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, 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.

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 surround sound home theater system called StealthTech, and the most recently launched PillowSac TM Accent Chair and Sactionals Reclining Seat. 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

There are a number of macroeconomic factors and uncertainties affecting the overall business environment and our business, including increased inflation, elevated interest rates, weak housing market conditions, consumer debt and available credit, layoffs, political uncertainty, global conflicts and uncertainties in the global financial markets. These factors have had and may continue to have a negative impact on markets in which we operate, including the potential for an economic recession, a continued downturn in the housing market, and a reduction in consumer discretionary spending. We believe that these macroeconomic factors have caused a significant shift in consumer spending and a decline in the demand for home furnishings which has contributed to the slowdown in demand that we have experienced in our business which may continue in future periods.

Current wording

There are a number of macroeconomic factors and uncertainties affecting the overall business environment and our business, including fluctuations in inflation, elevated interest rates, housing market conditions, consumer debt and available credit, increased tariff and trade restrictions, global conflicts and uncertainties in the global financial markets. These factors have a negative impact on us and the markets in which we operate, including the potential for an economic recession, a continued downturn in the housing market, and a reduction in consumer discretionary spending. We believe that these macroeconomic factors have contributed to the slowdown in demand that we have experienced in our business which may continue in future periods.

Previous wording

Our products serve as a set of building blocks that can be rearranged, restyled and re-upholstered with any new setting, mitigating constant changes in fashion and style. They are built to last and evolve throughout a customer’s life.

Current wording

Our products serve as a set of building blocks that can be rearranged, restyled and re-upholstered for any new setting or occasion, mitigating constant changes in fashion and style. They are built to last and evolve throughout a customer’s life.

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. 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.

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 primarily two, standardized pieces, “seats” and “sides,” and approximately 200 high quality, tight-fitting cover options 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, and in November 2024, we launched the Sactionals Reclining Seat, an innovation that integrates advanced reclining technology and delivers unparalleled comfort and flexibility while maintaining the sleek, sophisticated aesthetic of our Sactionals. 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 92.0% and 91.8% of our net sales for the thirteen weeks ended May 4, 2025 and May 5, 2024, respectively.

Previous wording

Our Sactionals StealthTech Sound + Charge product line complements our Sactionals as a unique innovation that features immersive surround sound by Harman Kardon and convenient wireless charging, all seamlessly embedded and hidden inside the adaptable Sactionals platform. The system includes two Sound + Charge Sides each with embedded front- and rear-firing Harman Kardon speakers, a Subwoofer that easily integrates into a Sactionals Seat Frame and a Center Channel, all working in unison to deliver captivating surround sound that is completely hidden from view. In May 2023, we introduced Satellite Subwoofers as an add-on to the Sound + Charge System. The Satellite Subwoofer is an upgrade to the existing StealthTech setup and enhances the bass and overall entertainment experience.

Current wording

Our Sactionals StealthTech Sound + Charge product line complements our Sactionals as a unique innovation that features immersive surround sound by Harman Kardon and convenient wireless charging, all seamlessly embedded and hidden inside the adaptable Sactionals platform. The system includes two Sound + Charge Sides each with embedded front- and rear-firing Harman Kardon speakers, a Subwoofer that easily integrates into a Sactionals Seat Frame and a Center Channel, all working in unison to deliver captivating surround sound that is completely hidden from view. In May 2023, we introduced Satellite Subwoofers as an add-on to the Sound + Charge System. The Satellite Subwoofer is an upgrade to the existing StealthTech setup and enhances the bass and overall entertainment experience. In November 2024, we launched the StealthTech Charge Side, integrating wireless device charging into our Sactionals Sides without the need for our sound system.

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. 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.

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 6.8% and 6.7% of our net sales for the thirteen weeks ended May 4, 2025 and May 5, 2024, 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. 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 meet changing style preferences.

Previous 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.

Current wording

•Showrooms. We market and sell our products through 267 showroom locations at top tier malls, lifestyle centers, mobile concierge, kiosk, and street locations in 43 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 69.7% and 61.5% of total net sales for the thirteen weeks ended May 4, 2025 and May 5, 2024, 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 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.

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 24.1% and 27.6% of total net sales for the thirteen weeks ended May 4, 2025 and May 5, 2024, 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 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.

