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.

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