Lovesac Co
For the period ended Aug 2, 2026. Filed Sep 10, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 2, 2026 · Filed Sep 10, 2026
LOVE$15.80-4.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-05-03; filed 2026-06-11.
0001628280-26-042366
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-08-02; filed 2026-09-10.
0001628280-26-061220
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 98 previous paragraphs and 116 current paragraphs.
65 unchanged; 30 reworded; 15 added; 2 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 3 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA") tariffs were unlawful, and in April 2026, U.S. Customs and Border Protection (“CBP”) launched a phased refund process for previously paid IEEPA tariffs. Accordingly, we submitted refund claims through the Consolidated Administration and Processing of Entries (“CAPE”) process in April 2026. During the second quarter of fiscal 2027, we received and recognized $21.0 million of IEEPA tariff refunds and related interest, consisting of $20.0 million recognized as a reduction of cost of merchandise sold, $0.3 million recognized as a reduction of inventory, and $0.7 million recognized as interest income.
Current report
Subsequent to August 2, 2026, CBP advanced Phase III of the refund process by accepting the Company's CAPE Phase III registration. The Phase III portal did not open as anticipated in August 2026, and CBP has not announced a revised launch date. As no declarations or refund claims have been submitted and no entries have been reliquidated, no amounts have been recognized in accordance with ASC 450-30. See Note 6. Commitments and Contingencies 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.
Current report
Showroom net sales increased $5.1 million, or 4.6%, in the thirteen weeks ended August 2, 2026 compared to the prior year period.
Current report
Gross profit increased $19.7 million, or 21.7% in the thirteen weeks ended August 2, 2026 compared to the prior year period. Gross margin increased 1,200 basis points to 68.4% of net sales in the thirteen weeks ended August 2, 2026 from 56.4% of net sales in the prior year period. Gross margin increased primarily due to recoveries of IEEPA tariffs, which contributed 1,240 basis points, and a 250 basis point improvement in product margin driven primarily by price increases, partially offset by higher promotional discounting. These favorable impacts were partially offset by increases of 160 basis points in inbound transportation and tariff costs and 130 basis points in outbound transportation and warehousing costs. During the quarter, we received $21.0 million of IEEPA tariff refunds and related interest. Approximately $20.0 million was recognized through cost of merchandise sold, $0.3 million reduced inventory, and $0.7 million was recognized as interest income.
Current report
Income tax (expense) benefit
Current report
Income tax expense was $4.7 million for the thirteen weeks ended August 2, 2026, compared to an income tax benefit of $2.1 million in the prior year period. The change in the tax provision was primarily attributable to the Company's generation of pre-tax income in the current quarter compared to a pre-tax loss in the prior-year period, and an increase in the effective tax rate.
Current report
Twenty-six weeks ended August 2, 2026 compared to the twenty-six weeks ended August 3, 2025
Current report
Net sales
Current report
Net sales increased $0.5 million, or 0.2%, in the twenty-six weeks ended August 2, 2026 compared to the prior year period driven by new showroom openings, partially offset by the closure of the Company's Best Buy shop-in-shop locations and a decrease of 1.3% in omni-channel comparable net sales. In the twenty-six weeks ended August 2, 2026, the numbers of repeat and new customers decreased by 1.3% and 2.6%, respectively. In the comparable prior year period, the number of repeat customers increased by 14.8%, partially offset by a 3.9% decline in new customers.
Current report
Showroom net sales increased $5.6 million, or 2.7%, in the twenty-six weeks ended August 2, 2026 compared to the prior year period.
Current report
Gross profit
Current report
SG&A expenses increased $1.7 million, or 1.2%, in the twenty-six weeks ended August 2, 2026 compared to the prior year period. The increase was primarily related to increases of $2.9 million in payroll associated with severance and higher incentive compensation, $1.0 million in new product innovation costs, and $0.7 million in other overhead expenses, partially offset by $1.5 million of impairment charges related to the Best Buy partnership termination that were recognized in the prior year period, and a $1.4 million decrease in equity-based compensation. As a percentage of net sales, SG&A was 47.0% in the twenty-six weeks ended August 2, 2026, compared to 46.6% in the prior year period.
