Shares of modular furniture maker Lovesac (LOVE -1.24%) are down 17% Thursday as of 11 p.m. ET, according to data provided by S&P Global Market Intelligence.
During the second quarter, Lovesac met analysts' expectations by growing sales by 2.5%, and its $0.40 net loss per share was much better than expected for the company's slower summer quarter.
However, management slashed full-year earnings-per-share guidance from $1.08 at the midpoint to $0.75, prompting the market's adverse reaction.
Lovesac keeps gaining market share
While 2.5% sales growth isn't necessarily eye-catching, it is much better than the broader furniture industry's sales decline of 4% over the same period. These market share gains are crucial to the investment thesis for Lovesac, as it is only the 19th-largest home furnishings retailer, according to Furniture Today.
Battling lower consumer confidence, a housing market in limbo, and ever-changing tariffs (such as those on China, where Lovesac makes roughly 15% of its furniture), the company's industry-beating growth in Q2 was respectable.
Image source: Getty Images.
Best yet, Lovesac's new durable, washable, and adaptable Snugg line of sofas and furniture soft-launched in Q2 and has been a success so far, according to management. Designed to boost online sales, Snugg sofas are simpler and don't require the learning curve (in-person demos) associated with Lovesac's Sactionals, which are more complex and infinitely customizable.
Ultimately, whether or not to buy Lovesac and tolerate the inevitable cyclicality that comes with it will be a decision that each interested investor must make. However, trading at just 0.4 times sales, Lovesac stock already has a lot of negativity priced into it. Shares could be poised to pop if the company's Snugg couches are a hit and it keeps gaining market share -- even in trying times.
