Lovesac Co at Oppenheimer Consumer Growth and E-Commerce Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : So I just -- look, I know you -- the Lovesac story is becoming more well known. But for those still less familiar, if you want to do just a quick backtrack of what Lovesac -- like I said in my opening, you've found the company, a while ago -- discuss the company's strategic positioning within the retail and home furniture landscape and probably, most importantly, the unique products that you produce.

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : Perfect. And again, this -- the Sactional product, we have -- that's really the growth vehicle of Lovesac at this juncture. I mean, I know we talked about a lot over the years. But just how would you describe currently that product versus your traditional sofa, the key benefits of a Sactional versus a traditional sofa as most people would know of?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : Okay. So before we talk more about the unique aspects of Lovesac and your products. I would like to just step back, and I know you reported fiscal Q1 results recently. You and I chatted after. And again, look, a big theme of this conference -- and frankly, what we're hearing from our investors -- is just the overall -- the underlying health of the consumer. So I'd love to get your perspectives on what you're seeing from a consumer's perspective. And we're in Q1 -- in the Q1 results on your conference [call it] behind still very, very strong solid growth at Lovesac. You did highlight to some extent that which you thought maybe a weakening trend, maybe we can talk about that. But just, overall, what do you see in the consumer environment right now?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : But then with the -- again, I know we're talking about very short-term time frame. But just the recent weakness, you told me that you thought that was really isolated or centered mostly on that kind of entry-level price point. You've actually seen strengthening trends within the higher end. Is that a fair characterization?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : Maybe, look, to the extent that this -- again, it's hard to say what we actually heading into but the extent this consumer malaise persists or even intensifies, what levers would -- could or would Lovesac pull to sort of say stimulate better demand?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : Right. Now shifting gears a bit, another bigger topic we've discussed for a while now has just been supply chain. In some of the -- and look, we have pretty much every consumer company out there I've -- discusses supply chain. So I guess the question I have for you, Shawn, what do you see from your supply chain dynamics? Now you made a big push to de-emphasize, if you will, China, and that was done a while ago now. But then you had like others have contended with these elevated shipping costs. So I guess what are you seeing now? Are you starting to see supply chain dynamics improve? And then to what extent or how should we be thinking about, as supply chain eventually normalizes, if you will, that path towards those mid-50% gross margins for Lovesac?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : Okay. Just a -- I think a point worth bringing up -- and we've talked a lot about your inventory -- really one of the key positives with Lovesac is there's really very little in the way of obsolescence risk within your inventory. So it's (multiple speakers) --

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : That's a perfect segue to -- so on the marketing front there, as you continue to sort of, say, highlight the Lovesac and your unique price to consumers, how are you thinking about marketing now? What are the traditional means you use? Is that shifting at all? Is the product itself continues to stabilize, I guess [the right word] -- is the product itself develops? Are you planning to get more aggressive with your underlying marketing?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : No.

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : Unfortunately, it's not a Lovesac. I apologize. It's not (multiple speakers) -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : So just on that front, you just recently announced the relaunch, if you will, of the cost -- the shop-in-shop within Costco. You've been working with them online, and then you have -- building relationship with Best Buy. So maybe just talk a bit there. I mean one question with regard to call -- you had been in Costco historically. It was a historic relationship for Lovesac. As you go back into their stores physically, has that relationship changed or has your expectations for the relationship changed?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : Great. So our time is running down -- I guess the final question I'll ask you, just from a capital standpoint, Lovesac, despite being a young -- it's relatively young growing brand, it has kind of toggled around profitability. But how do you think about the underlying cash needs of the business, the balance sheet and such?

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : All right. Well, Shawn, thank you. Congratulations on the continued success of your brand.

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : It's always a pleasure catching up.

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : See you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.