Current report
Advertising and marketing expenses
Current report
Depreciation and amortization expenses
Current report
Interest and other income, net
Removed paragraphs (2)
Previous report
In April , 2026, we filed for refunds of previously paid tariffs assessed under the International Emergency Economic Powers Act. As of May 3, 2026, due to the uncertainty surrounding the ultimate receipt and amount of these refunds, we have not recorded a receivable or any related reduction to cost of merchandise sold or inventories in our condensed financial statements for the first quarter of fiscal 2027. Any benefit from these refunds will be recognized in the period the refunds are received. See Note 6. Commitments and Contingencies 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.
Previous report
Showroom net sales increased $0.6 million, or 0.6%, in the thirteen weeks ended May 3, 2026 compared to the prior year period.
Reworded paragraphs (30)
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, angled sides and roll or swept arms. In September 2024, we launched the AnyTable®, 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 90.9% and 92.0% of our net sales for the thirteen weeks ended May 3, 2026 and May 4, 2025, 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 over 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®, 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 91.1% and 93.1% of our net sales for the thirteen weeks ended August 2, 2026 and August 3, 2025, respectively, and 91.0% and 92.6% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, respectively.
Previous wording
•Sacs. We believe that our Sacs product line is a category leader in oversized beanbags. The Sacs 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 Chair, an accessory that elevates the style and comfort of our existing PillowSac. In October 2025, the Company launched the PillowSac Chair Jr. which delivers the same comfort and premium materials as the PillowSac Chair, scaled for smaller spaces. Our Sacs represented 5.3% and 6.8% of our net sales for the thirteen weeks ended May 3, 2026 and May 4, 2025, respectively.
Current wording
•Sacs. We believe that our Sacs product line is a category leader in oversized beanbags. The Sacs 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 Chair, an accessory that elevates the style and comfort of our existing PillowSac. In October 2025, the Company launched the PillowSac Chair Jr. which delivers the same comfort and premium materials as the PillowSac Chair, scaled for smaller spaces. Our Sacs represented 5.1% and 5.6% of our net sales for the thirteen weeks ended August 2, 2026 and August 3, 2025, respectively, and 5.2% and 6.2% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, respectively.
Previous wording
•Showrooms. We market and sell our products through 281 showroom locations strategically situated at top tier malls, lifestyle centers, and street locations in 45 states in the U.S. We carefully select what we believe are 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 70.2% and 69.7% of total net sales for the thirteen weeks ended May 3, 2026 and May 4, 2025, respectively.
Current wording
•Showrooms. We market and sell our products through 284 showroom locations strategically situated at top tier malls, lifestyle centers, and street locations in 45 states in the U.S. We carefully select what we believe are 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 70.8% and 67.9% of total net sales for the thirteen weeks ended August 2, 2026 and August 3, 2025, respectively, and 70.5% and 68.8% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, 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 25.8% and 24.1% of total net sales for the thirteen weeks ended May 3, 2026 and May 4, 2025, 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. Our net sales generated by this channel accounted for 24.9% and 26.5% of total net sales for the thirteen weeks ended August 2, 2026 and August 3, 2025, respectively, and 25.4% and 25.4% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, 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 May 3, 2026 and May 4, 2025, we operated 159 and 171 in store pop-up-shops, respectively, and 9 and 2 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 August 2, 2026 and August 3, 2025, we operated 172 and 157 in store pop-up-shops, respectively, and 6 and 3 online pop-up-shops on Costco.com, respectively, and for the twenty-six weeks ended August 2, 2026 and August 3, 2025, we operated 331 and 328 in store pop-up-shops, respectively, and 15 and 5 online pop-up-shops on Costco.com, respectively.
Previous wording
◦Shop-in-shops. Prior to discontinuing this touchpoint at the end of fiscal 2026, shop-in-shops were designed to be in permanent locations carrying the same digital technology of our showrooms and were also staffed with associates trained to demonstrate and sell our products. In June 2025, the Company discontinued its partnership with Best Buy, resulting in the closure of all remaining shop-in-shop locations as of the end of fiscal 2026. Prior to the discontinuation of the partnership, we operated 49 Best Buy shop-in-shops as of May 4, 2025.
Current wording
◦Shop-in-shops. Prior to discontinuing this touchpoint at the end of fiscal 2026, shop-in-shops were designed to be in permanent locations carrying the same digital technology of our showrooms and were also staffed with associates trained to demonstrate and sell our products. In June 2025, the Company discontinued its partnership with Best Buy, resulting in the closure of all remaining shop-in-shop locations as of the end of fiscal 2026. Prior to the discontinuation of the partnership, we operated 43 Best Buy shop-in-shops as of August 3, 2025.
