LOVE 10-K & 10-Q changes, risk factors and insider trading

•our ability to protectaccurately forecast our trademarks,operating brandresults image,and growth rate or othermanage intellectualour propertygrowth rights.effectively;

We face numerous business risks relating to macroeconomic factors. Uncertainties in global economic conditions that are beyond our control have in the past impacted discretionary consumer spending and our business and may in the future materially adversely affect our business, results of operations, financial condition and stock price. Consumer purchases of discretionary items, including our products, generally decline during recessionary periods and other times when disposable income is lower. Factors impacting discretionary consumer spending include general economic conditions, inflation, reduction in wages and discretionary income, levels of unemployment, consumer debt, reductions in net worth based on severe market declines, residential real estate and mortgage markets, taxation, regulations and new or increased tariffs, including retaliatory tariffs, export controls, volatility of fuel and energy prices, fluctuations in interest rates or currency exchange rates, consumer confidence, closure or restricted operating conditions for businesses, political and economic uncertainty, inclement weather, natural disasters, health epidemics or pandemics and other macroeconomic factors, including geopolitical conditions and regional conflicts. Deterioration in economic conditions, increasing inflation or increasing unemployment levels may reduce the level of discretionary consumer spending and inhibit consumers’ use of credit, which may adversely affect our sales. In recessionary periods and other periods where disposable income is adversely affected, we may have to increase the number of promotional sales or otherwise dispose of inventory for which we have previously paid to manufacture, which could further adversely affect our financial performance. A downturn in the economic environment can also lead to financial instability, increased credit and collectability risk on our receivables, the failure of important partners, including suppliers, manufacturers, logistics providers, and other financial institutions. It is difficult to predict when or for how long any of these conditions could affect our business and a prolonged economic downturn could have a material adverse effect on our business, financial condition, operating results and prospects.

To acquire new customers, we must appeal to prospects who have historically used other means of commerce to purchase furniture, such as traditional furniture retailers. We have made significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers and to reactivate prior customers. To date, we have reached new customers primarily through our showroom presence in various markets, and through social media, digital content, third-party advocates for our brand and products, by word of mouth, and through national television advertisements. These efforts are expensive and may not result in the cost-effective acquisition of customers. Our marketing expenses have varied from period to period, and we expect this trend to continue as we test new channels and refine our marketing strategies. Until now, these efforts have allowed us to acquire new customers at what we believe is a reasonable cost and rate. However, thereThere is no guarantee that these methods will continue to be successful or will drive customer acquisition rates necessary for us to achieve revenue growth or profitability.

We also utilize non-paid advertising. Our non-paid advertising efforts include search engine optimization, non-paid social media, mobile "push" notifications and email. We obtain a significant amount of traffic via search engines and, therefore, rely on search engines such as Google,Google. Bing and Yahoo!. Although weWe employ search engine optimization and search engine marketing strategies, and our ability to maintain and increase the number of visitors directed to our website and application is not entirely within our control. Search engines frequently update and change the logic that determines the placement and display of results of a user's search, such that the purchased or algorithmic placement of links to our sites can be negatively affected. Moreover, a search engine could, for competitive or other purposes, alter its search algorithms or results, causing our sites to place lower in search query results. A major search engine could change its algorithms in a manner that negatively affects our paid or non-paid search ranking, and competitive dynamics could impact the effectiveness of search engine marketing or search engine optimization. Furthermore, major search engines can and have shifted to artificial intelligence-generated search results, which may cause us to experience a significant decrease in traffic to our sites. Mobile “push” notifications and emails are also an important source of traffic to our sites. Regulatory changes could limit our ability to send such communications or impose additional requirements upon us in connection with sending such communications. Further, changes in how web and mail services block, organize and prioritize email may reduce the number of prospective customers who receive or open our emails. Our use of email and other messaging services to send communications to consumers may also result in legal claims against us, which may cause us increased expenses, and if successful might result in fines and orders with costly reporting and compliance obligations or might limit or prohibit our ability to send emails or other messages. We also obtain a significant amount of traffic via social networking websites or other channels used by our current and prospective customers. As e-commerce and social networking continue to rapidly evolve, we must continue to establish relationships with these channels and may be unable to develop or maintain these relationships on acceptable terms. If we are unable to cost-effectively drive traffic to our sites, our ability to acquire new customers, reactivate prior customers or retain our existing customers and our financial condition would suffer.

