Cover
Cover - shares | 3 Months Ended | |
Apr. 30, 2023 | May 31, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Apr. 30, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-38555 | |
Entity Registrant Name | THE LOVESAC COMPANY | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 32-0514958 | |
Entity Address, Address Line One | Two Landmark Square | |
Entity Address, Address Line Two | Suite 300 | |
Entity Address, City or Town | Stamford | |
Entity Address, State or Province | CT | |
Entity Address, Postal Zip Code | 06901 | |
City Area Code | 888 | |
Local Phone Number | 636-1223 | |
Title of 12(b) Security | Common Stock, $0.00001 par value per share | |
Trading Symbol | LOVE | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 15,216,988 | |
Amendment Flag | false | |
Entity Central Index Key | 0001701758 | |
Current Fiscal Year End Date | --02-04 | |
Document Fiscal Year Focus | 2024 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Apr. 30, 2023 | Jan. 29, 2023 |
Current Assets | ||
Cash and cash equivalents | $ 45,125 | $ 43,533 |
Trade accounts receivable | 18,447 | 9,469 |
Merchandise inventories, net | 106,819 | 119,962 |
Prepaid expenses and other current assets | 17,306 | 21,077 |
Total Current Assets | 187,697 | 194,041 |
Property and equipment, net | 59,219 | 52,904 |
Operating lease right-of-use assets | 142,463 | 138,271 |
Other Assets | ||
Goodwill | 144 | 144 |
Intangible assets, net | 1,445 | 1,411 |
Deferred tax asset | 10,750 | 9,420 |
Other assets | 26,318 | 21,863 |
Total Other Assets | 38,657 | 32,838 |
Total Assets | 428,036 | 418,054 |
Current Liabilities | ||
Accounts payable | 32,165 | 24,576 |
Accrued expenses | 16,765 | 23,392 |
Payroll payable | 6,582 | 6,783 |
Customer deposits | 15,372 | 6,760 |
Current operating lease liabilities | 22,160 | 21,898 |
Sales taxes payable | 3,878 | 5,430 |
Total Current Liabilities | 96,922 | 88,839 |
Operating Lease Liabilities, long-term | 141,868 | 135,955 |
Line of Credit | 0 | 0 |
Total Liabilities | 238,790 | 224,794 |
Commitments and Contingencies (see Note 6) | ||
Stockholders’ Equity | ||
Preferred Stock $0.00001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of April 30, 2023 and January 29, 2023. | 0 | 0 |
Common Stock $.00001 par value, 40,000,000 shares authorized, 15,217,120 shares issued and outstanding as of April 30, 2023 and 15,195,698 shares issued and outstanding as of January 29, 2023. | 0 | 0 |
Additional paid-in capital | 182,770 | 182,554 |
Accumulated earnings | 6,476 | 10,706 |
Stockholders’ Equity | 189,246 | 193,260 |
Total Liabilities and Stockholders’ Equity | $ 428,036 | $ 418,054 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares | Apr. 30, 2023 | Jan. 29, 2023 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized (in shares) | 40,000,000 | 40,000,000 |
Common stock, shares issued (in shares) | 15,217,120 | 15,195,698 |
Common stock, shares outstanding (in shares) | 15,217,120 | 15,195,698 |
Condensed Statements of Operati
Condensed Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | |
Apr. 30, 2023 | May 01, 2022 | |
Income Statement [Abstract] | ||
Net sales | $ 141,193 | $ 129,380 |
Cost of merchandise sold | 70,489 | 63,272 |
Gross profit | 70,704 | 66,108 |
Operating expenses | ||
Selling, general and administration expenses | 56,838 | 44,901 |
Advertising and marketing | 16,913 | 15,901 |
Depreciation and amortization | 2,822 | 2,661 |
Total operating expenses | 76,573 | 63,463 |
Operating (loss) income | (5,869) | 2,645 |
Interest income (expense), net | 341 | (35) |
Net (loss) income before taxes | (5,528) | 2,610 |
Benefit from (provision for) income taxes | 1,298 | (715) |
Net (loss) income | $ (4,230) | $ 1,895 |
Net (loss) income per common share: | ||
Basic (in dollars per share) | $ (0.28) | $ 0.13 |
Diluted (in dollars per share) | $ (0.28) | $ 0.12 |
Weighted average number of common shares outstanding: | ||
Basic (in shares) | 15,230,763 | 15,155,378 |
Diluted (in shares) | 15,230,763 | 16,173,339 |
Condensed Statements of Changes
Condensed Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Total | Common | Additional Paid-in Capital | Accumulated (Deficit) Income |
Balance (in shares) at Jan. 30, 2022 | 15,123,338 | |||
Balance at Jan. 30, 2022 | $ 156,226 | $ 0 | $ 173,762 | $ (17,536) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net (loss) income | 1,895 | 1,895 | ||
Equity based compensation | 1,163 | 1,163 | ||
Vested restricted stock units (in shares) | 1,704 | |||
Exercise of warrants (in shares) | 0 | |||
Taxes paid for net share settlement of equity awards | (47) | (47) | ||
Balance (in shares) at May. 01, 2022 | 15,125,042 | |||
Balance at May. 01, 2022 | 159,237 | $ 0 | 174,878 | (15,641) |
Balance (in shares) at Jan. 29, 2023 | 15,195,698 | |||
Balance at Jan. 29, 2023 | 193,260 | $ 0 | 182,554 | 10,706 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net (loss) income | (4,230) | (4,230) | ||
Equity based compensation | 686 | 686 | ||
Vested restricted stock units (in shares) | 21,422 | |||
Taxes paid for net share settlement of equity awards | (470) | (470) | ||
Balance (in shares) at Apr. 30, 2023 | 15,217,120 | |||
Balance at Apr. 30, 2023 | $ 189,246 | $ 0 | $ 182,770 | $ 6,476 |