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. Our barter inventory arrangement permits us from time to time 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,
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. Our barter inventory arrangement permits us from time to time 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 August 2, 2026.
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 4.0% and 6.2% of our total net sales for the thirteen weeks ended May 3, 2026 and May 4, 2025, 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 4.3% and 5.6% of our total net sales for the thirteen weeks ended August 2, 2026 and August 3, 2025, respectively, and 4.1% and 5.8% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, respectively.
Previous wording
Gross profit is equal to our net sales less cost of merchandise sold. Gross profit as a percentage of our net sales is referred to as gross margin. 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
Gross profit is equal to our net sales less cost of merchandise sold. Gross profit as a percentage of our net sales is referred to as gross margin. 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 gross margin may not be comparable to other companies.
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 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.
Current wording
Advertising and marketing expenses 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 weeks ended May 3, 2026 and May 4, 2025:
Current wording
The following tables summarize key components of our results of operations for the thirteen and twenty-six weeks ended August 2, 2026 and August 3, 2025:
Previous wording
(1) During the second quarter of fiscal 2026, the Company made the decision to repurpose its 2 mobile concierges, and subsequently closed its last remaining kiosk in the fourth quarter of fiscal 2026. Showrooms open as of May 4, 2025 included 1 kiosk and 2 mobile concierges.
Current wording
(1) During the second quarter of fiscal 2026, the Company made the decision to repurpose its 2 mobile concierges, and subsequently closed its last remaining kiosk in the fourth quarter of fiscal 2026. Showrooms open as of August 3, 2025 included 1 kiosk.
Previous wording
Net sales decreased $0.2 million, or 0.1%, in the thirteen weeks ended May 3, 2026 compared to the prior year period driven by the closure of the Company's Best Buy shop-in-shop locations and a 1.0% decrease in omni-channel comparable net sales, partially offset by new showroom openings. In the thirteen weeks ended May 3, 2026, the number of repeat and new customers decreased by 1.2% and 2.5%, respectively. In the comparable prior year period, the number of repeat and new customers increased by 23.0% and 1.2%, respectively.
Current wording
Net sales increased $0.7 million, or 0.4%, in the thirteen weeks ended August 2, 2026 compared to the prior year period driven by new showroom openings, partially offset by a 1.9% decrease in omni-channel comparable net sales and the closure of the Company's Best Buy shop-in-shop locations. In the thirteen weeks ended August 2, 2026, the number of repeat and new customers decreased by 0.5% and 1.9%, respectively. In the comparable prior year period, the number of repeat customers increased by 8.6%, partially offset by a 7.4% decline in new customers.
Previous wording
Internet net sales (sales made directly to customers through our ecommerce channel) increased $2.4 million, or 7.1%, in the thirteen weeks ended May 3, 2026 compared to the prior year period.
Current wording
Internet net sales (sales made directly to customers through our ecommerce channel) decreased $2.3 million, or 5.3%, in the thirteen weeks ended August 2, 2026 compared to the prior year period.
Previous wording
Other net sales, which include pop-up-shop sales, shop-in-shop sales, and the Loved by Lovesac program, decreased $3.1 million, or 36.3%, in the thirteen weeks ended May 3, 2026 compared to the prior year period. The decrease was primarily attributable to the closure of the Company's Best Buy shop-in-shop locations as a result of the discontinuation of its partnership with Best Buy.
Current wording
Other net sales, which include pop-up-shop sales, shop-in-shop sales, and the Loved by Lovesac program, decreased $2.1 million, or 23.2%, in the thirteen weeks ended August 2, 2026 compared to the prior year period. The decrease was primarily attributable to 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
SG&A expenses increased $1.5 million, or 2.2%, in the thirteen weeks ended May 3, 2026 compared to the prior year period. The increase was primarily related to increases of $1.0 million in payroll associated with higher incentive compensation and $0.5 million in other overhead expenses. As a percentage of net sales, SG&A was 49.6% for the thirteen weeks ended May 3, 2026 compared to 48.5% in the prior year period.