We believe our success has depended, and continues to depend, on the efforts and talents of Shawn Nelson, our founder, member of the Board of Directors and Chief Executive Officer,Officer; Mary Fox, our President and Chief Operating Officer,; Keith Siegner, our Executive Vice President, Chief Financial Officer and Treasurer,Treasurer; and other members of our management team. Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled associates. The market for such associates in the cities in which we operate is competitive. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. The loss of any of our key associates, including members of our senior management team, could materially adversely affect our ability to execute our business plan, and we may not be able to find adequate replacements. Our inability to recruit and develop mid-level managers could have similar adverse effects on our ability to execute our business plan. Moreover, we believe that a key contributor to our success and our ability to retain highly skilled personnel has been our corporate culture, which we believe fosters innovation, teamwork, and a passion for our products and consumers. If we fail to maintain the beneficial aspects of our corporate culture globally, it could adversely affect our ability to attract and retain employees, continue to perform at current levels, or execute on our business strategy.

We do not own or operate any manufacturing facilities and therefore depend on third-party suppliers for the manufacturing of all of our products. Moreover, a substantial portion of our business is dependent on a small number of suppliers. Sacs are currently manufactured by twoone manufacturersmanufacturer in Texas and North Carolina, which havehas previously experienced, and may continue to experience in the future, disruptions to its manufacturing operations. Sactionals are currently manufactured by suppliers in Vietnam, Malaysia, China, Malaysia, Indonesia, Mexico, Taiwan, and India. If our relationship with these suppliers or the suppliers' services are disrupted, terminated or otherwise negatively impacted, we could have difficulty or incur additional costs in replacing these suppliers.

Our current suppliers areoperate manufacturing facilities located in Vietnam, Malaysia, China, Vietnam,Indonesia, Taiwan, India, Indonesia, Malaysia, Mexico and theIndia. UnitedWe States.are developing additional relationships with domestic manufacturing partners. Our reliance on international suppliers for the substantial majority of our products increases our risk of supply chain disruption. Events that have in the past and could in the future cause disruptions to our supply chain include but are not limited to, the imposition of additional trade laws or regulations; public health crises; the imposition of additional duties, tariffs and other charges on imports and exports; foreign currency fluctuations; theft; and restrictions on the transfer of funds. The occurrence of any of the foregoing could materially increase the cost and reduce or delay the supply of our products, which could adversely affect our business, financial condition, operating results and prospects.

Many of our imported products are subject to existing duties, tariffs, anti-dumping duties and quotas that may limit the quantity or affect the price of some types of goods that we import into the United States. In addition, recent events have resulted in substantial regulatory uncertainty regarding international trade and trade policy, both in the United States and abroad. The U.S. Government has also raised the possibility of other initiatives that may affect importation of goods including renegotiation of trade agreements with other countries and the introduction of new or increased import duties or tariffs with respect to products from a number of different countries. The U.S. has imposed or proposed the imposition of new tariffs on products imported into the U.S. from a number of countries, including China, Mexico, Canada and other countries and could propose additional tariffs or increases to those already in place. A substantial portion of our products sourced from China hashave been affected by increased tariffs and may be subject to further increased tariffs. We rely upon vendors outside of the U.S. for the substantial majority of our products. The possible implementation of a border tax or new or increased tariffs, or the uncertainty surrounding existing or invalidated tariffs and any related refund processes, could materially increase our cost of goods sold with respect to merchandise that we purchase from vendors who manufacture products outside the U.S., which could in turn require us to increase our prices and, in the event consumer demand declines as a result, negatively impact our results of operations. Furthermore, certain of our competitors may be better positioned than us to withstand or react to border taxes, tariffs or other restrictions on global trade and as a result, we may lose market share to such competitors. Due to broad uncertainty regarding the timing, content and extent of any regulatory changes in the U.S. or abroad, we cannot predict the impact, if any, that these changes could have to our business, financial condition and results of operations.

