Lovesac Co

Previous wording

We are a technology driven company that designs, manufactures and sells unique, high quality furniture derived through our proprietary "Designed for Life" approach which results in products that are built to last a lifetime and designed to evolve as our customers’ lives do. Our current product offering is comprised of modular couches called Sactionals, premium foam beanbag chairs called Sacs, and their associated home decor accessories. Innovation is at the center of our design philosophy with all of our core products protected by a robust portfolio of utility patents. We market and sell our products through an omni-channel platform that includes direct-to-consumer touch points in the form of our own showrooms, which include our mobile concierge and kiosks, and online directly at www.lovesac.com. We believe that our ecommerce centric approach, coupled with our ability to deliver our large upholstered products through express couriers, is unique to the furniture industry.

Current wording

We are a technology driven company that designs, manufactures and sells unique, high quality furniture derived through our proprietary "Designed for Life" approach which results in products that are built to last a lifetime and designed to evolve as our customers’ lives do. Our current product offering is comprised of modular couches called Sactionals, premium foam beanbag chairs called Sacs, the Sactionals StealthTech Sound + Charge System, and the most recently launched PillowSac TM Accent Chair. Innovation is at the center of our design philosophy with all of our core products protected by a robust portfolio of utility patents. We market and sell our products through an omni-channel platform that includes direct-to-consumer touch points in the form of our own showrooms, which include our mobile concierge and kiosks, and online directly at www.lovesac.com. We believe that our ecommerce centric approach, coupled with our ability to deliver our large upholstered products through express couriers, is unique to the furniture industry.

Previous wording

•Sactionals. Our Sactional product line currently represents a majority of our net sales. We believe our Sactionals platform is unlike competing products in its adaptability yet is comparable aesthetically to similarly priced premium couches and sectionals. Our Sactional products include a number of patented features relating to their geometry and modularity, coupling mechanisms and other features. Utilizing only two, standardized pieces, “seats” and “sides,” and approximately 200 high quality, tight-fitting covers that are removable, washable, and changeable, customers can create numerous permutations of a sectional couch with minimal effort. Customization is further enhanced with our specialty-shaped modular offerings, such as our wedge seat, roll arm and angled sides. Our custom features and accessories can be added easily and quickly to a Sactional to meet endless design, style, storage and utility preferences, reflecting our Designed for Life philosophy. Sactionals are built to meet the highest durability and structural standards applicable to fixed couches. Sactionals are comprised of standardized units and we guarantee their compatibility over time, which we believe is a major pillar of their value proposition to the consumer. Our Sactionals represented 91.3% and 90.9% of our net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 91.5% and 90.8% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.

Current wording

•Sactionals. Our Sactional product line currently represents a majority of our net sales. We believe our Sactionals platform is unlike competing products in its adaptability yet is comparable aesthetically to similarly priced premium couches and sectionals. Our Sactional products include a number of patented features relating to their geometry and modularity, coupling mechanisms and other features. Utilizing only two, standardized pieces, “seats” and “sides,” and approximately 200 high quality, tight-fitting covers that are removable, washable, and changeable, customers can create numerous permutations of a sectional couch with minimal effort. Customization is further enhanced with our specialty-shaped modular offerings, such as our wedge seat, roll arm and angled sides. In September 2024, we launched the AnyTable TM, a versatile table that seamlessly enhances any Sactionals living space. Our custom features and accessories can be added easily and quickly to a Sactional to meet endless design, style, storage and utility preferences, reflecting our Designed for Life philosophy. Sactionals are built to meet the highest durability and structural standards applicable to fixed couches. Sactionals are comprised of standardized units and we guarantee their compatibility over time, which we believe is a major pillar of their value proposition to the consumer. Our Sactionals represented 91.4% and 91.1% of our net sales for the thirteen weeks ended November 3, 2024 and October 29, 2023, respectively, and 91.5% and 90.9% of our net sales for the thirty-nine weeks ended November 3, 2024 and October 29, 2023, respectively.

