By Denny Jacob

Lovesac shares tumbled Thursday despite a better-than-expected first quarter, an indication of the uncertain environment retailers continue to face.

Like other companies, the home-furnishings brand is working to navigate through tariffs that have cooled demand and prompted more supply chain diversity. The company is moving manufacturing further away from China.

Executives on an earnings call said their pivot to manufacture more towards America is not driven by tariffs but a desire to manufacture closer to its customers.

"We remain on track to be about 13% for the full fiscal year, but with exit rates substantially lower than that," said Mary Fox, president, referring to the move away from China.

Lovesac also disclosed its decision to end its partnership with Best Buy, which will result in a one-time charge around $2 million in the current quarter, while also expanding its partnership with warehouse retailer Costco Wholesale.

The Stamford, Conn., company narrowed its loss to $10.8 million, or 73 cents a share, for the first quarter ended May 4, from $13 million, or 83 cents a share, in the prior-year period. Analysts polled by FactSet expected 79 cents a share.

Sales rose to $138.4 million from $132.6 million. Analysts polled by FactSet expected $137.3 million.

Lovesac said the topline increase was primarily driven by an increase of 2.8% in retail and online comparable sales and the addition of 21 new showrooms from a year ago.

Lovesac forecast sales between $157 million and $166 million as well as a loss in the range of $8 million to $12 million in the second quarter of fiscal 2026. Analysts polled by FactSet expected $161.7 million in sales and a loss of $2.8 million.

For the fiscal year, the company forecast sales between $700 million to $750 million with net income between $13 million to $22 million. Analysts polled by FactSet expected $711.5 million in sales and net income of $18.4 million.

Shares tumbled 17% to $17.10. The stock is down about 28% on the year.

D.A. Davidson analysts Michael Baker and Keegan Cox said in a research note that while the quarter was solid, they were keeping an eye on its gross margins and inventory levels.

"We figured inventory would be high due to bringing in product early in front of tariffs, as well as two new product launches. But, this was higher than expected," say Baker and Cox.

Write to Denny Jacob at denny.jacob@wsj.com

(END) Dow Jones Newswires

June 12, 2025 12:05 ET (16:05 GMT)

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