Lovesac Co

Previous wording

10-Q and our Annual Report on Form 10-K for the fiscal year ended February 2, 2025. As discussed in the section titled “Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified in the Forward-Looking Statements section herein and those discussed in the section titled “Risk Factors” under Part I, Item 1A in our Annual Report on Form 10-K.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended February 2, 2025. As discussed in the section titled “Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified in the Forward-Looking Statements section herein and those discussed in the section titled “Risk Factors” under Part I, Item 1A in our Annual Report on Form 10-K.

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 surround sound home theater system called StealthTech, the PillowSac TM Chair, the Sactionals Reclining Seat and the most recently launched platform of premium seating called Snugg™. 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, 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 immersive surround sound home theater system called StealthTech, the PillowSac TM Chair, the Sactionals Reclining Seat and the most recently launched platform of premium seating called Snugg™. 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, 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 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 93.1% and 91.3% of our net sales for the thirteen weeks ended August 3, 2025 and August 4, 2024, respectively, and 92.6% and 91.5% of our net sales for the twenty-six weeks ended August 3, 2025 and August 4, 2024, 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, angled sides and roll or swept arms. 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 90.3% and 91.4% of our net sales for the thirteen weeks ended November 2, 2025 and November 3, 2024, respectively, and 91.8% and 91.5% of our net sales for the thirty-nine weeks ended November 2, 2025 and November 3, 2024, 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. In May 2024, we launched the PillowSac TMChair Frame, an accessory that elevates the style and comfort of our existing PillowSac. Our Sacs represented 5.6% and 7.4% of our net sales for the thirteen weeks ended August 3, 2025 and August 4, 2024, respectively, and 6.2% and 7.1% of our net sales for the twenty-six weeks ended August 3, 2025 and August 4, 2024, 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 32 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 TMChair, an accessory that elevates the style and comfort of our existing PillowSac. In October 2025, the Company launched the PillowSac TM Chair Jr. which delivers the same comfort and premium materials as the PillowSac TMChair, scaled for smaller spaces. Our Sacs represented 6.6% and 7.2% of our net sales for the thirteen weeks ended November 2, 2025 and November 3, 2024, respectively, and 6.3% and 7.1% of our net sales for the thirty-nine weeks ended November 2, 2025 and November 3, 2024, respectively.

Previous wording

•Showrooms. We market and sell our products through 270 showroom locations at top tier malls, lifestyle centers, kiosks, 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-showroom sample configurations for display and our ability to stock our inventory for immediate sale. The architecture and layout of these showrooms are 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 67.9% and 63.1% of total net sales for the thirteen weeks ended August 3, 2025 and August 4, 2024, respectively, and 68.8% and 62.4% of our net sales for the twenty-six weeks ended August 3, 2025 and August 4, 2024, respectively.

Current wording

•Showrooms. We market and sell our products through 275 showroom locations at top tier malls, lifestyle centers, kiosks, and street locations in 44 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-showroom sample configurations for display and our ability to stock our inventory for immediate sale. The architecture and layout of these showrooms are 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 68.4% and 60.7% of total net sales for the thirteen weeks ended November 2, 2025 and November 3, 2024, respectively, and 68.6% and 61.8% of our net sales for the thirty-nine weeks ended November 2, 2025 and November 3, 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. Our net sales generated by this channel accounted for 26.5% and 28.3% of total net sales for the thirteen weeks ended August 3,

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. Our net sales generated by this channel accounted for 24.8% and 29.9% of total net sales for the thirteen weeks ended November 2, 2025 and November 3, 2024, respectively, and 25.2% and 28.6% of our net sales for the thirty-nine weeks ended November 2, 2025 and November 3, 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 August 3, 2025 and August 4, 2024, we operated 157 and 138 in store pop-up-shops, respectively, and 3 and 2 online pop-up-shops on Costco.com, respectively, and for the twenty-six weeks ended August 3, 2025 and August 4, 2024, we operated 328 and 258 in store pop-up-shops, respectively, and 5 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 November 2, 2025 and November 3, 2024, we operated 161 and 165 in store pop-up-shops, respectively, and 3 and 2 online pop-up-shops on Costco.com, respectively, and for the thirty-nine weeks ended November 2, 2025 and November 3, 2024, we operated 489 and 423 in store pop-up-shops, respectively, and 8 and 7 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 August 3, 2025 and August 4, 2024, we operated 43 and 51 Best Buy shop-in-shops, respectively. In June 2025, the Company discontinued its partnership with Best Buy and has started to wind down the shop-in-shop locations. The Company expects to be substantially complete by the third quarter of fiscal year 2026.

