Lovesac Co (NASDAQ:LOVE), the Designed for Life home and technology brand best known for its Sactionals, The World’s Most Adaptable Couch, stock fell 6.33% (As on April 11, 11:18:50 AM UTC-4, Source: Google Finance) after the company posted higher than expected results for the fourth quarter of FY25. The Lovesac Co achieved a gross margin increase of 70 basis points to 60.4% in the fourth quarter, attributed to reduced transportation costs. Gross profit decreased $3.8 million, or 2.6%, in the fourth quarter of fiscal 2025 compared to the prior year period. Operating income rose to $47.6 million, with an operating margin of 19.7%, up from 16.0% in the prior year. Net income for the quarter was $35.3 million. The company’s focus on innovation, such as the launch of the Sactionals Reclining Seat and the EverCouch, positions it well for future growth in the competitive furnishings industry.

Further, total merchandise inventory was $124.3 million as of February 2, 2025 as compared to $98.4 million as of February 4, 2024 primarily related to a planned stock inventory increase of $26.7 million. The cash and cash equivalents balance as of February 2, 2025 was $83.7 million as compared to $87.0 million as of February 4, 2024. There was no balance on the Company’s line of credit as of February 2, 2025 and February 4, 2024. The Company’s availability under the line of credit was $32.6 million and $36.0 million as of February 2, 2025 and February 4, 2024, respectively. As previously announced, on July 29, 2024, we amended the credit agreement to add an uncommitted accordion feature that allows the Company, subject to certain customary conditions, to increase the size of the revolving credit facility by $10 million and, among other things, extend the maturity date of the loans made under the Amendment from September 30, 2024 to July 29, 2029.

LOVE in the fourth quarter of FY25 has reported the adjusted earnings per share of $2.13, beating the analysts’ estimates for the adjusted earnings per share of $1.87. The company had reported the adjusted revenue decline of 3.6 percent to $241.5 million in the fourth quarter of FY2, beating the analysts’ estimates for revenue of $233.95 million. This is primarily due to a 9.4% decline in omni-channel comparable net sales. Despite this, the company added 27 new showrooms, which partially offset the sales decline. For the fiscal year, net sales were $680.6 million, slightly below the previous year’s $700.3 million.

Looking ahead, The Lovesac Co anticipates net sales between $700 million and $750 million for fiscal 2026,  with adjusted EBITDA expected to range from $48 million to $60 million.