LOVE - Lovesac stock crashes amid inventory inflationary pressures

The Lovesac Company ( NASDAQ: LOVE ) shares slid more than 17% at Wednesday’s market open despite posting better than anticipated earnings results.

The Stamford, Connecticut-based furniture manufacturer posted a $0.55 per share loss, coming in $0.17 lighter than the analyst consensus. To be sure, that figure represented a stark reversal from the prior year quarters positive $0.17 in earnings per share. Meanwhile, a 15% rise in revenue year over year to $134.8M narrowly exceeded expectations. Comparable sales jumped 8.9% in the quarter and gross margins reached 47.2%, above the 44.5% consensus.

“We believe we are well positioned for the all-important fourth quarter holiday-season where early signs point to strong cash flow generation for the quarter,” CEO Shawn Nelson said. “At the same time, we are planning for continued inflationary pressure on consumers and intend to maintain tight expense management and careful prioritization of critical spending to support continued growth.”

Inventory issues appeared to catch the market’s attention, as inventory levels rose to $154.5M from $94.5M in the prior year quarter, representing an over 60% increase. Management also noted elevated freight costs related to the soaring inventory. Guidance on the impact of expected promotions was not provided.

Elsewhere, the company’s earnings release notes that cash and cash equivalents balance as of the close of the quarter was $3.8M, down from $47.9M in the year prior.

Shares slid 17.74% on Wednesday’s market open.

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