Lovesac Q2 Sales Rise Snug Rollout Grows

Lovesac(NASDAQ:LOVE) reported results for its fiscal second quarter ended August 3, 2025, on September 11, 2025, highlighting net sales grew 2.5% year-over-year to $160.5 million, gross margin declined 260 basis points year-over-year to 56.4%, and updated full-year revenue guidance is $710 million to $740 million, representing expected 4%-9% growth. Strategic initiatives included a major rebranding, rollout of the 'Snug by Lovesac' platform to over 100 showrooms, and active mitigation strategies for ongoing tariff pressures. Diluted EPS guidance was narrowed to $0.52 to $1.05. The following analysis details pivotal developments in sales channels, risk management, and brand strategy shaping the long-term thesis.

Snug rollout expands Lovesac omnichannel reach

Lovesac accelerated the Snug platform rollout from an initial 27-showroom soft launch to over 100 locations, supported by a high-profile marketing campaign featuring celebrity endorsements and integration into both showroom and digital channels. The $14 billion U.S. couch category targeted by Snug represents a material new addressable market relative to traditional Lovesac Sactionals, which require a more complex in-person sales approach.

"This new product line, which features not only stylishly adaptable couches, but also loveseat and chair options, was soft launch in quarter two in 27 showrooms and on lovsac.com with a learning agenda focused on our selling experience. Initial results from the soft launch look promising, and this will build as we've already expanded the number of showrooms in quarter two to a 100 and growing. However, beginning earlier this week, and with full rebranding in place, we launched our formal marketing campaign. You'll see many of the brand and performance marketing elements we've already discussed coming life. It all begins with an engaging campaign leveraging one of the hottest and culturally relevant celebrities. Britney Spoke. This is just the beginning of many new ways we plan to effectively build love back into a home brand that is trusted and loved by customers. All informed by the brand evolution work we're completing. And we look forward to sharing more in coming quarters."
-- Mary Fox, President

Snug’s simplified sales model enhances scalability across new and less service-intensive channels, enabling Lovesac to diversify beyond high-touch in-store engagement and increase both unit velocity and digital conversion rates.

Lovesac executes four-point tariff mitigation plan

While the home furnishings category contracted approximately 4% year-over-year, Lovesac faced worsened input cost pressures due to a mid-2025 doubling of reciprocal tariffs on key sourcing countries (e.g., rates rising from 10% to 20% in Vietnam and Malaysia), necessitating price increases and cost control. Despite these headwinds, SG&A expense as a percent of net sales was 40.9%, down from 47% in the prior year period, reflecting proactive management.

"To address tariff headwinds, we deployed a four point mitigation plan back in April. And I'm pleased to report strong progress across all fronts. The first is focused on managing costs by working with our long term vendors for concessions, We've received support from every key vendor enabling us to reduce costs. Second is manufacturing diversification, including the work to further diversify manufacturing away from China with our long term partners. We remain on track to be mid teens for China for the full fiscal year but with an exit rate well below that. Third is strategic pricing. And as I shared before, we some informed price increases. These increases were determined following a deep dive into our overarching competitive price positioning against numerous options in the consideration set for our customers. We feel very comfortable with where and how Lovesac is now positioned. Appropriate for the quality, style, features, and benefits each of our products has to offer. Additionally, the work helped us better understand the elements of our value proposition we immediately developed and rolled out training and tools throughout the field organization. Making it easier for all of our team members to convey to customers the specific value inherent in our Design for Life product platform. And the final initiative for us was cost efficiency, we've achieved and continue to identify cost savings across the business. Lastly, I really want to recognize our team for their swift and strategic execution. Thanks to their efforts, we believe that this four point plan will mitigate the majority of the current tariff pressures."
-- Mary Fox, President

Lovesac’s demonstrated agility and rapid cost response underlines management’s ability to preserve margins and strategic flexibility even amidst external shocks, enhancing long-term resilience and differentiation from less nimble competitors.

Brand evolution redefines product hierarchy and channel strategy

The year-long brand evolution, developed with an external agency and now led by a new Chief Marketing Officer, seeks to clarify product segmentation and optimize channel expansion, including non-demo reliant SKUs suited for third-party and digital-first distribution. Lovesac ended its Best Buy partnership and incurred $1.9 million in nonrecurring exit expenses.

"This brand evolution work has been going on over this past year in collaboration with a world-class branding and design firm. And it's been fortuitous that our talented new CMO, Heidi Cooley, is fully onboarded now and able to spearhead this effort to its completion. This work has laid a clear and reliable foundation where on we can build Lovesac into a multifaceted home brand with an organized and prioritized product hierarchy and merchandising strategy. This will not only allow us to confidently extend the brand further, but also deeper. Into the categories where we already have strength. In order to compete even more vigorously for market share. To that point, we see many opportunities to rapidly harvest Lovesac brand equity earning more revenue and margin dollars from existing markets and customers through incremental new product development, and channel expansion. We believe this is our fastest and most credible path to more profitable and secular growth in the near term as we strengthen the core at Lovesac."
-- Shawn Nelson, Chief Executive Officer

The shift from a single-product focus toward a modular, brand-forward platform unlocks cross-category revenue synergies and positions Lovesac for sustained share gains as the sector eventually rebounds.

Looking Ahead

Management tightened full-year guidance to $710 million to $740 million in net sales (4%-9% year-over-year growth), adjusted EBITDA of $42 million to $55 million, gross margin of 57%-58%, and net income of $8 million to $17 million, with diluted EPS of $0.52 to $1.05 and 16.3 million weighted shares. Expectations for the fiscal third quarter ending November 2, 2025, are $151 million to $161 million in net sales, adjusted EBITDA loss of $1 million to $7 million, and gross margin of 56%-57%. No explicit timelines were disclosed for the next “new room” platform launch, though management confirmed the broader 2030 goal of reaching three million Lovesac households remains intact.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool recommends Lovesac. The Motley Fool has a disclosure policy.