Previous wording

•Sacs. We believe that our Sacs product line is a category leader in oversized beanbags. The Sac product line offers 5 different sizes ranging from 35 pounds to 95 pounds with capacity to seat 3+ people on the larger model Sacs. Filled with Durafoam, a proprietary blend of shredded foam, Sacs provide serene comfort and guaranteed durability. Their removable covers are machine washable and may be easily replaced with a wide selection of cover offerings. Our Sacs represented 7.4% and 7.5% of our net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 7.1% and 7.6% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.

Current wording

•Sacs. We believe that our Sacs product line is a category leader in oversized beanbags. The Sac product line offers 5 different sizes ranging from 35 pounds to 95 pounds with capacity to seat 3+ people on the larger model Sacs. Filled with Durafoam, a proprietary blend of shredded foam, Sacs provide serene comfort and guaranteed durability. Their removable covers are machine washable and may be easily replaced with a wide selection of cover offerings. In May 2024, we launched the PillowSac TM Accent Chair Frame, an accessory that elevates the style and comfort of our existing PillowSac. Our Sacs represented 7.2% and 7.3% of our net sales for the thirteen weeks ended November 3, 2024 and October 29, 2023, respectively, and 7.1% and 7.5% of our net sales for the thirty-nine weeks ended November 3, 2024 and October 29, 2023, respectively.

Previous wording

•Other Our Other product line enhances the versatility of our Sacs and Sactionals, catering to the evolving demands and preferences of our customers. In May 2024, we launched the PillowSac Accent Chair Frame, an accessory that elevates the style and comfort of our existing PillowSac. Our current offerings also include Sactional-specific drink holders, Footsac blankets, decorative pillows, fitted seat tables, ottomans in various styles and finishes, and the unique Sactionals Power Hub. These products provide our customers with the flexibility to personalize their furnishings with both decorative and practical add-ons, ensuring they can adapt to changing style preferences

Current wording

•Other Our Other product line enhances the versatility of our Sacs and Sactionals, catering to the evolving demands and preferences of our customers. Our current offerings also include Sactional-specific drink holders, Footsac blankets, decorative pillows, fitted seat tables, ottomans in various styles and finishes, and the unique Sactionals Power Hub. These products provide our customers with the flexibility to personalize their furnishings with both decorative and practical add-ons, ensuring they can adapt to changing style preferences

Previous wording

•Showrooms. We market and sell our products through 254 showroom locations at top tier malls, lifestyle centers, mobile concierge, kiosk, and street locations in 42 states in the U.S. We carefully select the best small-footprint showroom locations in high-end malls and lifestyle centers for our showrooms. Compared to traditional retailers, our showrooms require significantly less square footage because of our need to have only a few in-store sample configurations for display and our ability to stock our inventory for immediate sale. The architecture and layout of these showrooms is designed to communicate our brand personality and key product features. Our goal is to educate first-time customers, creating an environment where people can touch, feel, read, and understand the technology behind our products. Our showroom concept emphasizes our unique product platform and utilizes technology in more experiential ways to increase traffic and net sales. Net sales generated by this channel accounted for 63.1% and 63.6% of total net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 62.4% and 61.5% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.

Current wording

•Showrooms. We market and sell our products through 258 showroom locations at top tier malls, lifestyle centers, mobile concierge, kiosk, and street locations in 42 states in the U.S. We carefully select the best small-footprint showroom locations in high-end malls and lifestyle centers for our showrooms. Compared to traditional retailers, our showrooms require significantly less square footage because of our need to have only a few in-store sample configurations for display and our ability to stock our inventory for immediate sale. The architecture and layout of these showrooms is designed to communicate our brand personality and key product features. Our goal is to educate first-time customers, creating an environment where people can touch, feel, read, and understand the technology behind our products. Our showroom concept emphasizes our unique product platform and utilizes technology in more experiential ways to increase traffic and net sales. Net sales generated by this channel accounted for 60.7% and 64.0% of total net sales for the thirteen weeks ended November 3, 2024 and October 29, 2023, respectively, and 61.8% and 62.3% of our net sales for the thirty-nine weeks ended November 3, 2024 and October 29, 2023, respectively.