Condensed Statement of Cash Flo
Condensed Statement of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Apr. 30, 2023 | May 01, 2022 | |
Cash Flows from Operating Activities | ||
Net (loss) income | $ (4,230) | $ 1,895 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Depreciation and amortization of property and equipment | 2,697 | 2,575 |
Amortization of other intangible assets | 125 | 86 |
Amortization of deferred financing fees | 42 | 29 |
Equity based compensation | 686 | 1,163 |
Non-cash operating lease cost | 5,308 | 4,184 |
Deferred income taxes | (1,330) | 523 |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | (8,978) | 2,134 |
Merchandise inventories | 13,143 | (14,515) |
Prepaid expenses and other current assets | 5,971 | 270 |
Other assets | (4,455) | 0 |
Accounts payable and accrued expenses | (5,785) | (10,359) |
Operating lease liabilities | (5,515) | (4,062) |
Customer deposits | 8,612 | (5,709) |
Net Cash Provided by (Used in) Operating Activities | 6,291 | (21,786) |
Cash Flows from Investing Activities | ||
Purchase of property and equipment | (4,177) | (5,893) |
Payments for patents and trademarks | 0 | (125) |
Net Cash Used in Investing Activities | (4,177) | (6,018) |
Cash Flows from Financing Activities | ||
Payment of deferred financing costs | (52) | (161) |
Taxes paid for net share settlement of equity awards | (470) | (47) |
Net Cash Used in Financing Activities | (522) | (208) |
Net Change in Cash and Cash Equivalents | 1,592 | (28,012) |
Cash and Cash Equivalents - Beginning | 43,533 | 92,392 |
Cash and Cash Equivalents - Ending | 45,125 | 64,380 |
Supplemental Cash Flow Disclosures | ||
Cash paid for taxes | 0 | 905 |
Cash paid for interest | 30 | 33 |
Non-cash investing activities: | ||
Asset acquisitions not yet paid for at period end | $ 4,994 | $ 0 |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Apr. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Summary of Significant Accounting Policies The balance sheet of The Lovesac Company (the “Company”, “we”, “us” or “our”) as of January 29, 2023, which has been derived from our audited financial statements as of and for the 52-week year ended January 29, 2023, and the accompanying interim unaudited condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. Certain information and note disclosures normally included in annual financial statements, prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), have been condensed or omitted pursuant to those rules and regulations. The financial information presented herein, which is not necessarily indicative of results to be expected for the full current fiscal year, reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the interim unaudited condensed financial statements. Such adjustments are of a normal, recurring nature. These condensed financial statements should be read in conjunction with the Company’s financial statements filed in its Annual Report on Form 10-K for the fiscal year ended January 29, 2023. Due to the seasonality of the Company’s business, with the majority of our activity occurring in the fourth quarter of each fiscal year, the results of operations for the thirteen weeks ended April 30, 2023 and May 1, 2022 are not necessarily indicative of results to be expected for the full fiscal year. Nature of Operations We are a technology driven company that designs, manufactures and sells unique, high quality furniture derived through its 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. The Company markets and sells its products through modern and efficient showrooms and, increasingly, through online net sales directly at www.lovesac.com, supported by direct-to-consumer touch-feel points in the form of our own showrooms, which include our newly created mobile concierge and kiosks, as well as through shop-in-shops and online pop-up-shops with third party retailers. As of April 30, 2023, the Company operated 211 showrooms including kiosks and mobile concierges located throughout the United States. The Company was formed as a Delaware corporation on January 3, 2017, in connection with a corporate reorganization with SAC Acquisition LLC, a Delaware limited liability company, the predecessor entity to the Company. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Company evaluates its estimates and judgements on an ongoing basis based on historical experience, expectations of future events and various other factors we believe to be reasonable under the circumstances and revise them when necessary in the period the change is determined. Actual results may differ from the original or revised estimates. Recent Accounting Pronouncements The Company has considered all recent accounting pronouncements issued by the Financial Accounting Standards Board and they were considered to be not applicable or the adoption of such pronouncements will not have a material impact on the financial statements. Employee Benefit Plan In February 2017, the Company established the The Lovesac Company 401(k) Plan (the “401(k) Plan”) with Elective Deferrals beginning May 1, 2017. The 401(k) Plan calls for Elective Deferral Contributions, Safe Harbor Matching Contributions and Profit-Sharing Contributions. All