Q2 FY2027
Filed Sep 10, 2026Q2 Net Sales Increased to $161.2M; Record Product Launches On Track for Second Half FY27
Net sales increased 0.4% and net income improved to $7.4 million, but the reported profit and gross-margin expansion were driven by IEEPA tariff recoveries while omni-channel comparable net sales declined 1.9% and adjusted EBITDA was a loss.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net salesGAAP | $161.2 million | – | 0.4% |
| Showroom net salesGAAP | $114.1 million | – | 4.6% |
| Internet net salesGAAP | $40.2 million | – | (5.3%) |
| Other net salesGAAP | $6.9 million | – | (23.2%) |
| Omni-channel Comparable Net Salesother | (1.9) % | – | – |
| Ending Showroom Countother | 284 | – | – |
| Cost of merchandise soldGAAP | $50,975 thousand | – | – |
| Gross profitGAAP | $110.3 million | – | 21.7% |
| Gross marginGAAP | 68.4 % | – | 1,200 bps |
| Gross margin excluding IEEPA tariff recoveriesother | 56.0% | – | 40 basis point reduction |
| Selling, general and administrative expensesGAAP | $72.3 million | – | 0.3% |
| SG&A as a % of Net SalesGAAP | 44.8 % | – | (10) bps |
| Advertising and marketing expenseGAAP | $22.8 million | – | (2.9%) |
| Advertising & marketing as a % of Net SalesGAAP | 14.1 % | – | (50) bps |
| Depreciation and amortizationGAAP | $4,209 thousand | – | – |
| Total operating expensesGAAP | $99.3 million | – | (0.1%) |
| Operating income (loss)GAAP | $10.9 million | – | – |
| Operating marginGAAP | 6.9% | – | – |
| Interest and other income, netGAAP | $1,212 thousand | – | – |
| Net income (loss) before taxesGAAP | $12,154 thousand | – | – |
| Income tax (expense) benefitGAAP | $(4,725) thousand | – | – |
| Net income (loss)GAAP | $7.4 million | – | 211.7% |
| Basic net income (loss) per common shareGAAP | $0.51 | – | 213.3% |
| Diluted net income (loss) per common shareGAAP | $0.51 | – | 213.3% |
| Net income per diluted share net benefit from tariff refundsGAAP | $0.86 | – | – |
| Adjusted EBITDAnon-GAAP | $(1.3) million | – | (249.6%) |
| Net cash provided by operating activitiesGAAP | $23.9 million | – | 96.7% |
| Year-to-date net salesGAAP | $299.4 million | – | 0.2% |
| Year-to-date gross profitGAAP | $182.2 million | – | 10.5% |
| Year-to-date gross marginGAAP | 60.9 % | – | 570 bps |
| Year-to-date total operating expensesGAAP | $188.7 million | – | —% |
| Year-to-date operating income (loss)GAAP | $(6.4) million | – | – |
| Year-to-date net income (loss)GAAP | $(3.7) million | – | 79.1% |
| Year-to-date diluted net income (loss) per common shareGAAP | $(0.25) | – | 79.0% |
| Year-to-date net cash used in operating activitiesGAAP | $(11.4) million | – | 60.9% |
| Year-to-date Adjusted EBITDAnon-GAAP | $(11.8) million | – | (55.0%) |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Showrooms14 net new showrooms, partially offset by a 1.9% decrease in omni-channel comparable net sales. | $114.1 million | – | 4.6% |
| InternetInternet Sales decreased (5.3) %. | $40.2 million | – | (5.3%) |
| OtherClosure of the Company's Best Buy shop-in-shop locations. | $6.9 million | – | (23.2%) |
full year of fiscal 2027 and third quarter of fiscal 2027 outlook
- RevenueFull year of fiscal 2027: $690 million to $710 million. Third quarter of fiscal 2027: $140 million to $150 million.
- NoteFull year of fiscal 2027 net income: $14.5 million to $18.5 million.
- NoteFull year of fiscal 2027 Adjusted EBITDA: $31.5 million to $35.5 million.
- NoteFull year of fiscal 2027 diluted income per common share: $0.98 to $1.26 on approximately 14.6 million estimated diluted weighted average shares outstanding.
- NoteThird quarter of fiscal 2027 net loss: $9 million to $12 million.
- NoteThird quarter of fiscal 2027 Adjusted EBITDA loss: $7 million to $10 million.
- NoteThird quarter of fiscal 2027 basic loss per common share: $0.62 to $0.83 on approximately 14.5 million estimated basic weighted average shares outstanding.
Capital returns
- Repurchases of common stock were $(7,239) thousand during the twenty-six weeks ended August 2, 2026, compared to $(6,000) thousand during the twenty-six weeks ended August 3, 2025.
- Taxes paid for net share settlement of equity awards were $(2,177) thousand during the twenty-six weeks ended August 2, 2026.
What drove it
- Second-quarter net sales increased primarily from 14 net new showrooms, partially offset by a 1.9% decrease in omni-channel comparable net sales and the closure of Best Buy shop-in-shop locations.
- The Company opened 5 additional showrooms and closed 2 showrooms during the second quarter of fiscal 2027.
- Gross margin benefited from recoveries of IEEPA tariffs, contributing 1,240 basis points, and a 250 basis point improvement in product margin driven primarily by price increases.
- Advertising and marketing expense declined due to strategic timing of marketing investments and continued emphasis on efficiency.
- Management cited larger customer configurations and additions of Reclining Seat, Lovesoft and Storage as sources of strength at the high end of the business.
Concerns
- Omni-channel comparable net sales decreased 1.9% in the thirteen weeks ended August 2, 2026.
- Internet sales declined 5.3% and Other net sales declined 23.2% in the quarter.