Previous wording

•Ecommerce. Through our ecommerce channel, we believe we are able to significantly enhance the consumer shopping experience for home furnishings, driving deeper brand engagement and loyalty, while also realizing more favorable margins than our showroom locations. We believe our robust technological capabilities position us well to benefit from the growing consumer preference to transact at home and via mobile devices. With furniture especially suited to ecommerce applications, our net sales generated by this channel accounted for 28.3% and 26.8% of total net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 28.0% and 27.6% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.

Current wording

•Ecommerce. Through our ecommerce channel, we believe we are able to significantly enhance the consumer shopping experience for home furnishings, driving deeper brand engagement and loyalty, while also realizing more favorable margins than our showroom locations. We believe our robust technological capabilities position us well to benefit from the growing consumer preference to transact at home and via mobile devices. With furniture especially suited to ecommerce applications, our net sales generated by this channel accounted for 29.9% and 26.0% of total net sales for the thirteen weeks ended November 3, 2024 and October 29, 2023, respectively, and 28.6% and 27.1% of our net sales for the thirty-nine weeks ended November 3, 2024 and October 29, 2023, respectively.

Previous wording

◦In store and online pop-up-shops. We utilize in store pop-up-shops to increase the number of locations where customers can experience and purchase our products, a low cost alternative to drive brand awareness, in store net sales, and ecommerce net sales. These in store pop-up-shops are typically 10-day shows and are staffed similarly to our showrooms with associates trained to demonstrate and sell our products and promote our brand. For the thirteen weeks ended August 4, 2024 and July 30, 2023, we operated 138 and 100 in store pop-up-shops, respectively, and 2 and 3 online pop-up-shops on Costco.com, respectively, and for the twenty-six weeks ended August 4, 2024 and July 30, 2023, we operated 258 and 195 in store pop-up-shops, respectively, and 5 and 5 online pop-up-shops on Costco.com, respectively.

Current wording

◦In store and online pop-up-shops. We utilize in store pop-up-shops to increase the number of locations where customers can experience and purchase our products, a low cost alternative to drive brand awareness, in store net sales, and ecommerce net sales. These in store pop-up-shops are typically 10-day shows and are staffed similarly to our showrooms with associates trained to demonstrate and sell our products and promote our brand. For the thirteen weeks ended November 3, 2024 and October 29, 2023, we operated 165 and 147 in store pop-up-shops, respectively, and 2 online pop-up-shops on Costco.com, and for the thirty-nine weeks ended November 3, 2024 and October 29, 2023, we operated 423 and 342 in store pop-up-shops, respectively, and 7 online pop-up-shops on Costco.com.

Previous wording

◦Shop-in-shops. Shop-in-shops are designed to be in permanent locations carrying the same digital technology of our showrooms and are also staffed with associates trained to demonstrate and sell our products. Shop-in-shops require less capital expenditure to open a productive space to drive brand awareness and touchpoint opportunities for demonstrating and selling our products. As of August 4, 2024 and July 30, 2023, we operated 51 and 25 Best Buy shop-in-shops, respectively.

Current wording

◦Shop-in-shops. Shop-in-shops are designed to be in permanent locations carrying the same digital technology of our showrooms and are also staffed with associates trained to demonstrate and sell our products. Shop-in-shops require less capital expenditure to open a productive space to drive brand awareness and touchpoint opportunities for demonstrating and selling our products. As of November 3, 2024 and October 29, 2023, we operated 49 and 41 Best Buy shop-in-shops, respectively.

Previous wording

Other net sales which includes pop-up-shop sales, shop-in-shop sales, and barter inventory transactions accounted for 8.6% and 9.6% of our total net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 9.6% and 10.9% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.

Current wording

Other net sales which includes pop-up-shop sales, shop-in-shop sales, and barter inventory transactions accounted for 9.4% and 10.0% of our total net sales for the thirteen weeks ended November 3, 2024 and October 29, 2023, respectively, and 9.6% and 10.6% of our net sales for the thirty-nine weeks ended November 3, 2024 and October 29, 2023, respectively.