We also face uncertainty in the interpretation of new tariffs and their applicability, including with respect to customs valuation, product classification and country-of-origin determinations. Although we and our vendors seek to comply with applicable customs laws and regulations, the application of rules regarding new tariffs can be subject to varying interpretations or future re-interpretations. It is possible that U.S. Customs and Border Protection or other relevant authorities could, upon review or audit, disagree with the valuation, rules of origin or classification methods applied to certain merchandise. Any such disagreement could result in the retroactive assessment of additional duties with interest, the imposition of penalties, or other enforcement actions without the ability to mitigate such penalties, thereby adversely affecting our operations or financial results. In addition, recent events have resulted in substantial regulatory uncertainty regarding international trade and trade policy, both in the United States and abroad. For example, in February 2026, the Supreme Court of the U.S. issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”). To preserve its rights to recover such duties, we filed a complaint and a protective action with the U.S. Court of International Trade seeking a full refund of all tariffs paid under the invalidated IEEPA authorities, but the ultimate availability, timing and amount of any potential refunds of these tariffs remain uncertain. Following the Supreme Court decision, the U.S. Administration announced a new 15% global tariff under Section 122 of the Trade Act of 1974, subject to certain carveouts. At this time we cannot reasonably estimate the total financial impact of this ruling, however it, and any additional tariffs, may materially affect our future results of operations and cash flows.

Most of our products are shipped from our suppliers by ocean vessel. If a disruption occurs in the operation of ports through which our products are imported, for instance, as a result of port congestion, adverse weather, terrorist attack, natural disasters or climate change, we may incur increased costs related to air freight or use of alternative ports. Shipping by air is significantly more expensive than shipping by ocean and our margins could be reduced. Shipping to alternative ports could also lead to delays in receipt of our products. We rely on third-party shipping companies to deliver our products to us. Our ability to efficiently ship products to customers has been and may be in the future negatively affected by factors beyond our and the shipping companies' control,whichcontrol, which may include labor disputes, union organizing activity, supply chain issues, the closure of such shipping companies’ offices or a reduction in operational capacity due to an economic slowdown or the inability to sufficiently ramp up operational capacity during an economic recovery or upturn, health pandemics and epidemics, political instability, military conflict, increased fuel costs and costs associated with any regulations to address climate change, and other factors affecting the shipping industry’s capacity or ability to deliver our products to us. For example, ocean freight capacity issues increased during the COVID-19 pandemic which resulted in greater demand for shipping and reduced capacity and equipment, which resulted in increases in shipping container rates. As a result, our inventory levels were adversely impacted and resulted in elevated, and sometimes lengthy, customer backorders. While the pandemic-era disruptions have largely subsided, if in the future there are transportation delays, increases on costs of shipping containers, more extensive travel restrictions, closures or disruptions of businesses and facilities or social, economic, political or labor instability in the affected areas, as a result of pandemics or otherwise, these developments could have a material adverse effect on our business, financial condition, operating results and prospects.

Additionally, a recentport proposalfee implemented by the U.S. to impose new port fees on Chinese-operated and built vessels and to restrictrestricts a percentage of U.S. products from being transported on non-U.S. vesselsvessels, which could have the potential to dramatically impact shipping capacity and costs. The actual implementation of these proposed actions remains uncertain. The final form, scope, and effective dates of any measures that are ultimately adopted may significantly differ from the current proposals. Furthermore, retaliatory measures from China or other nations could further compound disruptions and cost increases within the global shipping industry. This proposalfee, or other similar fees, could result in a significant increase in our shipping costs, cause inventory disruptions and have a material adverse effect on our operations and financial results.

Our gross margin depends, in part, on our ability to mitigate rising costs or shortages of raw materials used to manufacture our products. Raw materials used to manufacture our products are subject to availability constraints and price volatility impacted by a number of factors, including supply and demand for fabrics, steel and metal components, and electronic components, weather, government regulations, economic conditions, economic and political instability, and other unpredictable factors. In addition, our sourcing costs may fluctuate due to labor conditions, transportation or freight costs, energy prices, currency fluctuations, tariffs and trade restrictions, public health crises, or other unpredictable factors. The occurrence of any of the foregoing could increase our costs, delay or reduce the availability of our products and negatively impact our gross margin. For example, members of the U.S. Government have called for substantial changes to tax policies, including the possible implementationimposition of anew borderor tax.increased tariffs or trade restrictions. The U.SU.S. Government has also raised the possibility of other initiatives that may affect importation of goods including renegotiation of trade agreements with other countries and the introduction of new or increased import duties or tariffs with respect to products from a number of different countries. The U.S. has imposed or proposed the imposition of new tariffs on products imported into the U.S. from a number of countries. If maintained, these and other newly announced tariffs and the potential escalation of trade disputes could increase price and supply pressures.

