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Bear of the Day: Lovesac (LOVE)

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Lovesac (LOVE - Free Report) is a $400 million furniture company that IPO'd a year ago in June in the $20s, soared to $45 this May, and then dropped after a 40% Q1 FY20 earnings miss and disappointing outlook.
Offering a unique modular system for couches and sectionals that they call "Sactionals," the company claims their brand of furniture "can give you that first day feeling, every day."
Here's how they describe their trademark product, The World's Most Adaptable Couch™...
"Sactionals provide all-around comfort and peace of mind that other couches can’t. Because they can adapt to most spaces and styles, and can forever look like new, Sactionals are a smart investment."
Sounds great. But the stock may not be such a great investment right now despite strong projected sales growth of 46% to $242 million this year.
After the quarterly report, consensus among 3 covering analysts contributing EPS estimates to the Zacks Rank dropped from a loss of 16 cents for this year to -$0.63. This large swing in estimates is what put LOVE back into the cellar of the Zacks Rank.
Based in Stamford, Connecticut, The Lovesac Company is a direct-to-consumer specialty furniture brand with 68 retail showrooms supporting its ecommerce delivery model and whose name comes from its original Durafoam filled beanbags called Sacs.
The company derives a majority of its current sales from its proprietary platform called Sactionals, a washable, changeable, reconfigurable, and FedEx-shippable solution for large upholstered seating.
Founder and CEO, Shawn Nelson’s, “Designed for Life” philosophy emphasizes sustainable products that are built to last a lifetime and designed to evolve with the customer’s needs, providing long-term utility and ultimately reducing the amount of furniture discarded into landfills.
While the growth opportunity here may be visible to many analysts, with next year's sales expected to cross $300 million, the profit outlook is very volatile right now.
There may be a time to make a seat for Lovesac in a retail-focused portfolio but it's better to wait for the estimates to stabilize and start heading back up. The Zacks Rank will let you know.
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