Previous wording

Cost of merchandise sold includes the direct cost of sold merchandise; inventory shrinkage; inventory adjustments due to obsolescence, including excess and slow-moving inventory and lower of cost or net realizable value reserves; inbound freight; all freight costs to ship merchandise to our showrooms, and warehousing and all logistics costs associated with shipping product to our customers. Certain of our competitors and other retailers may report gross profit differently than we do, by excluding from gross profit some or all of the costs related to their distribution network and instead including them in selling, general and administrative expenses. As a result, the reporting of our gross profit and profit margin may not be comparable to other companies.

Current wording

Cost of merchandise sold includes the direct cost of sold merchandise; inventory shrinkage; inventory adjustments due to obsolescence, including excess and slow-moving inventory and lower of cost or net realizable value reserves; inbound freight; all freight costs to ship merchandise to our showrooms, and warehousing and all logistics costs associated with shipping product to our customers. Certain competitors and other retailers may report gross profit differently than we do, by excluding from gross profit some or all of the costs related to their distribution network and instead including them in selling, general and administrative expenses. As a result, the reporting of our gross profit and profit margin may not be comparable to other companies.

Previous wording

Our recent revenue growth has been accompanied by increased selling, general and administrative expenses. The most significant components of these increases are payroll and rent costs. We expect these expenses, as well as rent expense associated with the opening of new showrooms, to increase as we grow our business. We expect to leverage total selling, general and administrative expenses as a percentage of net sales as net sales volumes continue to grow. We expect to continue to invest in infrastructure to support the Company's growth. Our continued infrastructure investments include research and development costs on our existing and future products and foundational technology investments to support our continued growth. These investments will lessen the impact of expense leveraging during the period of investment with the greater impact of expense leveraging happening after the period of investment. However, total selling, general and administrative expenses generally will leverage during the periods of investments with the greatest leverage occurring within the fourth quarter.

Current wording

Our recent revenue growth has been accompanied by increased selling, general and administrative expenses. The most significant components of these increases are payroll and rent costs. We expect these expenses to increase as we grow our business. We expect to leverage total selling, general and administrative expenses as a percentage of net sales as net sales volumes continue to grow. We expect to continue to invest in infrastructure to support the Company's growth. Our continued infrastructure investments include research and development costs on our existing and future products and foundational technology investments to support our continued growth. These investments will lessen the impact of expense leveraging during the period of investment with the greater impact of expense leveraging happening after the period of investment. However, total selling, general and administrative expenses generally will leverage during the periods of investments with the greatest leverage occurring within the fourth quarter.

Previous wording

The following tables summarize key components of our results of operations for the thirteen and twenty-six weeks ended August 4, 2024 and July 30, 2023:

Current wording

The following tables summarize key components of our results of operations for the thirteen and thirty-nine weeks ended November 3, 2024 and October 29, 2023:

Previous wording

(1) Showrooms open at the end of the period include 1 kiosk and 2 mobile concierges as of August 4, 2024, and 9 kiosks and 2 mobile concierges as of July 30, 2023.

Current wording

(1) Showrooms open at the end of the period include 1 kiosk and 2 mobile concierges as of November 3, 2024, and 7 kiosks and 2 mobile concierges as of October 29, 2023.

Previous wording

Net sales increased $2.1 million, or 1.3%, in the thirteen weeks ended August 4, 2024 compared to the prior year period driven by new showroom openings, partially offset by a decrease of 5.4% in omni-channel comparable net sales. New customers increased by 12.9% in the thirteen weeks ended August 4, 2024 compared to an increase of 14.5% in the prior year period.

Current wording

Net sales decreased $4.1 million, or 2.7%, in the thirteen weeks ended November 3, 2024 compared to the prior year period driven by a decrease of 8.3% in omni-channel comparable net sales, partially offset by new showroom openings. New customers increased by 6.9% in the thirteen weeks ended November 3, 2024 compared to an increase of 15.9% in the prior year period.

Previous wording

Internet net sales (sales made directly to customers through our ecommerce channel) increased $2.9 million, or 7.0%, in the thirteen weeks ended August 4, 2024 compared to the prior year period.