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. In June 2025, the Company discontinued its partnership with Best Buy, resulting in the closure of all remaining Best Buy shop-in-shop locations as of November 2, 2025. Prior to the discontinuation of the partnership, we operated 49 Best Buy shop-in-shops as of November 3, 2024.

Previous wording

◦Barter inventory transactions. Our barter inventory transactions with a third party vendor are part of our Circular Operations ("CO"), Designed for Life, and Environmental, Social and Governance ("ESG") initiatives. CO is a way of doing business that is meant to reduce our footprint, while dramatically extending the life of products through more looped, localized, long-term, and sustainable practices, policies, and programs. We have the option to repurpose returned open-box inventory in exchange for media credits, which are being used to support our advertising initiatives to create brand awareness and drive net sales growth.

Current wording

◦Barter inventory transactions. Our barter inventory transactions with a third party vendor are part of our Circular Operations ("CO"), Designed for Life, and Environmental, Social and Governance ("ESG") initiatives. CO is a way of doing business that is meant to reduce our footprint, while dramatically extending the life of products through more looped, localized, long-term, and sustainable practices, policies, and programs. We have the option to repurpose returned open-box inventory in exchange for media credits, which are being used to support our advertising initiatives to create brand awareness and drive net sales growth. See Note 2. Revenue Recognition— Barter Arrangements in the notes to the condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for more information about our unused media credits as of November 2, 2025.

Previous wording

Other net sales, which includes pop-up-shop sales, shop-in-shop sales, barter inventory transactions, and the Loved by Lovesac program, accounted for 5.6% and 8.6% of our total net sales for the thirteen weeks ended August 3, 2025 and August 4, 2024, respectively, and 5.8% and 9.6% of our net sales for the twenty-six weeks ended August 3, 2025 and August 4, 2024, respectively.

Current wording

Other net sales, which includes pop-up-shop sales, shop-in-shop sales, barter inventory transactions, and the Loved by Lovesac program, accounted for 6.8% and 9.4% of our total net sales for the thirteen weeks ended November 2, 2025 and November 3, 2024, respectively, and 6.2% and 9.6% of our net sales for the thirty-nine weeks ended November 2, 2025 and November 3, 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 showrooms. Comparable net sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP.

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 showrooms. Comparable net sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with US GAAP.

Previous wording

The following tables summarize key components of our results of operations for the thirteen and twenty-six weeks ended August 3, 2025 and August 4, 2024:

Current wording

The following tables summarize key components of our results of operations for the thirteen and thirty-nine weeks ended November 2, 2025 and November 3, 2024:

Previous wording

(1) Showrooms open at the end of the period include 1 kiosk as of August 3, 2025 and August 4, 2024. Showrooms open as of August 4, 2024 also include 2 mobile concierges. During the second quarter of fiscal 2026, the Company made the decision to repurpose the mobile concierges for marketing related activity and are included in the showrooms closed within the period.

Current wording

(1) Showrooms open at the end of the period include 1 kiosk as of November 2, 2025 and November 3, 2024. Showrooms open as of November 3, 2024 also include 2 mobile concierges. During the second quarter of fiscal 2026, the Company made the decision to repurpose the mobile concierges for marketing related activity and are included in the showrooms closed within the thirty-nine weeks ended November 2, 2025.

