Lovesac says accounting errors found related to last mile freight expenses

• Lovesac (NASDAQ:LOVE) disclosed in an SEC filing Wednesday that it identified errors related to last mile freight expenses.

• The company said it believes that previously reported operating income and net income were overstated by approximately $1.5 million to $2.5 million and $1 million to $2 million, respectively, for fiscal year 2023.
• When aggregating the error with other estimated required correcting entries, operating income and net income were overstated by about $2 million to $3 million and $1.5 million to $2.5 million, respectively, for the fiscal year ended January 29, 2023, the company said.
• The company said that financial statements for fiscal year 2023 included in the Annual Report on Form 10-K, management’s report on internal control over financial reporting, and other related reports should no longer be relied upon.
• The company expects to file a Form 10-K/A that will include restated financial statements for the 2023 fiscal year end and the relevant interim periods.
• SEC filing.
• Shares -6.1% at $22.32 after hours

More on Lovesac

• Lovesac: Softening Demand And Falling Metrics Cast Shadows On Its Prospects
• Seeking Alpha’s Quant Rating on Lovesac
• Earnings data for Lovesac
• Dividend for Lovesac

Comments

[MachineLearning]

Did I read something like 30% short interest?

[K. Oakes]

@MachineLearning looks like it per SA

[Vond]

@MachineLearning That means short squeeze coming.

[K. Oakes]

Soooo. Not the worst thing ever….but not great…

[lbeachmike]

2-3 million seems immaterial given about 800 million in 2023 revs.

[Bradley Guichard]

@lbeachmike I got to disagree a bit. 2-3 million in net income was overstated according to the article, not just revenue. That’s ~10% of the TTM net income of 22m. That’s a big oops.

[lbeachmike]

@Bradley Guichard Okay - I didn't have the income at hand. You're right - this expense comes right off the bottom line. I am always concerned when I hear "accounting irregularities" - but this one seems to not be a major issue in terms of destroying the overall business story/direction. So do we expect that it is a material impact on the forward-looking EPS or cash flows? I am viewing it more as a buying opportunity if we assume no other oopsies.

[Bradley Guichard]

@lbeachmike You could be right. I own a few shares of this as a flyer (also bought a put as a hedge). My concern is that this could only be the tip of the iceberg. Hopefully not. Deloitte is their auditor and they are reputable. So hopefully just an honest mistake.

Also, it sounds like a revenue timing issue, so cash flow would not be affected.

[Chris DeMuth Jr.]

According to science, this is the funniest company name.

[Bradley Guichard]

@Chris DeMuth Jr. ^

[G7Doug]

@Chris DeMuth Jr. Still don't know why this company hasn't signed the B-52's to cover their Love Shack hit in a campaign, the sweet spot for $10K sofas would be 60 year old boomers that were all playing the song at their weddings!