Current wording

Internet net sales (sales made directly to customers through our ecommerce channel) increased $4.9 million, or 12.1%, in the thirteen weeks ended November 3, 2024 compared to the prior year period.

Previous wording

Other net sales, which include pop-up-shop sales, shop-in-shop sales, and barter inventory transactions decreased $1.4 million, or 9.3%, in the thirteen weeks ended August 4, 2024 compared to the prior year period primarily driven by lower productivity of our Costco in-store and online pop-up-shops on Costco.com, partially offset by 26 additional Best Buy shop-in-shop locations as of August 4, 2024 compared to July 30, 2023.

Current wording

Other net sales, which include pop-up-shop sales, shop-in-shop sales, and barter inventory transactions decreased $1.4 million, or 8.6%, in the thirteen weeks ended November 3, 2024 compared to the prior year period primarily driven by lower productivity of our Costco in-store and online pop-up-shops on Costco.com, partially offset by 8 additional Best Buy shop-in-shop locations as of November 3, 2024 compared to October 29, 2023.

Previous wording

Gross profit remained flat in the thirteen weeks ended August 4, 2024 compared to the prior year period. Gross margin decreased 80 basis points to 59.0% of net sales in the thirteen weeks ended August 4, 2024 from 59.8% of net sales in the prior year period primarily driven by a decrease of 110 basis points in product margin driven by higher promotional discounting and an increase of 50 basis points in outbound transportation and warehousing costs, partially offset by a decrease of 80 basis points in inbound transportation costs.

Current wording

Gross profit decreased $0.8 million, or 0.9% in the thirteen weeks ended November 3, 2024 compared to the prior year period. Gross margin increased 110 basis points to 58.5% of net sales in the thirteen weeks ended November 3, 2024 from 57.4% of net sales in the prior year period primarily driven by decreases of 120 basis points in inbound transportation costs and 40 basis points in outbound transportation and warehousing costs, partially offset by a decrease of 50 basis points in product margin driven by higher promotional discounting.

Previous wording

SG&A expenses increased $21.7 million, or 18.0%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period. The increase was primarily related to an increase of $10.4 million in payroll, $5.5 million in professional fees, $1.9 million in equity-based compensation, $1.8 million in other investments in the business to support current and future growth, and $1.7 million in rent. As a percentage of net sales, SG&A was 49.1% in the twenty-six weeks ended August 4, 2024, compared to 40.7% in the prior year period.

Current wording

SG&A expenses increased $4.1 million, or 6.1%, in the thirteen weeks ended November 3, 2024 compared to the prior year period. The increase was primarily related to an increase of $5.0 million in payroll, $1.7 million in equity-based compensation, and $0.8 million in rent, partially offset by decreases of $1.4 million in professional fees, $1.0 million in credit card fees, and $0.9 million in other investments in the business to support current and future growth. As a percentage of net sales, SG&A was 47.9% for the thirteen weeks ended November 3, 2024 compared to 43.9% in the prior year period.

Previous wording

Advertising and marketing expenses decreased $3.2 million, or 12.2%, in the thirteen weeks ended August 4, 2024 compared to the prior year period. Advertising and marketing expenses were 14.9% of net sales in the thirteen weeks ended August 4, 2024 compared to 17.2% of net sales in the prior year period.

Current wording

Advertising and marketing expenses decreased $1.2 million, or 5.5%, in the thirteen weeks ended November 3, 2024 compared to the prior year period. Advertising and marketing expenses were 13.3% of net sales in the thirteen weeks ended November 3, 2024 compared to 13.7% of net sales in the prior year period.

Previous wording

Depreciation and amortization expenses increased $0.8 million, or 24.6%, in the thirteen weeks ended August 4, 2024 compared to the prior year period primarily driven by capital investments for new showrooms.

Current wording

Depreciation and amortization expenses increased $0.4 million, or 10.7%, in the thirteen weeks ended November 3, 2024 compared to the prior year period primarily driven by capital investments for new showrooms.

Previous wording

Interest income, net was $0.7 million for the thirteen weeks ended August 4, 2024, compared to $0.4 million in the prior year period. Interest income earned on the Company’s cash and cash equivalents balances was favorable from higher interest rates compared to the prior year period.