associates of the Company will be eligible to participate in the 401(k) Plan as of the day of the month which is coincident with or next follows the date on which they attain age 21 and complete one month of service. Participants will be able to contribute up to 100% of their eligible compensation to the 401(k) Plan subject to limitations with the IRS. The Company's contributions to the 401(k) Plan were $0.5 million and $0.4 million for the thirteen weeks ended April 30, 2023 and May 1, 2022, respectively. |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Apr. 30, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Revenue Recognition The Company’s revenue consists substantially of product net sales. The Company reports product net sales net of discounts and recognizes them at the point in time when control transfers to the customer, which generally occurs upon our delivery to a third-party carrier. Shipping and handling charges billed to customers are included in revenue. The Company recognizes shipping and handling expense as fulfillment activities (rather than a promised good or service) when the activities are performed. Accordingly, the Company records the expenses for shipping and handling activities at the same time the Company recognizes revenue. Shipping and handling costs incurred are included in cost of merchandise sold and include inbound freight and tariff costs relative to inventory sold, warehousing, and last mile shipping to our customers. During the thirteen weeks ended April 30, 2023 and May 1, 2022, shipping and handling costs were $37.8 million and $34.9 million, respectively. Estimated refunds for returns and allowances are recorded using our historical return patterns, adjusting for any changes in returns policies. The Company records estimated refunds for net sales returns on a monthly basis as a reduction of net sales and cost of sales on the condensed statements of operations and an increase in inventory and customers returns liability on the condensed balance sheets. There was a returns allowance recorded on the condensed balance sheet in the amount of $2.1 million as of April 30, 2023 and $4.5 million as of January 29, 2023, which was included in accrued expenses and $0.5 million as of April 30, 2023 and $1.0 million as of January 29, 2023, associated with sales returns included in merchandise inventories. In some cases, deposits are received before the Company transfers control, resulting in contract liabilities. These contract liabilities are reported as customer deposits on the Company’s condensed balance sheet. As of April 30, 2023 and January 29, 2023, the Company recorded under customer deposit liabilities the amount of $15.4 million and $6.8 million respectively. During the thirteen weeks ended April 30, 2023 and May 1, 2022, the Company recognized approximately $6.8 million and $13.3 million, respectively, related to our customer deposits. The Company offers its products through an inventory lean omni-channel platform that provides a seamless and meaningful experience to its customers in showrooms, which includes mobile concierge and kiosks, and through the internet. The Other channel predominantly represents net sales through the use of online pop-up-shops and shop-in-shops that are staffed with associates trained to demonstrate and sell our product. The following represents net sales disaggregated by channel: Thirteen weeks ended (amounts in thousands) April 30, May 1, Showrooms $ 83,574 $ 81,254 Internet 40,225 31,255 Other 17,394 16,871 $ 141,193 $ 129,380 The Company has no foreign operations and its net sales to foreign countries was less than .01% of total net sales in both fiscal 2024 and 2023. The Company had no customers that comprise more than 10% of total net sales for the thirteen weeks ended April 30, 2023 and May 1, 2022. See Note 9 for sales disaggregated by product . Barter Arrangements The Company has a bartering arrangement with a third-party vendor. The Company repurposes 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. Barter transactions with commercial substance are recorded at a transaction price based on the estimated fair value of the non-cash consideration of the media credits to be received and the revenue is recognized when control of inventory is transferred, which is when the inventory is picked up in our warehouse. Fair value is estimated using various considerations, including the cost of similar media advertising if transacted directly, the expected sales price of product given up in exchange for the media credits, and the expected usage of media credits prior to expiration based on a marketing spend forecast. The Company recognizes an asset for media credits which is subsequently evaluated for impairment at each reporting period for any changes in circumstances. As the barter credits are expected to be utilized at various dates through their expiration dates, the Company will classify the amount expected to be utilized in the next fiscal year as current, which is included in Prepaid and Other Current Assets, with the remaining balance included as part of Other Assets on the balance sheet. During the thirteen weeks ended April 30, 2023 and May 1, 2022, the Company recognized $4.1 million and $2.6 million, respectively, of barter sales in exchange for media credits. |
