Why Lovesac Stock Is a Sad Sack Today -- Down 25%

Couch manufacturer Lovesac (NASDAQ: LOVE) sprung multiple springs on Thursday. Its stock was down 25.2% through 11:40 a.m. ET, after reporting misses on both the top and bottom lines earlier in the morning.

Heading into the fiscal third quarter 2025 report, analysts were already pessimistic, predicting Lovesac would lose $0.28 per share on $155.3 million in sales -- but the news was worse. Lovesac lost $0.32 per share, and sales fell below estimates at $149.9 million.

Lovesac Q3 earnings

Q3 sales declined about 3%, in the quarter ended Nov. 3, on par with declines year to date. The company did expand its gross profit margin to 58.5%. However, spending on selling, general, and administrative expenses increased 4 times as fast as the gross margin improved, wiping out these gains and tumbling Lovesac for a $0.32 loss -- twice as bad as the company incurred one year ago.

Year to date, Lovesac has now lost $1.53 per share, 3 times as bad as last year's losses through Q3.

Despite all this bad news, CEO Shawn Nelson put on a happy face, dismissing the declines as "near-term headwinds" and insisting Lovesac is gaining market share and will bounce back because of its "relentless focus on product innovation and operational excellence."

Is Lovesac stock a sell?

Investors shouldn't have to wait long to learn if Nelson is right, because the CEO is predicting a big turnaround in Q4. Despite predicting that sales will keep slumping, from $250 million in last year's Q4 to no better than $241 million this time, Nelson sees his company earning anywhere from $1.67 to $2.14 per share in Q4 -- potentially even more than the $1.87 Lovesac earned in Q4 2024.

Nelson's prediction for full-year earnings, though, covers a huge range of possibilities -- anywhere from $0.74 per share to as little as $0.27. For a stock that costs $28 today, that implies a P/E ratio anywhere from 38 to more than 100.

Suffice it to say that's a lot to pay for a furniture company. Lovesac stock looks like a sell to me.

Should you invest $1,000 in Lovesac right now?

Before you buy stock in Lovesac, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Lovesac wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $853,765!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of December 9, 2024

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Lovesac. The Motley Fool has a disclosure policy.