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 May 4, 2025 and May 5, 2024, we operated 171 and 120 in store pop-up-shops, respectively, and 2 and 3 online pop-up-shops on Costco.com, respectively.

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 November 3, 2024 and October 29, 2023, we operated 49 and 41 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 May 4, 2025 and May 5, 2024, we operated 49 and 51 Best Buy shop-in-shops, respectively. In June 2025, the Company discontinued its partnership with Best Buy and intends to wind down the shop-in-shop locations. The Company expects to be substantially complete by the third quarter of fiscal year 2026. Refer to Note 10. Subsequent Events, contained in the Condensed Notes to Financial Statements in Item 1 of Part 1 of this Quarterly Report on Form 10-Q for a full description of the termination and our expectation of the impact, if any, on our results of operations and financial condition.

Previous 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.

Current wording

Other net sales which includes pop-up-shop sales, shop-in-shop sales, and barter inventory transactions accounted for 6.2% and 10.9% of our total net sales for the thirteen weeks ended May 4, 2025 and May 5, 2024, respectively.

Previous wording

Omni-channel comparable net sales is a measure that highlights the performance of our existing locations and websites by measuring the change in net sales for a period over the comparable prior-period of equivalent length. Comparable net sales includes sales at all retail locations and online, open greater than 12 months (including remodels and relocations) and excludes closed stores. Comparable net sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP. In fiscal year 2024, we updated how we calculate comparable sales to better reflect our business, store growth and omni-channel sales approach.

Current wording

Omni-channel comparable net sales is a measure that highlights the performance of our existing locations and websites by measuring the change in net sales for a period over the comparable prior-period of equivalent length. Comparable net sales includes sales at all retail locations and online, open greater than 12 months (including remodels and relocations) and excludes closed stores. Comparable net sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

Previous wording

We define a customer as new when the customer has completed a transaction at Lovesac either at a showroom or internet channel only for the first time. In fiscal 2024, we updated how we calculate new and repeat customers to better reflect business across all of our channels as well as the purchase cycle of the categories in which we compete.

Current wording

We define a customer as new when the customer has completed a transaction at Lovesac either at a showroom or internet channel only for the first time.

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 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; 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

Selling, general and administrative expenses include all operating costs, other than advertising and marketing expense, not included in cost of merchandise sold. These expenses include all payroll and payroll-related expenses; showroom expenses, including occupancy costs related to showroom operations, such as rent and common area maintenance; occupancy and expenses related to many of our operations at our headquarters, including utilities, equity based compensation, financing related expense; public company expenses; customer financing fees; and credit card transaction fees. Selling, general and administrative expenses as a percentage of net sales is usually higher in lower volume quarters and lower in higher volume quarters because a significant portion of the costs are relatively fixed.

Current wording

Selling, general and administrative expenses include all operating costs, other than advertising and marketing expense and depreciation and amortization, not included in cost of merchandise sold. These expenses include all payroll and payroll-related expenses; showroom expenses, including occupancy costs related to showroom operations, such as rent and common area maintenance; occupancy and expenses related to many of our operations at our headquarters, including utilities, equity based compensation, financing related expense; public company expenses; customer financing fees; and credit card transaction fees. Selling, general and administrative expenses as a percentage of net sales is usually higher in lower volume quarters and lower in higher volume quarters because a significant portion of the costs are relatively fixed.

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 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

Historically, our 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

Advertising and marketing expense include digital, social, and traditional advertising and marketing initiatives, that cover all of our business channels. Advertising and marketing expense is expected to continue to increase as a percentage of net sales as we continue to invest in advertising and marketing which has accelerated net sales growth.

Current wording

Advertising and marketing expense include digital, social, and traditional advertising and marketing initiatives, that cover all of our business channels. Advertising and marketing expenses are projected to rise as the Company drives net sales growth, supported by ongoing investments in these areas and careful monitoring to ensure efficient resource allocation.

Previous 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:

Current wording

The following tables summarize key components of our results of operations for the thirteen weeks ended May 4, 2025 and May 5, 2024:

Previous 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.

Current wording

(1) Showrooms open at the end of the period include 1 kiosk and 2 mobile concierges as of May 4, 2025, and May 5, 2024.

Previous 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.

Current wording

Net sales increased $5.8 million, or 4.3%, in the thirteen weeks ended May 4, 2025 compared to the prior year period driven by an increase of 2.8% in omni-channel comparable net sales and new showroom openings. New customers increased by 1.2% in the thirteen weeks ended May 4, 2025 compared to a decrease of 5.7% in the prior year period.

Previous 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.

Current wording

Internet net sales (sales made directly to customers through our ecommerce channel) decreased $3.3 million, or 8.9%, in the thirteen weeks ended May 4, 2025 compared to the prior year period.

Previous 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.

Current wording

Gross profit increased $2.4 million, or 3.2% in the thirteen weeks ended May 4, 2025 compared to the prior year period. Gross margin decreased 60 basis points to 53.7% of net sales in the thirteen weeks ended May 4, 2025 from 54.3% of net sales in the prior year period primarily driven by a decrease of 230 basis points in product margin driven by higher promotional discounting, partially offset by decreases of 130 basis points in inbound transportation costs and 40 basis points in outbound transportation and warehousing costs.

Previous 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.

Current wording

SG&A expenses decreased $1.3 million, or 1.9%, in the thirteen weeks ended May 4, 2025 compared to the prior year period. The decrease was primarily related to decreases of $3.8 million in professional fees and insurance matters, $0.9 million in credit card fees, $0.7 million in computer expense, and $0.3 million in other overhead costs, partially offset by increases of $2.2 million in payroll, $1.3 million in equity-based compensation, and $0.9 million in rent. As a percentage of net sales, SG&A was 48.5% for the thirteen weeks ended May 4, 2025 compared to 51.6% in the prior year period.

Previous 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.

Current wording

Advertising and marketing expenses increased $0.6 million, or 3.3%, in the thirteen weeks ended May 4, 2025 compared to the prior year period. Advertising and marketing expenses were 13.4% of net sales in the thirteen weeks ended May 4, 2025 compared to 13.6% of net sales in the prior year period.

Previous 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.

Current wording

Depreciation and amortization expenses increased $0.1 million, or 3.2%, in the thirteen weeks ended May 4, 2025 compared to the prior year period primarily driven by capital investments for new showrooms.

Previous 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.

Current wording

Income tax benefit was $3.8 million for the thirteen weeks ended May 4, 2025, compared to $4.2 million in the prior year period. The change in benefit is primarily driven by a lower 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 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.

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 May 4, 2025, we had $26.9 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 $16.1 million in the thirty-nine weeks ended November 3, 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 $8.7 million in the thirteen weeks ended May 4, 2025.

Previous 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.

Current wording

Net cash used in operating activities was $41.4 million in the thirteen weeks ended May 4, 2025, compared to $7.0 million in the prior year period, primarily driven by changes in working capital related to timing of payments to vendors.

Previous 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.

Current wording

For the thirteen weeks ended May 4, 2025 and May 5, 2024, net cash used in investing activities were $8.7 million and $7.3 million, respectively, primarily driven by one-time capital expenditures related to our new corporate office and continued investments in new showrooms.

Previous 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.

Current wording

For the thirteen weeks ended May 4, 2025 and May 5, 2024, net cash used in financing activities was $6.8 million and $0.4 million, respectively, mainly due to the repurchase of our common stock and taxes paid for the net share settlement of equity awards.

Previous wording

For additional information regarding our line of credit with Wells Fargo Bank, see Note 7. Financing Arrangements. As of November 3, 2024 and February 4, 2024, the Company’s borrowing availability under the line of credit was $36.0 million, and there were no outstanding borrowings under our credit facility.

Current wording

For additional information regarding our line of credit with Wells Fargo Bank, see Note 7. Financing Arrangements. As of May 4, 2025 and February 2, 2025, the Company’s borrowing availability under the line of credit was $36.0 million and $32.6 million, respectively, and there were no outstanding borrowings under our credit facility.

Previous wording

As of November 3, 2024, we had $36.6 million available to repurchase shares pursuant to the share repurchase program. For additional information, see Note 8 – Stockholders' Equity in the notes to the condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

As of May 4, 2025, we had $14.1 million available to repurchase shares pursuant to the share repurchase program. For additional information, see Note 8. Stockholders' Equity in the notes to the condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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 thirty-nine weeks ended November 3, 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 2, 2025 for a complete description of our significant accounting policies. There have been no material changes to the significant accounting policies during the thirteen weeks ended May 4, 2025.