Income Taxes
Income Taxes | 3 Months Ended |
Apr. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company recorded an income tax benefit of $1.3 million and income tax expense of $0.7 million for the thirteen weeks ended April 30, 2023 and May 1, 2022, respectively. The effective tax rate was 23.5% for the thirteen weeks ended April 30, 2023 as compared to 27.4% for the thirteen weeks ended May 1, 2022. The effective tax rate for the thirteen weeks ended April 30, 2023 and May 1, 2022 varies from the 21% federal statutory tax rate primarily due to state taxes. The Company does not anticipate any material adjustments relating to unrecognized tax benefits within the next twelve months; however, the ultimate outcome of tax matters is uncertain and unforeseen results can occur. The Company had no material interest or penalties during the thirteen weeks ended April 30, 2023 and May 1, 2022, respectively, and does not anticipate any such items during the next twelve months. The Company's policy is to record interest and penalties directly related to uncertain tax positions as income tax expense in the condensed statements of operations. |
Basic and Diluted Net (Loss) In
Basic and Diluted Net (Loss) Income Per Common Share | 3 Months Ended |
Apr. 30, 2023 | |
Earnings Per Share [Abstract] | |
Basic and Diluted Net (Loss) Income Per Common Share | Basic and Diluted Net (Loss) Income Per Common Share Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number of common shares outstanding and common stock equivalents outstanding during the period. Diluted net income per common share includes, in periods in which they are dilutive, the effect of those potentially dilutive securities where the average market price of the common stock exceeds the exercise prices for the respective periods. In periods of loss, there are no potentially dilutive common shares to add to the weighted average number of common shares outstanding. For the thirteen weeks ended April 30, 2023, the effects of 1,283,449 shares of common stock related to restricted stock units, 495,366 shares of common stock underlying stock options, and warrants to purchase 281,750 shares of common stock were excluded from the diluted net loss per share calculation because the effect of including these potentially dilutive shares was antidilutive. For the thirteen weeks ended May 1, 2022, the effects of 767,023 shares of common stock related to restricted stock units, 495,366 shares of common stock underlying stock options, and warrants to purchase 281,750 shares of common stock were included in the diluted share calculation. |
Leases
Leases | 3 Months Ended |
Apr. 30, 2023 | |
Leases [Abstract] | |
Leases | Leases Components of lease expense were as follows (in thousands): Thirteen weeks ended April 30, 2023 May 01, 2022 Operating lease expense $ 7,004 $ 5,334 Variable lease expense 2,041 2,197 Short term lease expense 240 179 Total lease expense $ 9,285 $ 7,710 Variable lease expense includes index-based changes in rent, maintenance, real estate taxes, insurance and other variable charges. The Company’s weighted average lease terms and weighted average discount rates are as follows: Thirteen weeks ended April 30, 2023 May 01, 2022 Weighted average remaining lease term (in years) Operating Leases 7.5 7.2 Weighted average discount rate Operating Leases 4.42 % 3.97 % We did not recognize any impairment charges associated with showroom-level right-of-use assets during the thirteen weeks ended April 30, 2023 or May 1, 2022. Future minimum lease payments under non-cancelable leases as of April 30, 2023 were as follows (in thousands): (amounts in thousands) 2024 $ 21,684 2025 28,644 2026 26,237 2027 23,905 2028 21,605 Thereafter 73,411 Total undiscounted future minimum lease payments 195,486 Less: imputed interest (31,458) Total present value of lease obligations 164,028 Less: current operating lease liability (22,160) Operating lease liability- long term $ 141,868 Supplemental Cash Flow information and non-cash activity related to our operating leases is as follows (in thousands): Thirteen weeks ended (amounts in thousands) April 30, 2023 May 01, 2022 Operating cash flow information: Amounts paid on operating lease liabilities $ 6,945 $ 4,062 Non-cash activities Right-of-use assets obtained in exchange for lease obligations $ 12,106 $ 12,513 |
Commitment and Contingencies
Commitment and Contingencies | 3 Months Ended |
Apr. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Contingency The Company is involved in various legal proceedings in the ordinary course of business. Management cannot presently predict the outcome of these matters, although management believes, based in part on the advice of counsel, that the ultimate resolution of these matters will not have a materially adverse effect on the Company’s condensed financial position, results of operations or cash flows. |
Financing Arrangements
Financing Arrangements | 3 Months Ended |
Apr. 30, 2023 | |
Line of Credit Facility [Abstract] | |