- Excluding IEEPA tariff recoveries, second-quarter gross margin was 56.0%, representing a 40 basis point reduction from the prior-year period.
- Higher promotional discounting, inbound transportation and tariff costs, and outbound transportation and warehousing costs partially offset favorable gross-margin factors.
- Adjusted EBITDA was a $(1.3) million loss in the second quarter and a $(11.8) million loss year to date.
- Third-quarter guidance calls for a net loss of $9 million to $12 million and an Adjusted EBITDA loss of $7 million to $10 million.
What to watch
- Whether omni-channel comparable net sales improve from the reported (1.9) % decline.
- The pace and sales contribution of new product introductions planned to build through the second half.
- Gross-margin performance excluding IEEPA tariff recoveries amid promotional discounting and transportation and tariff costs.
- Execution against third-quarter fiscal 2027 net sales guidance of $140 million to $150 million.
- Merchandise inventory, which included a planned stock inventory increase of $7.2 million as of August 2, 2026.
Balance sheet and cash flow
- Cash and cash equivalents were $68.8 million as of August 2, 2026, compared to $34.2 million as of August 3, 2025.
- Cash and cash equivalents were $68,804 thousand as of August 2, 2026, compared to $101,853 thousand as of February 1, 2026.
- There was no balance on the Company’s line of credit as of August 2, 2026 and August 3, 2025.
- Availability under the line of credit was $34.0 million as of August 2, 2026, compared to $36.0 million as of August 3, 2025.
- Total merchandise inventory was $130.2 million as of August 2, 2026, compared to $124.0 million as of August 3, 2025.
- Net cash used in operating activities was $(11,429) thousand during the twenty-six weeks ended August 2, 2026, compared to $(29,212) thousand during the twenty-six weeks ended August 3, 2025.
- Net cash used in investing activities was $(12,204) thousand during the twenty-six weeks ended August 2, 2026, compared to $(13,196) thousand during the twenty-six weeks ended August 3, 2025.
- Purchase of property and equipment was $(11,592) thousand during the twenty-six weeks ended August 2, 2026, compared to $(12,910) thousand during the twenty-six weeks ended August 3, 2025.
- Net cash used in financing activities was $(9,416) thousand during the twenty-six weeks ended August 2, 2026, compared to $(7,135) thousand during the twenty-six weeks ended August 3, 2025.
- Net change in cash and cash equivalents was $(33,049) thousand during the twenty-six weeks ended August 2, 2026, compared to $(49,543) thousand during the twenty-six weeks ended August 3, 2025.
Analysis
Lovesac reported modest top-line growth in the second quarter of fiscal 2027. Net sales increased 0.4% to $161.2 million, as $114.1 million of showroom sales grew 4.6% on 14 net new showrooms. The expansion was partly offset by a 1.9% decline in omni-channel comparable net sales, a 5.3% decline in internet sales, and the closure of Best Buy shop-in-shop locations. The company ended the period with 284 showrooms after opening 5 and closing 2 during the quarter.
Reported profitability improved sharply, but the gain was principally linked to IEEPA tariff recoveries. Gross profit increased 21.7% to $110.3 million and gross margin rose 1,200 basis points to 68.4%. The company received $21.0 million of IEEPA tariff refunds and related interest, with $20.0 million recognized through cost of merchandise sold, $0.3 million reducing inventory, and $0.7 million recognized as interest income. Excluding IEEPA tariff recoveries, gross margin was 56.0%, a 40 basis point reduction from the prior-year period.
Operating income was $10.9 million versus an operating loss of $8.8 million, and net income was $7.4 million, or $0.51 per diluted share, versus a net loss of $6.7 million, or $(0.45) per diluted share. Net income per diluted share included $0.86 of net benefit from tariff refunds. SG&A was nearly flat at $72.3 million, while advertising and marketing declined 2.9% to $22.8 million. Adjusted EBITDA, which excludes the tariff-refund impact among other items, was a $(1.3) million loss compared with $0.8 million in the prior-year quarter.
For the twenty-six weeks, sales grew 0.2% to $299.4 million, while the net loss narrowed to $(3.7) million from $(17.5) million. Year-to-date operating cash use improved to $(11.4) million from $(29.2) million, although the company used $(11.6) million for property and equipment purchases and $(7.2) million for common-stock repurchases. Cash and cash equivalents were $68.8 million at August 2, 2026, and the line of credit had no balance.
The company expects full-year fiscal 2027 net sales of $690 million to $710 million, net income of $14.5 million to $18.5 million, and Adjusted EBITDA of $31.5 million to $35.5 million. Third-quarter guidance calls for net sales of $140 million to $150 million, a net loss of $9 million to $12 million, and an Adjusted EBITDA loss of $7 million to $10 million. Management stated that its outlook reflects the latest tariff backdrop for the remainder of the year and that net income and earnings-per-share outlook was updated for approximately $21.0 million of collected IEEPA tariff refunds, including interest.
Management, verbatim
Second quarter results reflected a record Q2 performance and came in within our guidance range against a choppy category backdrop.
Shawn David Nelson, Chief Executive Officer
The high end of our business remained a clear source of strength, with resilience building as customers configure larger setups and add value enhancers like Reclining Seat, Lovesoft and Storage.
Shawn David Nelson, Chief Executive Officer
We enter the back half in a position of real financial strength, with no debt and a strong cash position.
Shawn David Nelson, Chief Executive Officer
Not in the filing
stated, not guessed- Previous-release outlook and prior-guidance comparison
- Free cash flow
- Dividend declaration or dividend payment
- Gross-margin guidance
- Operating-expense guidance
- Tax-rate guidance
- Non-GAAP earnings per share
- Quarter-over-quarter comparisons for reported metrics
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.