We are required to make substantial lease payments under our leases, and any failure to make these lease payments when due would likely harm our business. In addition, many of our leases contain use restrictions that may limit our ability to introduce new products or relocation clauses that allow the landlord to move the location of our showrooms. As our leases expire, we may be unable to negotiate acceptable renewals.

Many of our leases also include relocation clauses that allow the landlord to move the location of our showrooms. If any of our showrooms are relocated, there can be no assurance that the new location will experience the same levels of customer traffic or success that the prior location experienced. In addition, as our leases expire, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close showrooms in desirable locations. We may also be unable to enter into new leases on terms acceptable to us or in desirable locations. If any of the foregoing occur, our business, sales and results of operations may be harmed.

We rely on a variety of marketing strategies to compete for customers and increase sales. If our competitors increase their spending on marketing, if our marketing is less effective than that of our competitors, or if we do not adequately leverage the technology and data analytics needed to generate concise competitive insight, our business, financial condition, operating results and prospects could be adversely affected. Additionally,We use digital advertising to drive sales and traffic to our e-commerce sites. As a result, if the online market for our products does not continue to gain acceptance, a significant portion of our business may suffer. Our success will depend, in part, on our ability to attract consumers who have historically purchased furniture through traditional retailers. Furthermore, we may have to incur significantly higher and more sustained advertising and promotional expenditures in order to attract additional online consumers to our sites and convert them into purchasing customers online. We market our products globally through a range of advertising and promotional programs and campaigns, including social media. Customer response to our advertisements depends on merchandise assortment, availability and creative presentation, as well as the general retail sales environment, current domestic and global economic conditions and competition. If we do not successfully market our products or invest in the right campaigns or promotions for the right products at the right time, the lack of success or increased costs of promotional programs could have an adverse effect on our business, financial condition, and results of operations.

As of February 2,1, 2025,2026, we had 257278 showrooms,showrooms. including 1 kiosk and 2 mobile concierges, but ourOur growth strategy requiresrelies usin part on our ability to increase our showroom base. There can be no assurance that we will succeed in opening additional showrooms. If we are unable to successfully open and operate new showrooms, it could have a material adverse effect on our business, financial condition, operating results and prospects.

As we expand our showroom base and expend capital remodeling our existing showrooms, we may not be able to achieve the showroom sales growth rates that we have achieved in the past and there is no guarantee that this will result in incremental showroom traffic or sales and there is no guarantee that this will result in incremental showroom traffic or sales and there is no guarantee that this will result in incremental showroom traffic or sales, which could cause our share price to decline.

Our disclosure controls and procedures and internal controls over financial reporting have in the past been subject to deficiencies and material weaknesses which resulted in the restatement of our financial statements ,statements, and we cannot assure you that additional material weaknesses will not arise in the future. If other material weaknesses or other deficiencies arise in the future or if our independent registered public accounting firm is unable to express an opinion or expresses a qualified or adverse opinion about the effectiveness of our internal control over financial reporting, we may be unable to accurately report our future financial results, which could cause our future financial results to be materially misstated and require additional restatement. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements. We may also have difficulty accessing capital on favorable terms, or at all, be subject to fines, penalties or judgments, and incur reputational harm which may materially and adversely affect our business, results of operations and financial condition. Additionally, investors may lose confidence in our financial reporting and our stock price may decline as a result.

Additionally, we have in the past experienced high employee turnover in our accounting department which has resultsresulted in significant time and expense relating to identifying, recruiting, hiring, relocating and integrating qualified individuals. High employee turnover of key personnel may deplete our institutional knowledge base, erode our competitiveness and impact our internal controls and our financial reporting. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to prevent or avoid potential future material weaknesses. Our failure to maintain the adequacy and effectiveness of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, and we could fail to meet our financial and other reporting obligations.