Previous wording

Net sales increased $3.9 million, or 2.5%, in the thirteen weeks ended August 3, 2025 compared to the prior year period driven by an increase of 0.9% in omni-channel comparable net sales and new showroom openings. In the thirteen weeks ended August 3, 2025, the number of repeat customers increased by 8.6%, partially offset by a 7.4% decline in new customers. In the comparable prior year period, the number of repeat and new customers increased by 26.1% and 12.9%, respectively.

Current wording

Net sales increased $0.3 million, or 0.2%, in the thirteen weeks ended November 2, 2025 compared to the prior year period driven by new showroom openings, partially offset by a decrease of 1.2% in omni-channel comparable net sales. In the thirteen weeks ended November 2, 2025, the number of repeat and new customers decreased by 2.3% and 16.4%, respectively. In the comparable prior year period, the number of repeat and new customers increased by 23.4% and 6.9%, respectively.

Previous wording

Internet net sales (sales made directly to customers through our ecommerce channel) decreased $1.8 million, or 4.1%, in the thirteen weeks ended August 3, 2025 compared to the prior year period.

Current wording

Internet net sales (sales made directly to customers through our ecommerce channel) decreased $7.6 million, or 16.9%, in the thirteen weeks ended November 2, 2025 compared to the prior year period.

Previous wording

Other net sales, which include pop-up-shop sales, shop-in-shop sales, barter inventory transactions, and the Loved by Lovesac program, decreased $4.5 million, or 33.6%, in the thirteen weeks ended August 3, 2025 compared to the prior year period. The decrease was primarily attributable to the Company’s decision not to engage in any barter transactions during the current period.

Current wording

Other net sales, which include pop-up-shop sales, shop-in-shop sales, barter inventory transactions, and the Loved by Lovesac program, decreased $3.8 million, or 27.3%, in the thirteen weeks ended November 2, 2025 compared to the prior year period. The decrease was primarily attributable to the Company’s decision not to engage in any barter transactions during the current period, and the closure of the Company's Best Buy shop-in-shop locations as a result of the discontinuation of its partnership with Best Buy.

Previous wording

Gross profit increased $0.6 million, or 0.3%, in the twenty-six weeks ended August 3, 2025 compared to the prior year period. Gross margin decreased 160 basis points to 55.2% of net sales in the twenty-six weeks ended August 3, 2025 from 56.8% of net sales in the prior year period primarily driven by a decrease of 150 basis points in product margin driven by higher promotional discounting and an increase of 10 basis points in outbound transportation and warehousing costs.

Current wording

Gross profit decreased $3.4 million, or 3.9% in the thirteen weeks ended November 2, 2025 compared to the prior year period. Gross margin decreased 240 basis points to 56.1% of net sales in the thirteen weeks ended November 2, 2025 from 58.5% of net sales in the prior year period primarily driven by increases of 320 basis points in inbound transportation and tariff costs and 20 basis points in outbound transportation and warehousing costs, partially offset by an increase of 100 basis points in product margin driven by cost reduction initiatives from our vendors in response to changes in the tariff environment.

Previous wording

Advertising and marketing expenses increased $0.2 million, or 0.7%, in the thirteen weeks ended August 3, 2025 compared to the prior year period. Advertising and marketing expenses were 14.6% of net sales in the thirteen weeks ended August 3, 2025 compared to 14.9% of net sales in the prior year period.

Current wording

Advertising and marketing expenses increased $1.1 million, or 5.7%, in the thirteen weeks ended November 2, 2025 compared to the prior year period. Advertising and marketing expenses were 14.0% of net sales in the thirteen weeks ended November 2, 2025 compared to 13.3% of net sales in the prior year period.

Previous wording

Depreciation and amortization expenses increased $0.1 million, or 2.1%, in the thirteen weeks ended August 3, 2025 compared to the prior year period primarily driven by capital investments for new showrooms.

Current wording

Depreciation and amortization expenses increased $0.3 million, or 9.2%, in the thirteen weeks ended November 2, 2025 compared to the prior year period primarily driven by capital investments for new showrooms.

Previous wording

Interest and other income, net was $0.1 million for the thirteen weeks ended August 3, 2025 compared to $0.7 million in the prior year period. The decrease in interest income was primarily the result of lower cash deposits in the Company's interest-bearing bank accounts.

