The Lovesac Company (NASDAQ: LOVE) reported Q1 EPS of ($0.58), $0.09 better than the analyst estimate of ($0.67). Revenue for the quarter came in at $54.4 million versus the consensus estimate of $47.18 million.

Highlights for the First Quarter Ended May 3, 2020:

• The net sales increase of 32.8% was driven by an increase in internet sales of 255.4%, an increase of 11.0% in “Other” sales (which includes shop in shops and pop-up shops), partially offset by a decrease in showroom sales of (32.7%) due to the impact of showroom closures related to COVID-19.
• The gross profit increase of 30.0% was primarily due to the increase in net sales, partially offset by the impact of tariffs. The approximately 110 basis point decrease in gross margin versus the prior year period reflects an increase of approximately 300 basis points in distribution and tariff related expenses, partially offset by improvements of approximately 190 basis points in product costs as a result of vendor negotiations associated with tariff mitigation and continued shift of product sourcing from China to Vietnam and Malaysia.
• SG&A expense in the first quarter of fiscal 2021 and first quarter of fiscal 2020 included less than $0.2 million of other non-recurring expenses related to financing and executive recruitment fees, respectively. SG&A expense as a percent of net sales decreased 1080 basis points primarily due to leverage of employment costs, rent and professional fees as well as a decrease in equity-based compensation, partially offset by increases in selling related expenses.
• Advertising and marketing expense in the first quarter of fiscal 2021 increased approximately 52% over the prior year quarter principally due to increased media and direct-to-consumer program spend which contributed to the first quarter sales increase over the prior year period.
• Operating loss was $8.4 million in the first quarter of fiscal 2021 compared to $9.3 million in the prior year period. Operating margin improved to (15.4%) of net sales from (22.8%) of net sales in the prior year period.
• Net loss was $8.3 million in the first quarter of fiscal 2021 compared to $9.1 million in the prior year period.

Shawn Nelson, Chief Executive Officer, stated, “Amid the global dislocation caused by the COVID-19 pandemic, Lovesac’s first quarter results affirm the resilience and compassion of our team, the benefit of our diversified channel mix, and the fundamental appeal of the Lovesac brand. These positive attributes contributed to the quarter’s strong results with nearly 33% total company sales growth, including a 255% increase in our e-commerce sales. We were also pleased that our operating loss improved by almost $1 million from the prior year period despite our entire fleet of showrooms being closed for half the quarter.”

Mr. Nelson added, “Lovesac’s origins as an ‘e-commerce-first’ platform confers a distinct competitive advantage in this environment. Our logistical expertise, processes, and cultural underpinnings are evident in our shippable product offering, agile and lean multi-channel operating model, and dynamic digital marketing efforts. As we move into the re-opening phase, we are taking a thoughtful and measured approach to re-opening showrooms, governed by local regulations and with the health and safety of our employees and customers as our highest priority. The power of our business model, the execution and commitment of our entire team, combined with our strong balance sheet and financial position, will continue to serve us well as we move into this next phase and beyond.”

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