Current wording

Interest income, net was $0.7 million for the thirteen weeks ended November 3, 2024, compared to $0.3 million in the prior year period. Interest income earned on the Company’s cash and cash equivalents balances was favorable from higher interest rates compared to the prior year period.

Previous wording

Income tax benefit was $1.8 million for the thirteen weeks ended August 4, 2024, compared to less than $0.1 million in the prior year period. The change in benefit is primarily driven by higher net loss before taxes and an increase in the effective tax rate.

Current wording

Income tax benefit was $2.1 million for the thirteen weeks ended November 3, 2024, compared to $1.0 million in the prior year period. The change in benefit is primarily driven by higher net loss before taxes.

Previous wording

Net sales decreased $6.5 million, or 2.2%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period driven by a decrease of 10.0% in omni-channel comparable net sales, partially offset by new showroom openings. New customers increased by 3.4% in the twenty-six weeks ended August 4, 2024 compared to an increase of 19.0% in the prior year period.

Current wording

Net sales decreased $10.7 million, or 2.4%, in the thirty-nine weeks ended November 3, 2024 compared to the prior year period driven by a decrease of 9.1% in omni-channel comparable net sales, partially offset by new showroom openings. New customers increased by 4.2% in the thirty-nine weeks ended November 3, 2024 compared to an increase of 18.5% in the prior year period.

Previous wording

Internet net sales (sales made directly to customers through our ecommerce channel) decreased $0.8 million, or 0.9%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period.

Current wording

Internet net sales (sales made directly to customers through our ecommerce channel) increased $4.1 million, or 3.4%, in the thirty-nine weeks ended November 3, 2024 compared to the prior year period.

Previous wording

Other net sales, which include pop-up-shop sales, shop-in-shop sales, and barter inventory transactions decreased $4.4 million, or 13.5%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period primarily driven by lower productivity of our Costco in-store and online pop-up-shops on Costco.com, partially offset by 26 additional Best Buy shop-in-shop locations as of August 4, 2024 compared to July 30, 2023.

Current wording

Other net sales, which include pop-up-shop sales, shop-in-shop sales, and barter inventory transactions decreased $5.7 million, or 11.9%, in the thirty-nine weeks ended November 3, 2024 compared to the prior year period primarily driven by lower productivity of our Costco in-store and online pop-up-shops on Costco.com, partially offset by 8 additional Best Buy shop-in-shop locations as of November 3, 2024 compared to October 29, 2023.

Previous wording

Gross profit increased $1.4 million, or 0.9%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period. Gross margin increased 170 basis points to 56.8% of net sales in the twenty-six weeks ended August 4, 2024 from 55.1% of net sales in the prior year period primarily driven by a decrease of 420 basis points in inbound transportation costs, partially offset by an increase of 130 basis points in outbound transportation and warehousing costs and a decrease of 120 basis points in product margin driven by higher promotional discounting.

Current wording

Gross profit increased $0.7 million, or 0.3%, in the thirty-nine weeks ended November 3, 2024 compared to the prior year period. Gross margin increased 150 basis points to 57.4% of net sales in the thirty-nine weeks ended November 3, 2024 from 55.9% of net sales in the prior year period primarily driven by a decrease of 320 basis points in inbound transportation costs, partially offset by an increase of 80 basis points in outbound transportation and warehousing costs and a decrease of 90 basis points in product margin driven by higher promotional discounting.

Previous wording

SG&A expenses increased $9.9 million, or 15.4%, in the thirteen weeks ended August 4, 2024 compared to the prior year period. The increase was primarily related to an increase of $6.4 million in payroll, $1.5 million in equity-based compensation, $0.9 million in professional fees, $0.7 million in rent, and $0.5 million in other investments in the business to support current and future growth. As a percentage of net sales, SG&A was 47.0% for the second quarter of fiscal 2025 compared to 41.3% for the second quarter of fiscal 2024.