As previously disclosed, we reached a determination to restate our financial statements as of and for the year ended January 29, 2023, and the unaudited condensed quarterly financial information for the quarterly periods ended April 30, 2023, October 30, 2022, July 31, 2022 and May 1, 2022. As a result, we voluntarily self-reported to the SEC information concerning the internal investigation of these accounting matters. As a result of self-reporting, the Company was the subject of a non-public investigation by the SEC. The Company cooperated fully with the SEC in its investigation, and on October 29, 2024, the Company agreed to a settlement to resolve the claims against it. Without admitting or denying the SEC’s allegations, we agreed to the entry of a final judgment ordering us to pay a $1.5 million civil penalty and imposing a permanent injunction against future violations of Section 17(a)(3) of the Securities Act of 1933 and Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and the associated rules thereunder. As a result of the restatements, we have become subject to a number of additional risks and uncertainties, which may affect investor confidence in the accuracy of our financial disclosures and may raise reputational issues for our business. Specifically, we were involved in a putative securities class action that was filed against us and certain of our current and former officers, which we have settled. We arewere currentlyalso involved in certain putative shareholder derivative actions filed on behalf of the Company against certain of its current and former officers and directors.anddirectors, which have concluded. We may in the future be subject to additional litigation or other disputes, which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement. We cannot assure that all of the risks and challenges described above will be eliminated or that general reputational harm will not persist. If one or more of the foregoing risks or challenges persist, our business, operations and financial condition are likely to be materially and adversely affected.

We are also subject to numerous laws and regulations including those relating to the production, sale, marketing, labeling, content, safety and distribution of our products, anti-corruption (such as the Foreign Corrupt Practices Act), employment and occupational health and safety, and environmental, social and governance matters and reporting, among others. Compliance with these laws and regulations is costly and complex given the nature of our business, our reliance on third party suppliers in foreign countries and our exposure to the laws of those countries, and the frequent adoption of new laws and regulations. Failure to comply with such laws or regulations can subject us to criminal or civil investigations or enforcement actions, fines, penalties, injunctions or restrictions, all of which can adversely affect our business.

There is uncertainty regarding potential laws, regulations and policies related to global environmental sustainability matters, climate change laws and regulations, including disclosure obligations and reporting on such matters. Changes in the legal or regulatory environment affecting ESG and sustainability disclosure, responsible sourcing, supply chain transparency, or environmental protection, among others, including regulations to limit carbon dioxide and other greenhouse gas emissions, to discourage the use of plastic or to limit or to impose additional costs on commercial water use may result in increased compliance costs for us and our business partners, all of which may negatively impact our results of operations, financial condition and cash flows.Theflows. The expectations related to ESG and sustainability matters are rapidly evolving, and from time to time, we announce certain initiatives and goals, related to these matters. We could fail, or be perceived to fail to act responsibly, in our efforts, or we could fail in accurately reporting our progress on such initiatives and goals.

We provide a lifetime warranty on the hard insert pieces of our Sactionals and the soft insert pieces of our Sacs and a limited warranty on our StealthTech components and covers which, if deficient, could lead to warranty claims. The Company maintains a reserve for warranty claims. However, there can be no assurance that our reserve for warranty claims will be adequate or additional warranty reserves will not be required due to failures in the technology in our StealthTech components or reduced warranty reserves may be required. Material warranty claims could, among other things, harm our reputation and damage our brand, cause us to incur significant repair and/or replacement costs, and have a material adverse effect on our business, financial condition, operating results and prospects.

We are involved in and may in the future be subject to litigation or other disputes, which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatements, market price volatility or other factors. In particular, on December 19, 2023, a putative securities class action was filed against us and certain of our current and former officers in the United States District Court for the District of Connecticut captioned Gutknecht v. The Lovesac Company, No. 3:23-cv-1640 to recover damages allegedly caused by violations of federal securities law in connection with the restatements. Additionally, three putative shareholder derivative actions have been filed in the United States District Court for the District of Connecticut on behalf of the Company against certain of its current and former officers and directors. The cases assert claims on behalf of the Company for breach of fiduciary duty, violations of the Exchange Act, unjust enrichment, corporate waste, and aiding and abetting primary violations. Other potential plaintiffs may also file additional lawsuits in connection with the restatement. The outcome of any such litigation is uncertain. Additionally, the market price of our common stock has been and may continue to be volatile. As a result, we may be the target of securities class action litigation in the future. The defense or settlement of this litigation and any future litigation could be time-consuming and expensive, divert the attention of management away from our business, and, if any litigation is adversely resolved against us, could have a material adverse effect on our financial condition. Any additional regulatory consequences, litigation, claim or dispute, whether successful or not, could subject us to additional costs, divert the attention of our management, or impair our reputation. Each of these consequences could have a material adverse effect on our business, results of operations and financial condition.