Current wording
SG&A expenses increased $0.2 million, or 0.3%, in the thirteen weeks ended August 2, 2026 compared to the prior year period. The increase was primarily related to increases of $1.9 million in payroll associated with severance and higher incentive compensation and $0.8 million in other overhead expenses, partially offset by $1.5 million of impairment charges related to the Best Buy partnership termination that were recognized in the prior year period, and a $1.0 million decrease in equity-based compensation. As a percentage of net sales, SG&A was 44.8% for the thirteen weeks ended August 2, 2026 compared to 44.9% in the prior year period.
Previous wording
Advertising and marketing expenses decreased $2.0 million, or 10.7%, in the thirteen weeks ended May 3, 2026 compared to the prior year period, primarily due to the strategic timing of marketing investments and continued emphasis on efficiency. Advertising and marketing expenses were 12.0% of net sales in the thirteen weeks ended May 3, 2026 compared to 13.4% of net sales in the prior year period.
Current wording
Advertising and marketing expenses decreased $0.7 million, or 2.9%, in the thirteen weeks ended August 2, 2026 compared to the prior year period, primarily due to the strategic timing of marketing investments and continued emphasis on efficiency. Advertising and marketing expenses were 14.1% of net sales in the thirteen weeks ended August 2, 2026 compared to 14.6% of net sales in the prior year period.
Previous wording
Depreciation and amortization expenses increased $0.6 million, or 15.7%, in the thirteen weeks ended May 3, 2026 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 9.7%, in the thirteen weeks ended August 2, 2026 compared to the prior year period primarily driven by capital investments for new showrooms.
Previous wording
Interest and other income, net was $0.7 million for the thirteen weeks ended May 3, 2026 compared to $0.3 million in the prior year period. The increase in interest income was primarily the result of higher cash deposits in the Company's interest-bearing bank accounts.
Current wording
Interest and other income, net was $1.2 million for the thirteen weeks ended August 2, 2026 compared to $0.1 million in the prior year period. The increase in interest income was primarily the result of interest earned on IEEPA tariff refunds and higher cash deposits in the Company's interest-bearing bank accounts.
Previous wording
Gross profit decreased $2.4 million, or 3.2% in the thirteen weeks ended May 3, 2026 compared to the prior year period. Gross margin decreased 160 basis points to 52.1% of net sales in the thirteen weeks ended May 3, 2026 from 53.7% of net sales in the prior year period primarily driven by increases of 380 basis points in inbound transportation and tariff costs and 110 basis points in outbound transportation and warehousing costs, partially offset by an increase of 330 basis points in product margin driven by price increases and cost reduction initiatives, partially offset by higher promotional discounting.
Current wording
Gross profit increased $17.3 million, or 10.5%, in the twenty-six weeks ended August 2, 2026 compared to the prior year period. Gross margin increased 570 basis points to 60.9% of net sales in the twenty-six weeks ended August 2, 2026 from 55.2% of net sales in the prior year period. Gross margin increased primarily due to recoveries of IEEPA tariffs, which contributed 670 basis points, and a 280 basis point improvement in product margin driven primarily by price increases, partially offset by higher promotional discounting. These favorable impacts were partially offset by increases of 260 basis points in inbound transportation and tariff costs and 120 basis points in outbound transportation and warehousing costs.
Previous wording
Income tax benefit was $5.6 million for the thirteen weeks ended May 3, 2026, compared to $3.8 million in the prior year period. The change in benefit was primarily driven by a higher net loss before taxes and an increase in the effective tax rate.
Current wording
Income tax benefit was $0.9 million for the twenty-six weeks ended August 2, 2026, compared to $5.9 million in the prior year period. The change in benefit was primarily driven by lower pre-tax loss and a decrease in the effective tax rate.
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 May 3, 2026, we had $57.0 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. Our long-term cash needs will depend on, among other things, our profitability and our ability to manage working capital requirements, and if needed, our ability to identify and secure other potential sources to fund future working capital needs and meet capital expenditure requirements.
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 August 2, 2026, we had $68.8 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. Our long-term cash needs will depend on, among other things, our profitability and our ability to manage working capital requirements, and if needed, our ability to identify and secure other potential sources to fund future working capital needs and meet capital expenditure requirements.
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 $5.3 million in the thirteen weeks ended May 3, 2026.
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 $12.2 million in the twenty-six weeks ended August 2, 2026.
Previous wording
Net cash used in operating activities was $35.4 million in the thirteen weeks ended May 3, 2026, compared to $41.4 million in the prior year period. The decrease was primarily attributable to working capital fluctuations, driven by timing of payments to vendors.
