What happened
Shares of Lovesac (LOVE 4.29%) were climbing today after the maker of high-end furniture, including beanbag chairs and modular couches, posted strong results in its fourth-quarter earnings report.
As of 1:39 p.m. ET, the stock was up 12.6%.
Image source: Getty Images.
So what
Comparable sales jumped 50% in the quarter, driving overall revenue up 51.3% to $196.2 million, which easily beat estimates at $174.3 million. Like other home furnishings companies, Lovesac has benefited from a spike in demand during the pandemic, but the fourth-quarter numbers show that momentum has yet to fade.
The company did see profit margins shrink in the quarter as increased freight and warehousing costs drove gross margin down from 57.9% to 55.9%, and expenses for advertising and employment costs rose. Operating margin shrank from 16.8% to 12.3%, but operating income still improved from $21.8 million to $24.3 million.
Earnings per share jumped 48% to $2.03 as the company benefited from an income tax benefit, which smashed estimates at $0.54, showing analysts had expected significant supply chain challenges.
CEO Shawn Nelson said: "Lovesac's continued strong financial performance in the face of a myriad of macro and industry shifts affirms the power of our unique business model and products. Importantly, the key distinguishing attributes of this model, which include operational flexibility, highly engaged customers, innovation and a proven omni-channel approach, will only grow stronger over time as our progress along the product adoption curve steepens and word of mouth continues to gain strength."
Now what
Lovesac didn't offer guidance in the earnings report, but management sounded optimistic about its prospects this year as the company's ominchannel, direct-to-consumer model and comfort-focused product line have helped it stand out in the competitive home furnishings market.
While its comparable sales growth rate will moderate, overall sales growth should remain strong as it continues to add new showrooms across the country.
