Lovesac Reports Q1 Sales Flat at $138.2M, Operating Loss Widens to $17.4M
LOVE•The Lovesac Co ended Q1 FY27 with $57.0 million cash, no debt and net sales of $138.2 million, down 0.1%, while e-commerce revenue rose 7.1% and operating loss widened to $17.4 million. The company plans in-house Sactionals manufacturing to improve cost control and fulfillment speed, cut marketing spend 10.7% to $16.6 million, but saw gross margin contract 160 basis points to 52.1%.
1. Q1 Financial Performance
The Lovesac Co ended Q1 FY27 with net sales of $138.2 million, a 0.1% year-over-year decline, and reported an operating loss of $17.4 million, up from $15.0 million in the prior year. The company held $57.0 million in cash with no debt, and e-commerce sales rose 7.1% driven by higher traffic and average order values.
2. Margin and Expense Trends
Gross margin contracted by 160 basis points to 52.1% due to increased transportation and tariff costs despite price increases and cost initiatives. Advertising and marketing expenses fell by $2.0 million, or 10.7%, to $16.6 million (12.0% of net sales), while SG&A rose to 49.6% of sales and other net sales dropped 36.3% to $5.5 million following Best Buy shop-in-shop closures.
3. Manufacturing and Strategic Initiatives
The company is on track to start domestic manufacturing of Sactionals seats, aiming to reduce cost volatility, speed fulfillment and enhance customer experience. Lovesac is also piloting AI-driven commerce tools, refining its Love by Lovesac initiative in 30 states and leveraging digital transformations to sustain momentum in larger configurations.
4. Outlook and Macroeconomic Challenges
Management highlighted uncertain consumer sentiment impacting sub-$6,000 transactions and expects ongoing headwinds through the fiscal year. It has applied for $20.8 million in tariff refunds—$3.4 million received—to support profitability, with future use contingent on actual refund timing.
