The Lovesac Company (LOVE) Tops Q4 EPS by 79c, Revenues Beat
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The Lovesac Company (NASDAQ: LOVE) reported Q4 EPS of $1.37, $0.79 better than the analyst estimate of $0.58. Revenue for the quarter came in at $129.7 million versus the consensus estimate of $116.13 million.
Highlights for the Fourth Quarter Ended January 31, 2021:
- The net sales increase of 40.7% was driven by an increase in internet sales of 86.1% reflecting the shift in our customers’ shopping preference during the pandemic and our increased marketing activities, coupled with an increase in showroom sales of 28.4% driven by an increase in our comparable showroom point of sales transactions over the prior year period. This was partially offset by a decrease of 18.7% in “Other” sales related to a decrease in in store pop-up shops due to ongoing vendor negotiations, partially offset by an increase in temporary online pop-ups on Costco.com and Best Buy shop-in-shops.
- The gross profit increase of $30.0 million, or 66.4%, was primarily due to the increase in net sales, higher average retail price due to less promotional discounts and leverage of warehousing, freight and tariffs expense due to the sales increase. The 890 basis points increase in gross margin over the prior year period reflects 508 basis points improvement in gross profit as a result of a reduction in promotional discounts, reduced inventory reserve levels and lower product costs related to vendor negotiated tariff mitigation initiatives due to higher volume. Distribution expenses including warehousing, freight and tariff related expenses also improved by 382 basis points over the prior year due to higher leverage on warehousing and freight costs, including tariffs.
- SG&A expense as a percent of net sales decreased 230 basis points. The decline was primarily due to a decrease of 260 basis points in selling related expenses related to a reduction in in-store pop-up shop fees, partially offset by temporary online pop-up fees and expense leverage of 190 basis points in multiple areas such as rent expense and lower travel expenses due to COVID-19 restrictions. This was partially offset by the deleverage of 220 basis points in employment costs primarily driven by increases in variable compensation, equity-based compensation, insurance and credit card fees related to the growth of the Company.
- Advertising and marketing expense increased 48.8% over the prior year period and as a percent of net sales increased by 60 basis points due to an increase in national media spends with a focus on holiday media, increase in direct to consumer programming and the continuation of running 15 second spots in our television advertising mix.
- Operating income was $21.8 million in the fourth quarter of fiscal 2021 compared to operating income of $5.3 million in the fourth quarter of fiscal 2020. Operating margin was 16.8% of net sales in the fourth quarter of fiscal 2021 compared to 5.8% of net sales in the fourth quarter of fiscal 2020.
- Net income was $21.7 million in the fourth quarter of fiscal 2021 compared to net income of $5.4 million in the fourth quarter of fiscal 2020.
Shawn Nelson, Chief Executive Officer, stated, “Lovesac delivered landmark results in fiscal 2021, as the power of our model, our products and our operational excellence was fully manifest. This included an outstanding finish to the year with fourth quarter net sales growth of 40.7%, comparable sales growth of 45.0%, gross margin expansion of 890 basis points and a more than threefold increase in Adjusted EBITDA to $25.9 million. Throughout the year, we also delivered tangible results on key strategic initiatives including compelling new product launches, creative utilization of our showrooms and other channels to expand customer touchpoints, and efficient marketing and merchandising strategies. Notably, we prudently managed our expenses, and made investments in supply chain and infrastructure that we expect will yield benefits in the coming quarters. Our strong fiscal 2021 financial and operational performance is a testament to the strength of our people, brand, business model and operating platform.”
Mr. Nelson continued, “As we look past this unprecedented year, we are confident that Lovesac’s unyielding commitment to sustainable products that are built to last a lifetime and designed to evolve is a distinct and compelling competitive advantage. We expect that adherence to this ‘Designed for Life’ philosophy will not only drive continued growth and profitability, but will also help us reach our newly stated goal: to operate a 100% circular and sustainable business model, reaching targets of zero waste and zero emissions by 2040.”
For earnings history and earnings-related data on The Lovesac Company (LOVE) click here.
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