What happened

Shares of furniture brand Lovesac (LOVE -1.20%) soared on Tuesday after the company reported financial results for the fourth quarter of fiscal 2023. As of noon ET today, Lovesac stock was up 15% for the day and has now rebounded 57% from the 52-week lows it hit in December.

So what

Lovesac sells large beanbag chairs and sectional couches that it affectionately calls Sactionals. In the fourth quarter, the company had net sales of $239 million, an increase of almost 22% from the prior-year period. And for fiscal 2023, which ended in January, net sales were up 31% to $652 million.

The market is likely excited with Lovesac's fourth-quarter results because net sales were stronger than expected and its growth rate accelerated from the previous quarter. Management had guided for net sales growth in the "high single digits to the mid-teens range" -- and growth of 22% far exceeded that. And in the third quarter of fiscal 2023, Lovesac grew by only 15.5%.

Moreover, it overcame profitability headwinds in the fourth quarter. Logistic expenses decreased as a percentage of revenue, boosting the company's gross margin from 55.9% last year to 56.6% in the fourth quarter. And operating expenses also decreased as a percentage of revenue, allowing its operating margin to jump to 15.9% compared to 12.3% in the same quarter of fiscal 2022.

Now what

Lovesac expects net sales of $700 million to $740 million in fiscal 2024, a potential 7% to 14% year-over-year increase. That would be the company's slowest annual growth rate since going public in 2018. But management's guidance is more than what Wall Street was expecting, hence the stock soared today.

In fiscal 2024, management also expects earnings per share of $1.83 to $2.24. This means that at the midpoint, the stock trades at just 13.5 times its forward earnings, which is a reasonable price considering it's still growing.

Therefore, even though Lovesac stock has already rallied, I could see it continuing to perform well. Moreover, the company frequently outperforms management's guidance, which could be an additional catalyst if the trend continues in the coming year.