The Lovesac Company (NASDAQ: LOVE) reported Q3 EPS of $0.16, $1.04 better than the analyst estimate of ($0.88). Revenue for the quarter came in at $74.7 million versus the consensus estimate of $66.14 million.

Highlights for the Quarter Ended November 1, 2020:

• The net sales increase of 43.5% was driven by an increase in internet sales of 125.2%, coupled with an increase in showroom sales of 27.9% partially offset by a decrease of 8.7% in “Other” sales (which includes shop-in-shops and pop-up shops) related to a decrease in in store pop-up shops
• The gross profit increase of $15.1 million, or 57.3%, was primarily due to the increase in net sales, higher average retail price due to less promotional discounts and favorable mix impact, partially offset by the impact of tariffs. The 487 basis point increase in gross margin versus the prior year period reflects 535 basis points improvement in gross profit as a result of a reduction in promotional discounts, positive mix impact and lower product costs related to vendor negotiated tariff mitigation initiatives partially offset by an increase of approximately 48 basis points in distribution and tariff related expenses.
• SG&A expense as a percent of net sales decreased 1,228 basis points primarily due to leverage of employment costs, rent, and selling related expenses such as credit card fees and pop-up shop fees, partially offset by increases in equity compensation.
• Advertising and marketing expense increased 51.2% over the prior year period and as a percent of net sales increased by 75 bps principally due to increased media and direct-to-consumer program spend which contributed to the third quarter sales increase over the prior year period.
• Operating income was $2.5 million in the third quarter of fiscal 2021 compared to an operating loss of $6.9 million in the third quarter of fiscal 2020. Operating margin was 3.4% of net sales in the third quarter of fiscal 2021 compared to (13.2%) of net sales in the third quarter of fiscal 2020.
• Net income was $2.5 million in the third quarter of fiscal 2021 compared to a net loss of $6.7 million in the third quarter of fiscal 2020.

Shawn Nelson, Chief Executive Officer, stated, “Lovesac’s third quarter results exceeded our expectations on the top and bottom line, a strong affirmation that we continue to successfully navigate marketplace challenges. Highlights include strong topline growth of 43.5%, a total comparable sales increase of 53.5%, gross margin expansion of 487 bps and Adjusted EBITDA1 of $6.0 million. These results speak to the resiliency of our business model and the exceptional job our team has done to meet customer demand in a challenging and rapidly evolving environment.”

Mr. Nelson continued, “Our business fundamentals are strong, and our recently expanded partnership with Best Buy broadens our audience and expands Sactionals adoption in an agile, capital efficient manner. In combination with continued progress on our key strategic initiatives, we are well-positioned to capitalize on product demand and as such, we expect a strong year over year increase of 50% to 60% in Adjusted EBITDA1 for the fourth quarter. We look forward to building on our progress and success as we close out the fiscal year.”

Mr. Nelson added, “We believe that Lovesac leads the DTC and furniture categories in its commitment to sustainability and ESG initiatives, building sustainable products and contributing to a reduction of furniture waste in landfills. This is an endeavor that has been core to our DNA since the inception of our company, guided by our Designed For Life philosophy, with substantial progress to-date including sourcing all of our affixed upholstery fabric from 100% recycled plastic and repurposing over 20 million plastic bottles last year alone. Our products are built to last a lifetime and designed to evolve, and next year, we will be improving our communication on our tracking and impact. Adherence to our high bar for innovation and sustainability will, we believe, fuel market share gains in the current, and even new categories, in which we will compete. We will make operating decisions in support of our purpose, which is to inspire humankind to actually buy less, but buy better.”

For earnings history and earnings-related data on The Lovesac Company (LOVE) click here.