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Lovesac Gets Hit Hard By Tariffs and Freight Costs

MarketDash Editorial Team
17 hours ago
The furniture retailer posted a bigger-than-expected quarterly loss as transportation and tariff expenses ate into margins, prompting the company to slash its full-year forecast.

The Lovesac Company (LOVE) learned an expensive lesson this quarter: tariffs and shipping bills can wreck your margins faster than you can say "modular furniture."

The retailer's stock tumbled Thursday after posting results that missed on basically every metric that matters. The company lost 72 cents per share in the third quarter, wider than the 59-cent loss Wall Street was expecting. Revenue came in at $150.166 million, up a measly 0.2% year over year and short of the $154.146 million analysts had penciled in.

The Margin Squeeze

Here's where things get interesting. Quarterly gross profit fell 3.9% to $84.2 million, while gross margin got absolutely hammered, dropping 240 basis points to 56.1%. The culprit? Transportation and tariff costs jumped 320 basis points, with outbound transportation and warehousing adding another 20 basis points of pain.

That's a significant chunk of profitability vanishing into the black hole of logistics expenses.

The company did manage to add 17 new showrooms on a net basis, opening five in the quarter without closing any. But that wasn't enough to offset a 1.2% decline in omni-channel comparable sales, which tells you the underlying demand picture isn't exactly robust.

Operating loss doubled to $15.8 million from $7.7 million in the prior year period. Meanwhile, cash and cash equivalents dropped to $23.7 million from $61.7 million a year ago. That's a steep decline that should make investors pay attention to the balance sheet.

Slashing The Forecast

Given the challenging environment, Lovesac made some serious cuts to its outlook. The company now expects fiscal 2026 earnings of just 15 to 49 cents per share, down dramatically from its prior guidance of 52 cents to $1.05. That's well below the 85-cent analyst consensus.

Revenue guidance also took a haircut, now projected at $685 million to $705 million versus the previous $710 million to $740 million range and the $713.56 million consensus estimate.

For the fourth quarter specifically, Lovesac expects earnings of $1.88 to $2.22 per share (below the $2.33 estimate) and revenue of $236 million to $256 million (compared to the $260.47 million consensus).

Not All Doom And Gloom

CEO Shawn Nelson tried to inject some optimism into the narrative. "As we transitioned into our fiscal fourth quarter, we adjusted our marketing strategies and have seen solid growth quarter-to-date, inclusive of the Black Friday and Cyber Monday holiday events," he said.

Nelson also reiterated the company's longer-term ambitions: "Our tall ambitions begin with reaching our goal of three million Lovesac households by 2030."

The market wasn't buying the optimistic spin. Lovesac shares dropped 18.12% to $11.25 in premarket trading Thursday.

Back to News

Lovesac Gets Hit Hard By Tariffs and Freight Costs

MarketDash Editorial Team
17 hours ago
The furniture retailer posted a bigger-than-expected quarterly loss as transportation and tariff expenses ate into margins, prompting the company to slash its full-year forecast.

The Lovesac Company (LOVE) learned an expensive lesson this quarter: tariffs and shipping bills can wreck your margins faster than you can say "modular furniture."

The retailer's stock tumbled Thursday after posting results that missed on basically every metric that matters. The company lost 72 cents per share in the third quarter, wider than the 59-cent loss Wall Street was expecting. Revenue came in at $150.166 million, up a measly 0.2% year over year and short of the $154.146 million analysts had penciled in.

The Margin Squeeze

Here's where things get interesting. Quarterly gross profit fell 3.9% to $84.2 million, while gross margin got absolutely hammered, dropping 240 basis points to 56.1%. The culprit? Transportation and tariff costs jumped 320 basis points, with outbound transportation and warehousing adding another 20 basis points of pain.

That's a significant chunk of profitability vanishing into the black hole of logistics expenses.

The company did manage to add 17 new showrooms on a net basis, opening five in the quarter without closing any. But that wasn't enough to offset a 1.2% decline in omni-channel comparable sales, which tells you the underlying demand picture isn't exactly robust.

Operating loss doubled to $15.8 million from $7.7 million in the prior year period. Meanwhile, cash and cash equivalents dropped to $23.7 million from $61.7 million a year ago. That's a steep decline that should make investors pay attention to the balance sheet.

Slashing The Forecast

Given the challenging environment, Lovesac made some serious cuts to its outlook. The company now expects fiscal 2026 earnings of just 15 to 49 cents per share, down dramatically from its prior guidance of 52 cents to $1.05. That's well below the 85-cent analyst consensus.

Revenue guidance also took a haircut, now projected at $685 million to $705 million versus the previous $710 million to $740 million range and the $713.56 million consensus estimate.

For the fourth quarter specifically, Lovesac expects earnings of $1.88 to $2.22 per share (below the $2.33 estimate) and revenue of $236 million to $256 million (compared to the $260.47 million consensus).

Not All Doom And Gloom

CEO Shawn Nelson tried to inject some optimism into the narrative. "As we transitioned into our fiscal fourth quarter, we adjusted our marketing strategies and have seen solid growth quarter-to-date, inclusive of the Black Friday and Cyber Monday holiday events," he said.

Nelson also reiterated the company's longer-term ambitions: "Our tall ambitions begin with reaching our goal of three million Lovesac households by 2030."

The market wasn't buying the optimistic spin. Lovesac shares dropped 18.12% to $11.25 in premarket trading Thursday.