Current wording

SG&A expenses increased $25.8 million, or 13.7%, in the thirty-nine weeks ended November 3, 2024 compared to the prior year period. The increase was primarily related to an increase of $15.3 million in payroll, $4.1 million in professional fees, $3.6 million in equity-based compensation, $2.5 million in rent, and $0.9 million in other investments in the business to support current and future growth, partially offset by a decrease of $1.1 million in credit card fees. As a percentage of net sales, SG&A was 48.7% in the thirty-nine weeks ended November 3, 2024, compared to 41.8% in the prior year period.

Previous wording

Advertising and marketing expenses decreased $2.1 million, or 4.9%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period. Advertising and marketing expenses were 14.3% of net sales in the twenty-six weeks ended August 4, 2024 compared to 14.7% of net sales in the prior year period.

Current wording

Advertising and marketing expenses decreased $3.3 million, or 5.1%, in the thirty-nine weeks ended November 3, 2024 compared to the prior year period. Advertising and marketing expenses were 13.9% of net sales in the thirty-nine weeks ended November 3, 2024 compared to 14.4% of net sales in the prior year period.

Previous wording

Depreciation and amortization expenses increased $1.5 million, or 24.4%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period primarily driven by capital investments for new showrooms.

Current wording

Depreciation and amortization expenses increased $1.8 million, or 19.4%, in the thirty-nine weeks ended November 3, 2024 compared to the prior year period primarily driven by capital investments for new showrooms.

Previous wording

Interest income, net was $1.4 million for the twenty-six weeks ended August 4, 2024, compared to $0.7 million in the prior year period. Interest income earned on the Company’s cash and cash equivalents balances was favorable from higher interest rates compared to the prior year period.

Current wording

Interest income, net was $2.1 million for the thirty-nine weeks ended November 3, 2024, compared to $1.0 million in the prior year period. Interest income earned on the Company’s cash and cash equivalents balances was favorable from higher interest rates compared to the prior year period.

Previous wording

Income tax benefit was $6.0 million for the twenty-six weeks ended August 4, 2024, compared to $1.3 million in the prior year period. The change in benefit is primarily driven by higher net loss before taxes and an increase in the effective tax rate.

Current wording

Income tax benefit was $8.1 million for the thirty-nine weeks ended November 3, 2024, compared to $2.3 million in the prior year period. The change in benefit is primarily driven by higher net loss before taxes.

Previous wording

Our business relies on cash flows from operations, our revolving line of credit (see “Revolving Line of Credit” below) and securities issuances as our primary sources of liquidity. At August 4, 2024, we had $72.1 million in cash and cash equivalents. Our primary cash needs are for marketing and advertising, inventory, payroll, showroom rent, capital expenditures associated with opening new showrooms and updating existing showrooms, as well as infrastructure and information technology. In the future, we may also use cash to repurchase shares of our common stock under our share repurchase program. The most significant components of our working capital are cash and cash equivalents, merchandise inventory, prepaid expenses, accounts payable, accrued expenses, customer deposits, and other current liabilities. We believe that cash expected to be generated from operations, the availability under our revolving line of credit and our existing cash balances are sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months.

Current wording

Our business relies on cash flows from operations, our revolving line of credit (see “Revolving Line of Credit” below) and securities issuances as our primary sources of liquidity. At November 3, 2024, we had $61.7 million in cash and cash equivalents. Our primary cash needs are for marketing and advertising, inventory, payroll, showroom rent, capital expenditures associated with opening new showrooms and updating existing showrooms, as well as infrastructure and information technology. We periodically use cash to repurchase shares of our common stock under our share repurchase program. The most significant components of our working capital are cash and cash equivalents, merchandise inventory, prepaid expenses, accounts payable, accrued expenses, customer deposits, and other current liabilities. We believe that cash expected to be generated from operations, the availability under our revolving line of credit and our existing cash balances are sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months.

Previous wording

Historically, we have invested significant capital expenditures in opening new showrooms and updating existing showrooms. These capital expenditures have increased in the past and may continue to increase in future periods as we open additional showrooms. Capital expenditures are anticipated to support our showroom growth, including capital outlays for leasehold improvements, fixtures and equipment, and the construction of new showrooms. Cash paid for capital expenditures was $13.5 million in the twenty-six weeks ended August 4, 2024.

