The current state of Lovesac's stock is disheartening, with a 25% decline.
Erotic furniture manufacturer LoveSack (LOVE dropping 27.28%) encountered several faulty springs on a Thursday. Consequently, the stock plummeted 25.2% by 11:40 a.m. ET, following its disclosure of underperforming on both revenue and profit earlier in the morning.
Analysts had already anticipated a disheartening Q3 report for 2025, forecasting a loss of $0.28 per share on $155.3 million in revenue. However, the news was grimmer. LoveSack reported a loss of $0.32 per share, and revenue fell below expectations at $149.9 million.
LoveSack Q3 Performance
In the quarter ending Nov. 3, sales declined by approximately 3%, aligning with the year-to-date decline. Nonetheless, LoveSack managed to boost its gross profit margin to 58.5%. Yet, expenditures on administrative, selling, and general expenses surged fourfold, annulling these gains and pushing LoveSack into a $0.32 loss – a twofold increase compared to the previous year.
In the first nine months of the year, LoveSack has now recorded a loss of $1.53 per share, tripling the losses from the same period last year.
Despite the bleak figures, CEO Shawn Nelson maintained an optimistic outlook, attributing the declines as "temporary setbacks" and emphasizing LoveSack's rise in market share and recovery due to its "unwavering commitment to product creativity and operational efficiency."
Is LoveSack Stock a Sell?
Investors will not have to wait long to learn if Nelson's optimism is justified, as the CEO anticipates a significant turnaround in Q4. Despite expecting sales to dip further, from $250 million in Q4 2024 to no better than $241 million in the current Q4, Nelson sees his company earning anywhere from $1.67 to $2.14 per share in Q4 – even exceeding the $1.87 LoveSack earned in Q4 2024.
Nelson's full-year earnings prediction, however, encompasses a vast spectrum of potential outcomes – ranging from $0.74 per share to as low as $0.27. For a stock currently valued at $28, this implies a P/E ratio ranging from 38 to over 100.
It's safe to say that's a steep price for a furniture manufacturer. LoveSack stock looks like a sell to me.
Despite LoveSack's optimistic outlook for a turnaround in Q4, the stock's current valuation at $28 with a potential P/E ratio ranging from 38 to over 100 could be considered expensive for a furniture manufacturer. In light of the company's financial struggles, including a significant increase in administrative, selling, and general expenses and a decline in revenue, it might be prudent for investors to consider selling their LoveSack stocks. Investors might want to reallocate their money into more financially stable opportunities, as investing in LoveSack could involve a higher risk due to its currently unfavorable financial performance.