In June 2024, our Board of Directors approved a share repurchase programprogram. As of February 1, 2026, $14.1 million remained available for future purchases under whichthe weshare arerepurchase program. In March 2026, subsequent to the end of the fiscal period, our Board of Directors authorized tothe purchaserepurchase upof toan additional $40.0 million of our outstanding common stock fromunder timethe share repurchase program. As a result, total remaining availability under the share repurchase program increased to time.$54.1 million. Our share repurchase program does not have an expiration date and does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares on any particular timetable or at all. There can be no assurance that we will repurchase shares at favorable prices or at all. Further, our share repurchases could affect the trading price of our common stock, increase its volatility, reduce the market liquidity for our stock and may be suspended or terminated at any time, which may result in a lower market valuation of our common stock. Repurchasing our common stock will reduce the amount of cash we have available to fund working capital, capital expenditures, strategic acquisitions or business opportunities, and other general corporate purposes. The actual timing, number and value of shares repurchased will depend on various factors, including the market price of our common stock, trading volume, general market conditions and other corporate and economic considerations.

We operate on a 52- or 53-week fiscal year that ends on the Sunday closest to February 1. Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. TheFiscal fiscalyears year2026 ended February 2,and 2025 consisted of 52 weeks. Fiscal years 2024weeks, and 2023fiscal year 2024 consisted of 53 weeks and 52 weeks, respectively.weeks.

We are a technology driven company that designs, manufactures and sells unique, high quality furniture derived through our proprietary "Designed for Life"® approach which results in products that are built to last a lifetime and designed to evolve as our customers’ lives do. Our current product offering is comprised of modular couches called Sactionals,Sactionals®, premium foam beanbag chairs called Sacs,Sacs®, the immersive surround sound home theater system called StealthTech, andStealthTech®, the mostPillowSac® Chair, the Sactionals Reclining Seat, a recently launched PillowSacTMplatform Accentof Chairpremium seating called SnuggTM, and Sactionalsvarious Reclining Seat.accessories. Innovation is at the center of our design philosophy with all of our core products protected by a robust portfolio of utility and design patents. We market and sell our products through an omni-channel platform that includes direct-to-consumer touch points in the form of our own showrooms, which include our mobile concierge and kiosks,showrooms and online directly at www.lovesac.com. We believe that our ecommerce centric approach, coupled with our ability to deliver our large upholstered products through express couriers, is unique to the furniture industry.

There are a number of macroeconomic factors and uncertainties affectingthat in recent years have negatively affected the overall business environment and our business, including increasedfluctuations in inflation, elevated interest rates, housing market conditions, consumer debt and available credit, increased tariffstariff and trade restrictions, global conflicts and uncertainties in the global financial markets. These factors mayhave had and continue to have a negative impact on us and the markets in which we operate, including the potential for an economic recession, a continued downturn in the housing market, and a reduction in consumer discretionary spending. We believe that these macroeconomic factors have contributed to the slowdown in demand that we have experienced in our business which may continue in future periods.

Omni-channel comparable net sales is a measure that highlights the performance of our existing locations and websites by measuring the change in net sales for a period over the comparable prior-period of equivalent length. Comparable net sales includes sales at all retail locations and online, open greater than 12 months (including remodels and relocations) and excludes closed stores.showrooms. Comparable net sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with U.S.US GAAP.

Cost of merchandise sold includes the direct cost of sold merchandise; inventory shrinkage; inventory adjustments due to obsolescence, including excess and slow-moving inventory and lower of cost or net realizable value reserves; inbound freight; freight costs to ship merchandise to our showrooms, and warehousing and all logistics costs associated with shipping product to our customers. Certain competitors and other retailers may report gross profit differently than we do, by excluding from gross profit some or all of the costs related to their distribution network and instead including them in selling, general and administrative expenses. As a result, the reporting of our gross profit and profit margin may not be comparable to other companies.

