Shares of furniture company The Lovesac Company (LOVE 1.69%) fell on Thursday after it reported financial results for the second quarter of its fiscal 2023. As of 1 p.m. ET, Lovesac stock was down 11%.
The drop for Lovesac stock is a little surprising considering Q2 results exceeded internal guidance and external expectations. Management had guided for year-over-year net sales growth of 25% to 30%, but in reality it grew Q2 net sales by 45% to $148.5 million.
Lovesac also reported Q2 earnings per share (EPS) of $0.45. This was down from EPS of $0.52 in the same quarter last year. However, this was partly due to changes in taxes, not something with the business. Moreover, the company surpassed analyst expectations on both the top and bottom lines, which makes today's 11% drop a little unusual.
BTIG analyst Camilo Lyon did lower his price target for Lovesac stock from $100 per share to $80 per share, according to The Fly. This could be partly why the stock is down. However, Lyon's revised price target still implies roughly 200% upside.
The other reason Lovesac stock is down today may be related to management's forward guidance. It didn't provide hard numbers. But it did say it expects around 15% year-over-year net sales growth next quarter. And it said it expects expenses, including freight costs, to creep up slightly.
The slowing growth rate and the modest projected hit to profit margins may be what spooked the market with Lovesac stock today. However, it's worth noting that the company has a history of overdelivering. Therefore, the market could be overreacting to this commentary from management.