Current wording

Interest and other income, net was $0.2 million for the thirteen weeks ended November 2, 2025 compared to $0.7 million in the prior year period. The decrease in interest income was primarily the result of lower cash deposits in the Company's interest-bearing bank accounts.

Previous wording

Income tax benefit was $2.1 million for the thirteen weeks ended August 3, 2025, compared to $1.8 million in the prior year period. The change in benefit is primarily driven by a higher net loss before taxes.

Current wording

Income tax benefit was $5.0 million for the thirteen weeks ended November 2, 2025, compared to $2.1 million in the prior year period. The change in benefit was primarily driven by a higher net loss before taxes.

Previous wording

Net sales increased $9.7 million, or 3.3%, in the twenty-six weeks ended August 3, 2025 compared to the prior year period driven by an increase of 1.4% in omni-channel comparable net sales and new showroom openings. In the twenty-six weeks ended August 3, 2025, the numbers of repeat customers increased by 14.8%, partially offset by a 3.9% decline in new customers. In the comparable prior year period, the number of repeat and new customers increased by 18.0% and 3.4%, respectively.

Current wording

Net sales increased $9.9 million, or 2.3%, in the thirty-nine weeks ended November 2, 2025 compared to the prior year period driven by an increase of 0.4% in omni-channel comparable net sales and new showroom openings. In the thirty-nine weeks ended November 2, 2025, the numbers of repeat customers increased by 8.9%, partially offset by a 8.5% decline in new customers. In the comparable prior year period, the number of repeat and new customers increased by 19.5% and 4.2%, respectively.

Previous wording

Internet net sales (sales made directly to customers through our ecommerce channel) decreased $5.1 million, or 6.3%, in the twenty-six weeks ended August 3, 2025 compared to the prior year period.

Current wording

Internet net sales (sales made directly to customers through our ecommerce channel) decreased $12.7 million, or 10.1%, in the thirty-nine weeks ended November 2, 2025 compared to the prior year period.

Previous wording

Other net sales, which include pop-up-shop sales, shop-in-shop sales, barter inventory transactions, and the Loved by Lovesac program, decreased $10.4 million, or 37.2%, in the twenty-six weeks ended August 3, 2025 compared to the prior year period. The decrease was primarily attributable to the Company’s decision not to engage in any barter transactions during the current period.

Current wording

Other net sales, which include pop-up-shop sales, shop-in-shop sales, barter inventory transactions, and the Loved by Lovesac program, decreased $14.2 million, or 33.9%, in the thirty-nine weeks ended November 2, 2025 compared to the prior year period. The decrease was primarily attributable to the Company’s decision not to engage in any barter transactions during the current period, and the closure of the Company's Best Buy shop-in-shop locations as a result of the discontinuation of its partnership with Best Buy.

Previous wording

Gross profit decreased $1.8 million, or 1.9% in the thirteen weeks ended August 3, 2025 compared to the prior year period. Gross margin decreased 260 basis points to 56.4% of net sales in the thirteen weeks ended August 3, 2025 from 59.0% of net sales in the prior year period primarily driven by increases of 110 basis points in inbound transportation costs and 50 basis points in outbound transportation and warehousing costs and a decrease of 100 basis points in product margin driven by higher promotional discounting.

Current wording

Gross profit decreased $2.8 million, or 1.1%, in the thirty-nine weeks ended November 2, 2025 compared to the prior year period. Gross margin decreased 190 basis points to 55.5% of net sales in the thirty-nine weeks ended November 2, 2025 from 57.4% of net sales in the prior year period primarily driven by increases of 110 basis points in inbound transportation and tariff costs and 10 basis points in outbound transportation and warehousing costs, and a decrease of 70 basis points in product margin driven by higher promotional discounting.

Previous wording

SG&A expenses decreased $2.8 million, or 2.0%, in the twenty-six weeks ended August 3, 2025 compared to the prior year period. The decrease was primarily related to decreases of $5.9 million in legal and professional fees, $1.3 million in credit card fees, $1.0 million in computer expense, and $1.9 million in other overhead costs, partially offset by increases of $2.8 million in payroll, $1.9 million in equity-based compensation, $1.5 million in impairment charges related to the Best Buy partnership termination, and $1.1 million in rent. As a percentage of net sales, SG&A was 46.6% in the twenty-six weeks ended August 3, 2025, compared to 49.1% in the prior year period.

Current wording

SG&A expenses increased $0.4 million, or 0.2%, in the thirty-nine weeks ended November 2, 2025 compared to the prior year period. The increase was primarily related to increases of $6.9 million in payroll, including an out-of-period $1.6 million expense pertaining to prior periods employee benefits, $1.7 million in rent, $1.5 million in equity-based compensation, and $1.5 million in impairment charges related to the Best Buy partnership discontinuation. The increases were partially offset by decreases of $8.9 million in legal and professional fees, $1.3 million in credit card fees, and $1.0 million in other overhead costs. As a percentage of net sales, SG&A was 47.7% in the thirty-nine weeks ended November 2, 2025, compared to 48.7% in the prior year period.

Previous wording

Advertising and marketing expenses increased $0.8 million, or 1.9%, in the twenty-six weeks ended August 3, 2025 compared to the prior year period. Advertising and marketing expenses were 14.1% of net sales in the twenty-six weeks ended August 3, 2025 compared to 14.3% of net sales in the prior year period.

Current wording

Advertising and marketing expenses increased $1.9 million, or 3.1%, in the thirty-nine weeks ended November 2, 2025 compared to the prior year period. Advertising and marketing expenses were 14.1% of net sales in the thirty-nine weeks ended November 2, 2025 compared to 13.9% of net sales in the prior year period.

Previous wording

Depreciation and amortization expenses increased $0.2 million, or 2.6%, in the twenty-six weeks ended August 3, 2025 compared to the prior year period primarily driven by capital investments for new showrooms.

Current wording

Depreciation and amortization expenses increased $0.5 million, or 4.8%, in the thirty-nine weeks ended November 2, 2025 compared to the prior year period primarily driven by capital investments for new showrooms.

Previous wording

Interest and other income, net was $0.4 million for the twenty-six weeks ended August 3, 2025, compared to $1.4 million in the prior year period. The decrease in interest income was primarily the result of lower cash deposits in the Company's interest-bearing bank accounts.

Current wording

Interest and other income, net was $0.6 million for the thirty-nine weeks ended November 2, 2025, compared to $2.1 million in the prior year period. The decrease in interest income was primarily the result of lower cash deposits in the Company's interest-bearing bank accounts.

Previous wording

Income tax benefit was $5.9 million for the twenty-six weeks ended August 3, 2025, compared to $6.0 million in the prior year period. The change in benefit is primarily driven by a lower net loss before taxes.

Current wording

Income tax benefit was $10.9 million for the thirty-nine weeks ended November 2, 2025, compared to $8.1 million in the prior year period. The change in benefit was primarily driven by a higher net loss before taxes.

Previous wording

Our primary sources of liquidity are cash flows from operations, our current balances of cash and cash equivalents and our revolving line of credit (see “Revolving Line of Credit” below). At August 3, 2025, we had $34.2 million in cash and cash equivalents. We have pursued in the past, and may pursue in the future, additional strategies to generate capital to pursue opportunities and investments, including through issuing equity and/or debt securities. To the extent we choose to secure additional sources of liquidity through incremental equity or debt financing, there can be no assurances that we will be able to raise such financing on favorable terms, if at all, or that future financing requirements will not require us to raise money that could be dilutive to holders of our capital stock.

Current wording

Our primary sources of liquidity are cash flows from operations, our current balances of cash and cash equivalents and our revolving line of credit (see “Revolving Line of Credit” below). At November 2, 2025, we had $23.7 million in cash and cash equivalents. We have pursued in the past, and may pursue in the future, additional strategies to generate capital to pursue opportunities and investments, including through issuing equity and/or debt securities. To the extent we choose to secure additional sources of liquidity through incremental equity or debt financing, there can be no assurances that we will be able to raise such financing on favorable terms, if at all, or that future financing requirements will not require us to raise money that could be dilutive to holders of our capital stock.