Historically, our revenue growth has been accompanied by increasedhigher selling, general and administrative expenses.expenses, Theprimarily mostrelated significant components of these increases areto payroll and rent costs.rent. We expect these expenses to increase as we continue to grow our business. WeAs expectnet tosales leveragevolumes totalexpand, we anticipate leveraging selling, general and administrative expenses as a percentage of net salessales. asTo netsupport salesour volumesgrowth, continue to grow. We expect towe continue to invest in infrastructureinfrastructure, to support the Company’s growth. Our continued infrastructure investments includeincluding research and development costs on ourfor existing and future products and foundational technology investments to support our continued growth.initiatives. These investments willmay lessenreduce the impactdegree of expense leveraging during the period of investment with the greater impact of expense leveraging happening after the period of investment. However, total selling, general and administrative expenses generally will leverage during the periodsinvestment ofperiod. investmentsWe expect to realize greater leverage following these investments, with the greatestmost leveragesignificant occurringimpact withinexpected in the fourth quarter.

The following discussion provides an analysis of the Company’s financial condition and results of operations from management's perspective and should be read in conjunction with the financial statements and related notes included in this report. The discussion in this Form 10-K generally focuses on fiscal 2025 compared to fiscal 2024. Our fiscal 2024 results contain an additional, non-comparable 53rd week when2026 compared to fiscal 2025. A discussion of our results of operations and changes in financial condition for fiscal 20242025 compared to fiscal 20232024 has been excluded from this report, but can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 20242025 Annual Report on Form 10-K.

Net sales decreasedincreased $19.7$16.5 million, or 2.8%,2.4%, in fiscal 20252026 compared to fiscal 20242025 driven by anew decreaseshowroom openings and an increase of 9.3%0.5% in omni-channel comparable net sales,sales. In fiscal 2026, the number of repeat customers increased by 8.8%, partially offset by a 5.6% decline in new showroomcustomers. openings.In Newthe prior year, the number of repeat and new customers increased by 1.4%15.6% inand fiscal1.4%, 2025 as compared to 13.3% in fiscal 2024.respectively.

Showroom net sales decreasedincreased $11.5$42.1 million, or 2.6%9.9% in fiscal 20252026 compared to fiscal 2024.2025.

Other sales, which include pop-up-shop sales, shop-in-shop sales andsales, barter inventory transactions, and the Loved by Lovesac program, decreased $4.6$21.7 million, or 7.4%37.1% in fiscal 20252026 compared to fiscal 2024.2025. The decrease was primarily drivenattributable byto athe reductionCompany’s decision not to engage in any barter transactions coupledduring withthe lowercurrent productivityperiod, and the closure of ourthe temporary online pop-up-shops on Costco.com, partially offset by an increase in Best Buy shop-in-shop sales. We opened 5 additionalCompany's Best Buy shop-in-shop locations comparedas toa result of the priordiscontinuation year.of its partnership with Best Buy.

Gross profit decreased $3.2$4.6 million, or 0.8%,1.2%, in fiscal 20252026 compared to fiscal 2024.2025. Gross margin increaseddecreased 120210 basis points to 56.4% of net sales in fiscal 2026 from 58.5% of net sales in fiscal 2025 from 57.3% of net sales in fiscal 2024.2025. The increasedecrease was primarily driven by a decreaseincreases of 240180 basis points in inbound transportation costs,and partiallytariff offset by a decrease of 80 basis points in product margin driven by higher promotional discountingcosts and an increase of 40 basis points in outbound transportation and warehousing costs.costs, partially offset by an increase of 10 basis points in product margin driven by price increases, cost reduction initiatives and concessions from our vendors in response to changes in the tariff environment, partially offset by higher promotional discounting.

SG&A expenses increased $17.2$2.5 million, or 6.5%,0.9%, in fiscal 20252026 compared to fiscal 2024.2025. The increase was primarily related to increases of $15.8$14.8 million in payroll, $3.7due to higher incentive compensation and an out-of-period $1.6 million inexpense equity-basedpertaining compensation,to $1.7prior periods employee benefits, $1.8 million in rent, $1.5 million in impairment charges related to a settlement with the SEC,Best andBuy $1.1partnership million in professional fees, partially offset by decreases of $5.0 million in credit card feesdiscontinuation, and $1.6 million in other overhead costs. These increases were partially offset by decreases of $12.9 million in legal and professional fees, $2.4 million in equity-based compensation, and $1.9 million in credit card fees. As a percentage of net sales, SG&A was 40.7% in fiscal 2026, compared to 41.4% in fiscal 2025, compared to 37.7% in fiscal 2024.2025.