Financing Arrangements | Financing Arrangements The Company has a line of credit with Wells Fargo Bank, National Association (“Wells”). On March 25, 2022, the line of credit with Wells was amended and increased from $25 million to allow the Company to borrow up to $40.0 million, subject to borrowing base and availability restrictions, and will mature in March 2024. Borrowings are limited to 90% of eligible credit card receivables plus 85% of eligible wholesale receivables plus 85% of the net recovery percentage for the eligible inventory multiplied by the value of such eligible inventory of the Company for the period from December 16 of each year until October 14 of the immediately following year, with a seasonal increase to 90% of the net recovery percentage for the period from October 15 of each year until December 15 of such year, seasonal advance rate, minus applicable reserves established by Wells. The amended agreement contains a financial covenant that requires us to maintain undrawn availability under the credit facility of at least 10% of the lesser of (i) the aggregate commitments in the amount of $40.0 million and (ii) the amounts available under the credit facility based on eligible accounts receivable and inventory. On March 24, 2023, the Company amended the credit agreement to extend the maturity date to September 2024. All other terms of the credit agreement remain unchanged. As of April 30, 2023 and January 29, 2023, the Company’s borrowing availability under the line of credit with Wells was $36.0 million. As of April 30, 2023 and January 29, 2023, there were no borrowings outstanding on this line of credit. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Apr. 30, 2023 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Stockholders' Equity Common Stock Warrants On June 29, 2018, the Company issued 281,750 warrants with a five-year term to Roth Capital Partners, LLC as part of the underwriting agreement in connection with the Company's IPO. The warrants remain outstanding as of April 30, 2023. Warrants may be exercised on a cashless basis, where the holders receive fewer shares of common stock in lieu of a cash payment to the Company. There were no warrants issued, exercised, or expired and canceled for the thirteen weeks ended April 30, 2023 and May 1, 2022. As of April 30, 2023, 281,750 warrants remain outstanding with an average exercise price of $19.20 and a weighted average remaining contractual life of 0.16 years. As of May 1, 2022, 281,750 warrants remain outstanding with an average exercise price of $19.20 and a weighted average remaining contractual life of 1.16 years. Equity Incentive Plan The Company adopted the Amended and Restated 2017 Equity Incentive Plan (the “2017 Equity Plan”) which provides for awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. All awards shall be granted within 10 years from the effective date of the 2017 Equity Plan. In fiscal 2024, the 2017 Equity Plan was amended and restated to increase the shares of our common stock authorized and reserved for issuance by 225,000 shares, which increased the number of shares of common stock reserved for issuance under the 2017 Equity Plan to 2,879,889 shares of common stock as of April 30, 2023. Stock Options In June 2019, the Company granted 495,366 non-statutory stock options to certain officers of the Company with an option price of $38.10 per share. 100% of the stock options are subject to vesting on the third anniversary of the date of grant if the officers are still employed by the Company and the average closing price of the Company’s common stock for the prior 40 consecutive trading days has been at least $75 by the third anniversary of the grant. Both the employment and the market condition must be satisfied no later than June 5, 2024 or the options will terminate. These options were valued using a Monte Carlo simulation model to account for the path dependent market conditions that stipulate when and whether or not the options shall vest. The 495,366 stock options were modified in fiscal 2022 to extend the term of the options through June 5, 2024. This resulted in additional compensation of approximately $0.9 million of which, $0.3 million was recorded upon modification with the remaining expense to be recognized over the remaining expected term. The market condition was met on June 5, 2021, which was the date on which the average closing price of the Company’s common stock had been at least $75 for 40 consecutive trading days. The options vested and became exercisable on June 5, 2022 as the officers were still employed on that date. There were no stock options issued, exercised, or expired and canceled for the thirteen weeks ended April 30, 2023 and May 1, 2022. As of April 30, 2023, 495,366 stock options remain outstanding with a weighted average exercise price of $38.10, a weighted average remaining contractual life of 1.10 years, and no intrinsic value. As of May 1, 2022, 495,366 stock options remain outstanding with a weighted average exercise price of $38.10, a weighted average remaining contractual life of 2.1 years and intrinsic value of $8.05. Restricted Stock Units A summary of the status of our unvested restricted stock units as of April 30, 2023 and May 1, 2022, and changes during the thirteen weeks then ended, is presented below: Number of shares Weighted average grant date fair value Unvested at January 29, 2023 640,256 $ 34.50 Granted 693,989 26.97 Forfeited (12,888) 35.17 Vested (37,908) 46.22 Unvested at April 30, 2023 1,283,449 $ 30.07 Number of shares Weighted average grant date fair value Unvested at January 30, 2022 533,333 $ 28.41 Granted 256,329 46.11 Forfeited (20,159) 22.88 Vested (2,480) 16.57 Unvested at May 1, 2022 767,023 $ 34.31 Equity based compensation expense was approximately $0.7 million and $1.2 million for the thirteen weeks ended April 30, 2023 and May 1, 2022, respectively. The total unrecognized equity-based compensation cost related to unvested stock option and restricted unit awards was approximately $7.0 million as of April 30, 2023 and will be recognized in operations over a weighted average period of 2.4 years. |
Segment Information
Segment Information | 3 Months Ended |
Apr. 30, 2023 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Segments are reflective of how the chief operating decision maker ("CODM") reviews operating results for the purpose of allocating resources and assessing performance. The CODM group of the Company are the Chief Executive Officer and the President and Chief Operating Officer. The Company's operating segments are the sales channels, which share similar economic and other qualitative characteristics, and are aggregated together as one reportable segment. The Company’s sales by product which are considered one segment are as follows: Thirteen weeks ended April 30, May 1, (amounts in thousands) Sactionals $ 127,903 $ 115,002 Sacs 10,737 11,927 Other 2,553 2,451 $ 141,193 $ 129,380 |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Apr. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Company evaluates its estimates and judgements on an ongoing basis based on historical experience, expectations of future events and various other factors we believe to be reasonable under the circumstances and revise them when necessary in the period the change is determined. Actual results may differ from the original or revised estimates. |
Recent Accounting Pronouncements | Recent Accounting PronouncementsThe Company has considered all recent accounting pronouncements issued by the Financial Accounting Standards Board and they were considered to be not applicable or the adoption of such pronouncements will not have a material impact on the financial statements. |
Employee Benefit Plan | Employee Benefit PlanIn February 2017, the Company established the The Lovesac Company 401(k) Plan (the “401(k) Plan”) with Elective Deferrals beginning May 1, 2017. The 401(k) Plan calls for Elective Deferral Contributions, Safe Harbor Matching Contributions and Profit-Sharing Contributions. All associates of the Company will be eligible to participate in the 401(k) Plan as of the day of the month which is coincident with or next follows the date on which they attain age 21 and complete one month of service. Participants will be able to contribute up to 100% of their eligible compensation to the 401(k) Plan subject to limitations with the IRS. |
Shipping And Handling Charges | Shipping and handling charges billed to customers are included in revenue. The Company recognizes shipping and handling expense as fulfillment activities (rather than a promised good or service) when the activities are performed. Accordingly, the Company records the expenses for shipping and handling activities at the same time the Company recognizes revenue. Shipping and handling costs incurred are included in cost of merchandise sold and include inbound freight and tariff costs relative to inventory sold, warehousing, and last mile shipping to our customers. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Apr. 30, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of sales disaggregated by channel | The following represents net sales disaggregated by channel: Thirteen weeks ended (amounts in thousands) April 30, May 1, Showrooms $ 83,574 $ 81,254 Internet 40,225 31,255 Other 17,394 16,871 $ 141,193 $ 129,380 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Apr. 30, 2023 | |
Leases [Abstract] | |
Schedule of components of lease expense | Components of lease expense were as follows (in thousands): Thirteen weeks ended April 30, 2023 May 01, 2022 Operating lease expense $ 7,004 $ 5,334 Variable lease expense 2,041 2,197 Short term lease expense 240 179 Total lease expense $ 9,285 $ 7,710 |
Schedule of lease terms and rates | The Company’s weighted average lease terms and weighted average discount rates are as follows: Thirteen weeks ended April 30, 2023 May 01, 2022 Weighted average remaining lease term (in years) Operating Leases 7.5 7.2 Weighted average discount rate Operating Leases 4.42 % 3.97 % |
Schedule to reconcile undiscounted future minimum lease payments | Future minimum lease payments under non-cancelable leases as of April 30, 2023 were as follows (in thousands): (amounts in thousands) 2024 $ 21,684 2025 28,644 2026 26,237 2027 23,905 2028 21,605 Thereafter 73,411 Total undiscounted future minimum lease payments 195,486 Less: imputed interest (31,458) Total present value of lease obligations 164,028 Less: current operating lease liability (22,160) Operating lease liability- long term $ 141,868 |
