Lovesac: A Terrible Deal As Profit Margins Wane (Downgrade)

Summary

• Lovesac faces ongoing challenges as weak comp sales and macroeconomic headwinds weigh on performance, with shares down ~30% year to date.
• LOVE's recent Q2 results revealed margin erosion and a guidance cut, highlighting increased operating risk and diminished profit outlook.
• Despite a seemingly low 4.6x EV/FY25 adjusted EBITDA multiple, execution risks remain high due to waning gross margins, limited liquidity, and sluggish demand.
• I downgrade LOVE to a 'Sell,' citing a lack of near-term catalysts and advising investors to wait for a better entry point.