Market Minute: Weekend Spotlight: Lovesac (LOVE) CEO on Innovation & "Post-Covid" Landscape

Lovesac (LOVE) is a furniture retailer that offers patented “Sactionals”, aka modular sectionals, and giant beanbag “Sacs”. Personalization in retail is all the rage, and Lovesac is slightly ahead of the curve with its array of washable, “Guaranteed for Life” adaptable choices. They have unique features like embedding speakers into their sectionals, helping them stand out further in a market that generally relies on big, one-time purchases (a couch is a commitment, I have learned!).

Commitment to a few products over being a one-stop shop sets it apart from other furniture retailers like RH (RH) or Wayfair (W) – but also raises the risk for a public company when one bad quarter can send shares plunging. It hit a 52-week high early this month, and then cratered after its last earnings report, giving up all its gains for the year and then some (the stock is down around 2% year-to-date).

In its 3Q25 report on Dec. 12, CEO Shawn Nelson said “near-term headwinds” had persisted, but that the company had gained market share and continued to launch new products, including a Reclining Seat. Revenue was $149.9 million, down 2.7% year-over-year, with GAAP EPS of -$0.32 – a mixed report based on Wall Street estimates. The company still reports an operating loss, with operating margin of -5.1% for the quarter, compared to -2.3% last year. Worse still, in the eyes of the Street, Lovesac lowered its FY25 guidance.

CEO and founder Shawn Nelson, who started the company in 1995, joined the Schwab Network after its Investor Day. He describes “post-Covid” as a difficult time for all furniture retailers since demand got pulled forward during quarantine but says Lovesac is still finding growth and opening showrooms.

“2024 has been our most prolific year of new product launches ever,” he says, highlighting the recliner and a table that can integrate with the Sactionals “even if you bought it years ago.” The emphasis on backwards compatibility no doubt adds to customer loyalty – and stickiness.

However, the new jewel in Lovesac’s crown is the Evercouch that they announced at their investment day. Nelson excitedly explains that despite already making sectionals, it has a “big opportunity” in couches. He notes that they tend to sell larger sectionals, and getting into the couch sphere allows them access to the “bigger part” of the seating category. It’s expected to launch mid-2025, and maintains some of the customization options of its flagship Sactionals.

“If this is the new normal, we’ll compete,” he says, teasing “new categories” of products over the next two years – branching away from its core business instead of “waiting for the recovery.” If the furniture market stays depressed, moving into other areas of the home could help, but will it be as big a bump as the Street wants?

Despite the category slump, Nelson emphasizes that they have a unique product that they won’t discount as deeply as other retailers (though they have a sale running now). “We had a decent holiday season” with a “cautious” consumer, he adds.

Perhaps as a show of confidence in the company – or scooping up stock at a discount – some recent insider buying has been reported, with director Walter Field McIallen purchasing thousands of shares. Either way, if investors believe Lovesac can keep innovating and building its cash flow, the 25% plummet after earnings may create an appealing opportunity.

Tune into the Schwab Network for more CEO interviews, and Happy New Year’s!