Current wording
Net cash used in operating activities was $11.4 million in the twenty-six weeks ended August 2, 2026, compared to $29.2 million in the prior year period. The decrease was primarily attributable to the receipt of IEEPA tariff refunds and net working capital changes, including the timing of vendor payments and strategic investments in inventory to support future demand.
Previous wording
For the thirteen weeks ended May 3, 2026, net cash used in investing activities was $5.3 million, primarily driven by continued investments in new showrooms. For the thirteen weeks ended May 4, 2025, net cash used in investing activities was $8.7 million, primarily driven by one-time capital expenditures related to our new corporate office and the continued investments in new showrooms.
Current wording
For the twenty-six weeks ended August 2, 2026, net cash used in investing activities was $12.2 million, primarily driven by continued investments in new showrooms. 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 the continued investments in new showrooms.
Previous wording
For the thirteen weeks ended May 3, 2026 and May 4, 2025, net cash used in financing activities was $4.2 million and $6.8 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 twenty-six weeks ended August 2, 2026 and August 3, 2025, net cash used in financing activities was $9.4 million and $7.1 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, see Note 7. Financing Arrangements. As of May 3, 2026 and February 1, 2026, the Company’s borrowing availability under the line of credit was $34.9 million and $36.0 million, respectively, and there were no outstanding borrowings under our credit facility.
Current wording
For additional information regarding our line of credit with Wells, see Note 7. Financing Arrangements. As of August 2, 2026 and February 1, 2026, the Company’s borrowing availability under the line of credit was $34.0 million and $36.0 million, respectively, and there were no outstanding borrowings under our credit facility.
Previous wording
During the thirteen weeks ended May 3, 2026 and May 4, 2025, we repurchased and subsequently retired 141,482 and 306,325 shares of common stock, costing $2.4 million and $6.0 million, respectively, including broker commissions and fees.
Current wording
During the thirteen weeks ended August 2, 2026, we repurchased and subsequently retired 274,426 shares of common stock, costing $4.9 million, including broker commissions and fees. We did not repurchase any shares of common stock during the thirteen weeks ended August 3, 2025. During the twenty-six weeks ended August 2, 2026 and August 3, 2025, we repurchased and subsequently retired 415,908 and 306,325 shares of common stock for $7.2 million and $6.0 million, respectively, including broker commissions and fees.
Previous wording
As of May 3, 2026, approximately $51.7 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.
Current wording
As of August 2, 2026, approximately $46.9 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 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 1, 2026 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 3, 2026.
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 1, 2026 for a complete description of our significant accounting policies. There have been no material changes to the critical accounting policies during the twenty-six weeks ended August 2, 2026.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Internet net sales (sales made directly to customers through our ecommerce channel) increased $0.1 million, or 0.1%, in the twenty-six weeks ended August 2, 2026 compared to the prior year period.
Current report — wording carried from elsewhere
Other net sales, which include pop-up-shop sales, shop-in-shop sales, barter inventory transactions, and the Loved by Lovesac program, decreased $5.2 million, or 29.6%, in the twenty-six weeks ended August 2, 2026 compared to the prior year period. The decrease was primarily attributable to the closure of the Company's Best Buy shop-in-shop locations as a result of the discontinuation of its partnership with Best Buy.
Current report — wording carried from elsewhere
Selling, general and administrative (SG&A) expenses
Current report — wording carried from elsewhere
Advertising and marketing expenses decreased $2.7 million, or 6.4%, in the twenty-six weeks ended August 2, 2026 compared to the prior year period, primarily due to the strategic timing of marketing investments and continued emphasis on efficiency. Advertising and marketing expenses were 13.2% of net sales in the twenty-six weeks ended August 2, 2026 compared to 14.1% of net sales in the prior year period.
Current report — wording carried from elsewhere
Depreciation and amortization expenses increased $0.9 million, or 12.6%, in the twenty-six weeks ended August 2, 2026 compared to the prior year period primarily driven by capital investments for new showrooms.
Current report — wording carried from elsewhere
Interest and other income, net was $1.9 million for the twenty-six weeks ended August 2, 2026, compared to $0.4 million in the prior year period. The increase in interest income was primarily the result of interest earned on IEEPA tariff refunds and higher cash deposits in the Company's interest-bearing bank accounts.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Item 1 of this Quarterly Report on Form 10-Q, for more information about our unused media credits as of May 3, 2026.