Why did Lovesac stock fall 37% in December?

As 2024 came to a close, there seemed to be little investor love for it Lovesac (NASDAQ:LOVE). They shunned the specialist furniture maker’s shares after they posted a less inspiring price Quarterly profits a report. The situation was not helped by a gloomy analyst update. During the month of December, Lovesac stock lost more than 37% of its value.

Lots of it sale This happened mid-month on the heels of Lovesac releasing its third-quarter fiscal 2025 numbers. These revealed that net sales fell nearly 3% year over year to $149.9 million during the period. The net loss deepened to $4.9 million, or $0.32 per share, compared to the third quarter of fiscal year 2024, which had a deficit of $2.3 million.

Collectively, analysts tracking the stock were expecting better. They were modeling a top line of over $155 million and a net loss of $0.24 per share.

Lovesac attributed its profit decline largely to a more than 9% decline in omnichannel sales. This was offset to some extent by the net addition of 28 new showrooms for the company.

She also took an optimistic tone when discussing her immediate future. “Our expanding range of innovative products is resonating with customers and creating new avenues for sustainable growth in the future,” the company quoted CEO Shawn Nelson as saying. He cited the recently launched reclining chair as one product that embodies this innovation.

However, Lovesac expects a decline in sales year-on-year. It provided guidance for the full fiscal year 2025, calling for raising between $660 million to $680 million, which would be significantly lower than the $700 million it earned in the previous framework. On the plus side, management expects bottom-line gains, with annual net income in the range of $4.5 million to $12.5 million.

Less than a week after revealing those quarterly results and ahead of the company’s investor day, Lovesac posted an update on its outlook going forward. It is targeting annual net sales growth of 10% to 15% and wants to improve its annual profitability by at least 25%. However, judging by the market reaction, a large number of investors seem to doubt whether these goals can be achieved.

Thomas Forte, a DA Davidson analyst, might be considered a Lovesac skeptic as well. After the earnings announcement, Forte made a fairly significant cut in its price target for the stock. He now feels the stock is worth $35, well below its previous price of $44.

I don’t feel that investors should trade stocks based solely or mostly on quarterly performance, but this company’s recent report raises several concerns. Let’s see if he can right the ship in the new year.

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