With a 60%+ Upside, There’s Plenty to Love About Lovesac

Key Points

• Lovesac has transitioned from a novelty beanbag maker to a premium modular furniture brand, powered by its proprietary Sactionals and StealthTech features, that caters to an affluent demographic.
• Despite macroeconomic challenges, Lovesac posted solid earnings and margins, issued upbeat fiscal 2026 guidance, and maintained a strong balance sheet with no debt and significant liquidity.
• Lovesac is actively minimizing its reliance on Chinese manufacturing and optimizing its supply chain; currently, its products are sourced from Vietnam (50%), Malaysia (28%), China (13%), and Indonesia (6%).

Furniture manufacturer Lovesac Co. NASDAQ: LOVE has evolved from a gimmicky oversized foam beanbag chair maker to a higher-end furniture brand anchored around its modular, proprietary trademarked “Sactionals.”

Lovesac also partnered with Harman Kardon to develop StealthTech, which integrates immersive surround sound systems embedded into the Sactionals modular furniture.

Consumers can configure Sactionals, which are rearrangeable sectional seats and sides, into endless combinations. They also come in over 200 cover options, so consumers can match or update the colors and fabrics with their decor, seasons, or occasions. They are literally Lego sets of furniture that can be taken apart, rebuilt, and have new pieces added.

The versatility of the furniture is a competitive advantage over conventional sofas and chairs sold by La-Z-Boy Inc. NYSE: LZB or Wayfair Inc. NYSE: W.

While Lovesac still has a legion of bears that believe the company is a flash in the pan—as evidenced by the 24.91% short interest—there are plenty of reasons to believe shares may hit the 65% upside consensus analyst price target.

Fiscal Fourth Quarter 2025 Earnings Were Fire, Catering to Affluent Buyers

Lovesac reported fiscal fourth-quarter 2025 earnings per share (EPS) of $2.13, beating consensus estimates by 26 cents.

Revenues fell 3.6% year-over-year (YOY) to $241.5 million versus $230.33 million, a $11.17 million beat. Gross margin increased 70 bps to 60.4% of net sales, up from 59.7% in the year-ago period, primarily driven by the 90 bps drop in inbound transportation costs and 30 bps drop in outbound transportation costs.

Lovesac commercialized Design For Life (DFL) platform extensions, which include the early launch of Sactionals Reclining Seat. They also unveiled the first of three new platforms to launch in the following three years.

Lovesac closed the quarter and fiscal 2025 with $83.73 million in cash and cash equivalents and no debt.

The company has 258 showrooms and plans to grow to over 400 showrooms. The company caters to a premium demographic, with 82% of buyers earning over $100,000 annually.

The Holiday Season Started Slow, But Accelerated Quickly

CEO Shawn Nelson acknowledged that the holiday selling season started slowly but picked up momentum as sales teams converted quotes to sales, supporting a mid-teen YOY increase in net income in FQ4.

“Our business model uniquely positions us to capitalize on macro upside whenever it does materialize and without the need to over-commit early during periods of uncertainty," Nelson said.

The company is in a strong financial position, giving it flexibility to either improve return on invested capital (ROIC) or pursue profitable growth when the right opportunities come up.

Lovesac Issues Upside Guidance at the Midpoints for Fiscal 2026

For FQ1 2026, Lovesac forecasts an EPS loss of 66 cents to 85 cents, with a midpoint loss of 76 cents versus consensus analyst estimates for a loss of 80 cents. Revenues are expected between $136 million to $142 million, $139 million versus $138.61 million.

For the full-year fiscal 2026, Lovesac sees EPS of 80 cents to $1.36, with a midpoint of $1.08 versus 96 cents consensus estimates. Revenues are expected between $700 and $750 million, with a midpoint of $725 million beating $713.05 million consensus estimates.

Lovesac appointed Heidi Cooley as its new Chief Brand and Marketing Officer, effective April 23, 2025. Cooley was previously the Chief Marketing Officer at Crocs Inc. NASDAQ: CROX, a footwear and apparel leader in the retail/wholesale sector.

The Tariff Catalyst: A Strategic Supply Chain Overhaul

The word tariff was mentioned 26 times during the earnings conference call.

Management stated they have “reinvented” their supply chain and dramatically enhanced their customer relationship management (CRM) tool to broaden their moat. This, along with their healthy balance sheet, gives them substantial flexibility to weather tariff distractions.

President and COO Mary Fox stated that the company has diversified its countries of origin to establish redundancy in every product. 

Prior to the new tariff announcements, the fiscal 2026 countries of origin were Vietnam at around 50%, Malaysia at around 28%, China is down to 13%, and Indonesia is around 6%. They are actively working to get China under 10%.

This isn’t just reactionary—it’s strategic. In anticipation of tariffs, Lovesac is entering fiscal 2026 with a higher-than-normal inventory. The company also relies on its structurally higher margins to absorb cost increases. That means smaller, targeted price hikes instead of broad inflationary pressure on consumers.

Fox summed it up: “We have the ability to selectively take price increases due to the strength of our brand and the unique and compelling nature of our Design for Life products that are loved by many.”