Lovesac drove an $11 million reduction in inventory by relying on evergreen stock and other supply chain efficiencies without compromising delivery times, according to the company’s fourth-quarter earnings call.
As of Feb. 4, total merchandise inventory was at $98.4 million, down from $119.6 million in January 2023, according to an April 11 press release.
The furniture company attributed the 18% inventory cut to cost-of-goods-sold reductions and leveraging lower inbound freight and warehousing costs, Chief Operating Officer Mary Fox told analysts. The company further noted that Lovesac saw a $12.1 million decrease in freight capitalization due to lower inbound freight expenses. In fiscal year 2024, shipping and handling costs were at $133.2 million, down from $159.7 million in fiscal year 2023, according to a 10-K filing.
Lovesac has also implemented new planning and operational capabilities, Fox said.
“We launched a new order management system that should further enhance customer satisfaction, improve delivery metrics around timeline expectations, and increased efficiency of working capital,” Fox said. “We also see incremental savings on inbound freight and logistics through new partnerships.”
Fox noted that if demand swings upward, Lovesac will have the agility needed to build back its inventory.
“We feel exceptionally good about both the quality and quantity of our inventory and our ability to maintain industry-leading in-stock positions and delivery times,” Lovesac CFO Keith Siegner said on the earnings call.
Siegner also noted that Lovesac’s inventory levels are in line with its projections and believes that it can maintain its in-stock positions and delivery times.
“It was a result of a lot of the investments we've made in the past in supply chain. So, for us, we will continue to drive efficiencies in our inventory and even just the speed to market as we move goods from factory through to our [distribution center],” Fox said on the call. “You'll expect to see some benefits continuing.”
Furniture retailers are working to beef up their inventories after pandemic-driven challenges clogged ports and caused container shortages. As demand cooled, companies are now focusing on rightsizing their inventories to adjust to changing market conditions.
