What Happened?

Shares of furniture company Lovesac (NASDAQ:LOVE) fell 25.5% in the morning session after the company reported underwhelming third-quarter financial results, with revenue falling below Wall Street's expectations. In addition, its full-year EPS guidance missed significantly, and its EPS guidance for the next quarter fell short of Wall Street's estimates. Management added, "Near-term headwinds for our category clearly persisted through the pre-election period." Overall, this quarter could have been better.

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What The Market Is Telling Us

Lovesac’s shares are extremely volatile and have had 32 moves greater than 5% over the last year. But moves this big are rare even for Lovesac and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 3 months ago when the stock gained 24.1% on the news that the company reported strong second-quarter results. Lovesac beat analysts' EPS expectations, and its revenue narrowly outperformed Wall Street's estimates. Notably, the top line benefited from the net addition of 31 new showrooms, which increased its footprint, partially offset by a decrease of 5.4% in omni-channel comparable net sales. Amid a challenging macro backdrop, management highlighted market share gains as the business continued to innovate after launching new products, including the PillowSac Accent Chair and AnyTable. 

On the other hand, its earnings forecast for next quarter missed, and its full-year earnings guidance fell short of Wall Street's estimates. Overall, this was a mixed yet decent quarter for the company.

Lovesac is up 4.9% since the beginning of the year, but at $27.63 per share, it is still trading 28.5% below its 52-week high of $38.64 from December 2024. Investors who bought $1,000 worth of Lovesac’s shares 5 years ago would now be looking at an investment worth $2,339.

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