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. Capital expenditures also include patents and trademarks used in the normal course of our business. Cash paid for capital expenditures was $13.2 million in the twenty-six weeks ended August 3, 2025.

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. Capital expenditures also include patents and trademarks used in the normal course of our business. Cash paid for capital expenditures was $18.7 million in the thirty-nine weeks ended November 2, 2025.

Previous wording

Net cash used in operating activities was $29.2 million in the twenty-six weeks ended August 3, 2025, compared to $0.8 million in the prior year period, primarily driven by changes in working capital related to timing of payments to vendors.

Current wording

Net cash used in operating activities was $34.1 million in the thirty-nine weeks ended November 2, 2025, compared to $5.0 million in the prior year period. The increase was primarily attributable to working capital fluctuations, driven by inventory purchases and the timing of payments to vendors.

Previous wording

For the twenty-six weeks ended August 3, 2025, net cash used in investing activities was $13.2 million, primarily driven by one-time capital expenditures related to our new corporate office and continued investments in new showrooms. For the twenty-six weeks ended August 4, 2024, net cash used in investing was $13.5 million, primarily driven by the continued investments in new showrooms.

Current wording

For the thirty-nine weeks ended November 2, 2025, net cash used in investing activities was $18.7 million, primarily driven by one-time capital expenditures related to our new corporate office and continued investments in new showrooms. For the thirty-nine weeks ended November 3, 2024, net cash used in investing was $16.1 million, primarily driven by the continued investments in new showrooms.

Previous wording

For the twenty-six weeks ended August 3, 2025 and August 4, 2024, net cash used in financing activities was $7.1 million and $0.6 million, respectively, mainly due to the repurchase of our common stock and taxes paid for the net share settlement of equity awards.

Current wording

For the thirty-nine weeks ended November 2, 2025 and November 3, 2024, net cash used in financing activities was $7.2 million and $4.2 million, respectively, mainly due to the repurchase of our common stock and taxes paid for the net share settlement of equity awards.

Previous wording

On March 25, 2022, we amended our existing credit agreement providing for an asset-based revolving credit facility with the lenders party thereto, and Wells Fargo Bank, National Association, ("Wells Fargo Bank"), as administrative agent. The maturity date of our credit agreement was extended to March 25, 2024 and, among other things, the maximum revolver commitment was increased from $25.0 million to $40.0 million, subject to borrowing base and availability restrictions.

Current wording

On March 25, 2022, we amended our existing credit agreement providing for an asset-based revolving credit facility with the lenders party thereto, and Wells Fargo Bank, National Association ("Wells Fargo Bank"), as administrative agent. Pursuant to the amendment, the maturity date of our credit agreement was extended to March 25, 2024 and, among other things, the maximum revolver commitment was increased from $25.0 million to $40.0 million, subject to borrowing base and availability restrictions.

Previous wording

On March 24, 2023, we amended the credit agreement to extend the maturity date to September 30, 2024. On July 29, 2024, we amended the credit agreement to add an uncommitted accordion feature that allows the Company, subject to certain customary conditions, to increase the size of the revolving credit facility by $10 million and, among other things, extend the maturity date of the loans made under the Amendment from September 30, 2024 to July 29, 2029.

Current wording

On March 24, 2023, we amended the credit agreement to, among other things, extend the maturity date to September 30, 2024. On July 29, 2024, we amended the credit agreement to add an uncommitted accordion feature that allows the Company, subject to certain customary conditions, to increase the size of the revolving credit facility by $10 million and, among other things, extend the maturity date of the loans made under the credit agreement from September 30, 2024 to July 29, 2029.

Previous wording

As of August 3, 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.

Current wording

As of November 2, 2025, approximately $14.1 million remained available for future purchase under our 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. Refer to Note 1 of 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 twenty-six weeks ended August 3, 2025.

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 US 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. Refer to Note 1 of 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 thirty-nine weeks ended November 2, 2025.