What happened

Shares of Lovesac (NASDAQ:LOVE), a furniture retailer with a specialty in beanbag chairs and modular sofas, rose roughly 12% in the first 90 minutes of trading on Wednesday. It isn't hard to figure out why investors were so pleased: Lovesac reported third-quarter earnings before the bell.

So what

The retailer's fiscal third-quarter 2022 sales came in at $116.7 million, up a massive 56.1% from the $74.7 million it earned a year ago. On the surface, that might not be so exciting, given the pandemic headwinds in the 2020 calendar year. However, Lovesac's year-ago third-quarter sales, despite coronavirus headwinds, were up 43.5% from the $52.1 million tally in the third quarter of fiscal 2020, which was not impacted by the pandemic.

In other words, the company's strong growth has continued right through the pandemic. That was helped along by a notable increase in store count, which sat at 84 at the end of the third quarter in fiscal 2020, 107 in fiscal 2021, and now 135 in fiscal 2022. The company has also been benefiting from strong online sales.

The word Growth spelled out with blocks aligned on an upward sloping line.

Image source: Getty Images.

On the bottom line, the company posted third-quarter earnings of $0.17 per share, up only slightly from the $0.16 it made in the year-ago period. However, Wall Street analysts had been looking for a loss of $0.40 per share. In other words, despite being a small year-over-year improvement, it was a big beat.

Investors tend to like it when companies beat analyst consensus estimates. Notably, management made a point of highlighting that Lovesac's decentralized production model and concentrated product line helped it weather the broader supply chain disruptions that are hurting many retailers. That probably helped the mood here, too.

Now what

Lovesac is a relatively small company with a niche product that's in growth mode. It has broadened beyond its beanbag offerings to sell other furniture products and continues to open new stores. While year-over-year earnings growth may not have been all that impressive, the real story is sales growth, which comes at a cost because of the investments required. That said, the top-line advance in the third quarter shows that Lovesac's growth initiatives are still having the desired effect, which investors clearly saw as good news today.

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