Advertising and marketing expenses decreasedincreased $6.1$0.6 million, or 6.4%,0.7%, in fiscal 20252026 compared to fiscal 2024.2025. Advertising and marketing expenses were 12.9%12.7% and 13.4%12.9% of net sales in fiscal 20252026 and 2024,2025, respectively.

Depreciation and amortization expenses increased $2.1$0.5 million, or 16.7%,3.4%, in fiscal 20252026 compared to fiscal 2024,2025, primarily driven by assetscapital being placed into service related to leasehold improvementsinvestments for new showrooms.

Interest and other income, net was $1.3 million in fiscal 2026 compared to $2.8 million in fiscal 2025 compared to $1.7 million in fiscal 2024.2025. The increasedecrease in interest income was primarily the result of higherlower cash deposits in the Company's interest-bearing bank accounts combined with higher interest rates.accounts.

Our business relies on cash flows from operations, our revolving line of credit (see “Revolving Line of Credit” below) and securities issuances as our primary sources of liquidity. At February 2,1, 2025,2026, we had $83.7$101.9 million in cash and cash equivalents. Our primary cash needs are for marketing and advertising, inventory, payroll, showroom rent, capital expenditures associated with opening new showrooms and updating existing showrooms, as well as infrastructure and information technology. We periodically use cash to repurchase shares of our common stock under our share repurchase program. The most significant components of our working capital are cash and cash equivalents, merchandise inventory, prepaid expenses, accounts payable, accrued expenses, customer deposits, and other current liabilities. We believe that cash expected to be generated from operations, the availability under our revolving line of credit and our existing cash balances are sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. Our long-term cash needs will depend on, among other things, our profitability and our ability to manage working capital requirements, and if needed, our ability to identify and secure other potential sources to fund future working capital needs and meet capital expenditure requirements.

Net cash provided by (used in) operating activities

Net cash provided by (used in) operating activities consists primarily of net income adjusted for certain non-cash items, including depreciation and amortization, equity based compensation, non-cash lease expense, and deferred income taxes, and the effect of changes in working capital and other activities.

Net cash provided by operating activities was $39.0$49.3 million in fiscal 2025,2026 acompared decreaseto from $76.4$39.0 million in the prior yearfiscal period,year. The increase was primarily driven by lower net income and changes infavorable working capital relatedfluctuations, toparticularly from inventory management actions and income taxes paid. The decrease was partially offset by cash inflows resulting from the timing of payments to vendors.management.

OnWe Marchare 25,party 2022,to we amended our existinga credit agreement providing for an asset-based revolving credit facility with the lenders party thereto, and Wells Fargo Bank, National Association ("Wells Fargo Bank"), as administrative agent.agent, that matures July 29, 2029. The maturity date of our credit agreement was extended to March 25, 2024 and, among other things, the maximum revolver commitment was increased from $25.0 million tois $40.0 million, subject to borrowing base and availability restrictions.restrictions, and also includes an uncommitted accordion feature that allows the Company, subject to certain customary conditions, to increase the size of the revolving credit facility by $10.0 million. Our credit agreement includes a $1,000,000 sublimit for the issuance of letters of credit and a $4,000,000 sublimit for swing line loans.

On March 24, 2023, the Company amended the credit agreement to extend the maturity date to September 30, 2024. On July 29, 2024, we amended the credit agreement to add an uncommitted accordion feature that allows the Company, subject to certain customary conditions, to increase the size of the revolving credit facility by $10 million and, among other things, extend the maturity date of the loans made under the Amendment from September 30, 2024 to July 29, 2029. For additional information regarding our line of credit with Wells Fargo Bank, see Note 8. Financing Arrangements in the Notes to the Financial Statements included in Part IV of this report. As of February 2,1, 20252026 and February 4,2, 2024,2025, the Company’s borrowing availability under the line of credit was $32.6$36.0 million and $36.0$32.6 million, respectively, and there were no outstanding borrowings under our credit facility.

During fiscal 2026 and 2025, we repurchased $6.0 million and $19.9 million, respectively, of shares of our common stock pursuant to the share repurchase program. As of February 2,1, 2025,2026, we had $20.1$14.1 million available to repurchase shares pursuant to the share repurchase program. For additional information, see Note 9. Stockholders' