The Lovesac Company reported Q1 FY2026 results that showcased a modest top-line improvement led by showroom strength amid ongoing category headwinds. Total net sales rose 4.3% year over year to $138.4 million, driven by showroom gains (+18.2% to $96.5 million) while internet sales declined as Lovesac rebalanced its channel mix. The quarter featured meaningful gross margin pressure (53.7% vs. 54.3% prior year) primarily from higher promotional activity, but SG&A leverage and disciplined expense management supported an improved operating loss of $14.0 million vs. $17.9 million a year ago and a net loss of $10.8 million (-$0.73 per share) versus a $13.0 million loss a year ago. Management stressed execution on the EverCouch platform and other Design for Life initiatives as secular growth catalysts, while also highlighting tariff mitigation workstreams (vendor concessions, China diversification, selective pricing, and cost efficiencies) as key to preserving full-year guidance.
The balance sheet remained healthy with $26.9 million of cash, no debt drawn on the amended facility, and $36.0 million of committed availability. Inventory levels were intentionally elevated to weather tariff uncertainty, with expectations to begin normalizing in Q2 and support EverCouch stock throughput in the second half. Cash usage was significant in the quarter (-$41.4 million from operating activities), and free cash flow was negative (-$50.1 million) largely due to working capital and the inventory buildup. The company repurchased ~306k shares for ~$6.0 million, leaving about $14.1 million remain under the current authorization.
Management maintained full-year guidance of net sales $700–$750 million and adjusted EBITDA $48–$60 million, with an intermediate Q2 outlook projecting net sales of $157–$166 million and an adjusted EBITDA loss of $2–$7 million. The gross margin target for the full year remains ~59%, with advertising around 12.5% of net sales and SG&A around 41% of net sales. The company signaled ongoing opportunities across EverCouch marketing, showroom expansion (targeting ~100 showrooms for EverCouch by late summer), and collaborations with Costco, while exiting the Best Buy relationship to optimize its channel mix. Overall, Lovesac emphasizes a multiyear secular growth thesis built on new product platforms, a strengthened acquisition engine, and a more resilient supply chain posture to weather near-term category softness.