Schedule of supplemental cash flow information and non-cash activity related to operating leases | Supplemental Cash Flow information and non-cash activity related to our operating leases is as follows (in thousands): Thirteen weeks ended (amounts in thousands) April 30, 2023 May 01, 2022 Operating cash flow information: Amounts paid on operating lease liabilities $ 6,945 $ 4,062 Non-cash activities Right-of-use assets obtained in exchange for lease obligations $ 12,106 $ 12,513 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Apr. 30, 2023 | |
Stockholders' Equity Note [Abstract] | |
Schedule of unvested restricted stock | A summary of the status of our unvested restricted stock units as of April 30, 2023 and May 1, 2022, and changes during the thirteen weeks then ended, is presented below: Number of shares Weighted average grant date fair value Unvested at January 29, 2023 640,256 $ 34.50 Granted 693,989 26.97 Forfeited (12,888) 35.17 Vested (37,908) 46.22 Unvested at April 30, 2023 1,283,449 $ 30.07 Number of shares Weighted average grant date fair value Unvested at January 30, 2022 533,333 $ 28.41 Granted 256,329 46.11 Forfeited (20,159) 22.88 Vested (2,480) 16.57 Unvested at May 1, 2022 767,023 $ 34.31 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Apr. 30, 2023 | |
Segment Reporting [Abstract] | |
Schedule of operating segments | The Company’s sales by product which are considered one segment are as follows: Thirteen weeks ended April 30, May 1, (amounts in thousands) Sactionals $ 127,903 $ 115,002 Sacs 10,737 11,927 Other 2,553 2,451 $ 141,193 $ 129,380 |
Basis of Presentation and Sum_3
Basis of Presentation and Summary of Significant Accounting Policies (Details) $ in Millions | 3 Months Ended | |
Apr. 30, 2023 USD ($) showroom | May 01, 2022 USD ($) | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Number of stores | showroom | 211 | |
Contributions plan, percentage | 100% | |
Employer contribution plan, cost | $ | $ 0.5 | $ 0.4 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Apr. 30, 2023 | May 01, 2022 | Jan. 29, 2023 | |
Disaggregation of Revenue [Line Items] | |||
Cost of merchandise sold | $ 70,489 | $ 63,272 | |
Returns allowance | 2,100 | $ 4,500 | |
Accrued expenses | 500 | 1,000 | |
Customer deposit liabilities | 15,400 | 6,800 | |
Recognized related to customer deposits | 6,800 | 13,300 | |
Inventory exchanged for media credits | 4,100 | $ 2,600 | |
Unused media credits | $ 28,500 | $ 25,200 | |
Foreign Countries | Revenue Benchmark | Geographic Concentration Risk | |||
Disaggregation of Revenue [Line Items] | |||
Concentration of sales (less than) | 0.01% | 0.01% | |
Shipping and Handling | |||
Disaggregation of Revenue [Line Items] | |||
Cost of merchandise sold | $ 37,800 | $ 34,900 |
Revenue Recognition - Schedule
Revenue Recognition - Schedule of sales disaggregated by channel (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Apr. 30, 2023 | May 01, 2022 | |
Disaggregation of Revenue [Line Items] | ||
Sales | $ 141,193 | $ 129,380 |
Showrooms [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 83,574 | 81,254 |
Internet [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Sales | 40,225 | 31,255 |
Other [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Sales | $ 17,394 | $ 16,871 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 3 Months Ended | |
Apr. 30, 2023 | May 01, 2022 | |
Income Tax Disclosure [Abstract] | ||
Federal and state income tax (benefit) expense | $ (1,298,000) | $ 715,000 |
Effective income tax rate, percent | 23.50% | 27.40% |
Penalties and interest expense | $ 0 | $ 0 |
Basic and Diluted Net (Loss) _2
Basic and Diluted Net (Loss) Income Per Common Share (Details) - shares | 3 Months Ended | |
Apr. 30, 2023 | May 01, 2022 | |
Restricted Stock Units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive (in shares) | 1,283,449 | 767,023 |
Stock Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive (in shares) | 495,366 | 495,366 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive (in shares) | 281,750 | 281,750 |
Leases - Schedule of components
Leases - Schedule of components of lease expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Apr. 30, 2023 | May 01, 2022 | |
Leases [Abstract] | ||
Operating lease expense | $ 7,004 | $ 5,334 |
Variable lease expense | 2,041 | 2,197 |
Short term lease expense | 240 | 179 |
Total lease expense | $ 9,285 | $ 7,710 |
Leases - Schedule of lease term
Leases - Schedule of lease terms and rates (Details) | Apr. 30, 2023 | May 01, 2022 |
Leases [Abstract] | ||
Operating leases, weighted average remaining lease term (in years) | 7 years 6 months | 7 years 2 months 12 days |
Operating leases, weighted average discount rate | 4.42% | 3.97% |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) | 3 Months Ended | |
Apr. 30, 2023 | May 01, 2022 | |
Leases [Abstract] | ||
Impairment charges | $ 0 | $ 0 |
Leases - Schedule of future min
Leases - Schedule of future minimum payments for operating leases (Details) - USD ($) $ in Thousands | Apr. 30, 2023 | Jan. 29, 2023 |
Leases [Abstract] | ||
2024 | $ 21,684 | |
2025 | 28,644 | |
2026 | 26,237 | |
2027 | 23,905 | |
2028 | 21,605 | |
Thereafter | 73,411 | |
Total undiscounted future minimum lease payments | 195,486 | |
Less: imputed interest | (31,458) | |
Total present value of lease obligations | 164,028 | |
Less: current operating lease liability | (22,160) | $ (21,898) |
Operating Lease Liabilities, long-term | $ 141,868 | $ 135,955 |
Leases - Supplemental Cash Flow
Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Apr. 30, 2023 | May 01, 2022 | |
Leases [Abstract] | ||
Amounts paid on operating lease liabilities | $ 6,945 | $ 4,062 |
Right-of-use assets obtained in exchange for lease obligations | $ 12,106 | $ 12,513 |
Financing Arrangements (Details
Financing Arrangements (Details) - USD ($) | Mar. 25, 2022 | Apr. 30, 2023 | Jan. 29, 2023 | Mar. 24, 2022 |
Line of Credit Facility [Abstract] | ||||
Borrowings amount | $ 40,000,000 | $ 36,000,000 | $ 25,000,000 | |
Eligible credit card receivables percentage | 90% | |||
Eligible wholesale receivables percentage | 85% | |||
Net recovery percentage | 85% | |||
Increase the net recovery percentage | 90% | |||
Minimum undrawn availability | 10% | |||
Line of credit | $ 0 | $ 0 |
Stockholders' Equity - Narrativ
Stockholders' Equity - Narrative (Details) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||
Jun. 05, 2021 trading_day $ / shares | Jun. 29, 2018 shares | Mar. 31, 2023 shares | Jun. 30, 2019 trading_day $ / shares shares | Apr. 30, 2023 USD ($) $ / shares shares | May 01, 2022 USD ($) $ / shares shares | Jan. 30, 2022 USD ($) shares | |
Class of Stock [Line Items] | |||||||
Warrants issued (in shares) | 281,750 | ||||||
Warrants issued, term | 5 years | ||||||
Cashless warrant exercised (in shares) | 0 | 0 | |||||
Increase in common stock reserved for future issuance (in shares) | 225,000 | ||||||
Non statutory stock options granted (in shares) | 495,366 | ||||||
Stock option price exercise (in dollars per share) | $ / shares | $ 38.10 | ||||||
Stock options are subject to vesting percentage | 100% | ||||||
Consecutive trading days | trading_day | 40 | 40 | |||||
Stock price (in dollars per share) | $ / shares | $ 75 | $ 75 | |||||
Stock option modified (in shares) | 495,366 | ||||||
Additional compensation | $ | $ 0.9 | ||||||
Modification and remaining expense was recognized | $ | $ 0.3 | ||||||
Number of options, outstanding (in shares) | 495,366 | 495,366 | |||||
Weighted average exercise price, outstanding (in dollars per share) | $ / shares | $ 38.10 | $ 38.10 | |||||
Weighted average remaining contractual life, outstanding (in years) | 1 year 1 month 6 days | 2 years 1 month 6 days | |||||
Average intrinsic value, outstanding (in dollars per share) | $ / shares | $ 0 | $ 8.05 | |||||
Equity based compensation expense | $ | $ 0.7 | $ 1.2 | |||||
Total unrecognized equity based compensation cost related to unvested stock option and restricted unit awards | $ | $ 7 | ||||||
Weighted average period | 2 years 4 months 24 days | ||||||
Restricted stock units | |||||||
Class of Stock [Line Items] | |||||||
Restricted stock award grant (in shares) | 235,000 | ||||||
2017 Equity Incentive Plan | |||||||
Class of Stock [Line Items] | |||||||
Granted term | 10 years | ||||||
Common stock reserved issuance (in shares) | 2,879,889 | ||||||
Warrants Activity | |||||||
Class of Stock [Line Items] | |||||||
Number of warrants, warrants outstanding (in shares) | 281,750 | 281,750 | |||||
Average exercise price, warrants outstanding (in dollars per share) | $ / shares | $ 19.20 | $ 19.20 | |||||
Weighted average remaining contractual life (in years), warrants outstanding, beginning balance | 1 month 28 days | 1 year 1 month 28 days |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of unvested restricted stock (Details) - Restricted stock units - $ / shares | 3 Months Ended | |
Apr. 30, 2023 | May 01, 2022 | |
Number of shares | ||
Number of shares, unvested, beginning balance (in shares) | 640,256 | 533,333 |
Number of shares, granted (in shares) | 693,989 | 256,329 |
Number of shares, forfeited (in shares) | (12,888) | (20,159) |
Number of shares, vested (in shares) | (37,908) | (2,480) |
Number of shares, unvested, ending balance (in shares) | 1,283,449 | 767,023 |
Weighted average grant date fair value | ||
Weighted average grant date fair value, unvested, beginning balance (in dollars per share) | $ 34.50 | $ 28.41 |
Weighted average grant date fair value, granted (in dollars per share) | 26.97 | 46.11 |
Weighted average grant date fair value, forfeited (in dollars per share) | 35.17 | 22.88 |
Weighted average grant date fair value, vested (in dollars per share) | 46.22 | 16.57 |
Weighted average grant date fair value, unvested, ending balance (in dollars per share) | $ 30.07 | $ 34.31 |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | |
Apr. 30, 2023 USD ($) segment | May 01, 2022 USD ($) | |
Segment Reporting Information [Line Items] | ||
Number of reporting segments | segment | 1 | |
Net sales | $ 141,193 | $ 129,380 |
Sactionals | ||
Segment Reporting Information [Line Items] | ||
Net sales | 127,903 | 115,002 |
Sacs | ||
Segment Reporting Information [Line Items] | ||
Net sales | 10,737 | 11,927 |
Other | ||
Segment Reporting Information [Line Items] | ||
Net sales | $ 2,553 | $ 2,451 |