Current wording

Historically, we have invested significant capital expenditures in opening new showrooms and updating existing showrooms. These capital expenditures have increased in the past and may continue to increase in future periods as we open additional showrooms. Capital expenditures are anticipated to support our showroom growth, including capital outlays for leasehold improvements, fixtures and equipment, and the construction of new showrooms. Cash paid for capital expenditures was $16.1 million in the thirty-nine weeks ended November 3, 2024.

Previous wording

Net cash used in operating activities was $0.8 million in the twenty-six weeks ended August 4, 2024, compared to net cash provided by operating activities of $27.3 million in the prior year period, primarily driven by higher net loss and changes in working capital related to income taxes paid, inventory management actions, and timing of payments to vendors.

Current wording

Net cash used in operating activities was $5.0 million in the thirty-nine weeks ended November 3, 2024, compared to net cash provided by operating activities of $20.1 million in the prior year period, primarily driven by higher net loss and changes in working capital related to income taxes paid and inventory management actions.

Previous wording

For the twenty-six weeks ended August 4, 2024 and July 30, 2023, net cash used in investing activities were $13.5 million and $12.5 million, respectively, mainly as a result of investments in new showrooms.

Current wording

For the thirty-nine weeks ended November 3, 2024 and October 29, 2023, net cash used in investing activities were $16.1 million and $22.2 million, respectively, mainly as a result of investments in new showrooms.

Previous wording

Financing activities consist primarily of taxes paid for the net settlement of equity awards and payment of deferred financing costs.

Current wording

Financing activities consist primarily of repurchases of our common stock, taxes paid for the net settlement of equity awards and payment of deferred financing costs.

Previous wording

For the twenty-six weeks ended August 4, 2024 and July 30, 2023, net cash used in financing activities was $0.6 million and $3.6 million, respectively, mostly due to taxes paid for the net share settlement of equity awards.

Current wording

For the thirty-nine weeks ended November 3, 2024 and October 29, 2023, net cash used in financing activities was $4.2 million and $3.7 million, respectively, mainly due to the repurchase of our common stock and taxes paid for the net share settlement of equity awards, respectively.

Previous wording

On June 11, 2024, our board of directors authorized a share repurchase program for up to $40.0 million of shares of our common stock. Under the share repurchase program, we may repurchase shares from time to time in the open market, privately negotiated transactions and accelerated share repurchase. The timing, volume and nature of share repurchases, if any, will be at our sole discretion and will be dependent on market conditions, liquidity, applicable securities laws, and other factors. We may suspend or discontinue the share repurchase program at any time. We have not purchased any of our equity securities under the program to date. We plan on funding any repurchases in the future with our current cash and cash equivalents and future cash flows.

Current wording

On June 11, 2024, our board of directors authorized a share repurchase program for up to $40.0 million of shares of our common stock. Under the share repurchase program, we may repurchase shares from time to time in the open market, privately negotiated transactions and accelerated share repurchase. The timing, volume and nature of share repurchases, if any, will be at our sole discretion and will be dependent on market conditions, liquidity, applicable securities laws, and other factors. We may suspend or discontinue the share repurchase program at any time. We plan on funding any repurchases in the future with our current cash and cash equivalents and future cash flows.

Previous wording

The discussion and analysis of financial condition and results of operations is based upon our condensed financial statements, which have been prepared in conformity with GAAP. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Please see Note 1 to our financial statements included on Form 10-K for the fiscal year ended February 4, 2024 for a complete description of our significant accounting policies. There have been no material changes to the significant accounting policies during the twenty-six weeks ended August 4, 2024.

Current wording

The discussion and analysis of financial condition and results of operations is based upon our condensed financial statements, which have been prepared in conformity with GAAP. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Please see Note 1 to our financial statements included on Form 10-K for the fiscal year ended February 4, 2024 for a complete description of our significant accounting policies. There have been no material changes to the significant accounting policies during the thirty-nine weeks ended November 3, 2024.