hybrid business model, we are focused on investing in marketing to drive customer acquisition and market share gains.”

During the quarter, the Top 100 company opened five showrooms and closed one, ending the period with 72 showrooms in 30 states.

For the first half, net sales increased 56.4% to $60 million. Combined comparable sales were up 34.5% with comp showroom sales up 28.6% and comp online sales up 60.7%.

The net loss for the first half was 12.7 million, or $5.29 per share, vs. a net loss of $5.8 million, or $1.01. The adjusted loss, which excludes IPO and other one-time costs, was $9 million, or 67 cents per share, compared to a loss of $5.3 million, or 39 cents per share, last year.

Lovesac completed its public offering June 26, selling $4.025 million shares at $16 per share for net proceeds of $59.2 million. It used a portion to pay down $4.7 million on its asset-based loan and said it plans to use the rest for additional IPO-related expenses, opening and remodeling showrooms, marketing and product development among other things.

Following the earnings release, Lovesac’s stock price was down about 2.6% in morning trading to about $22.40 per share.

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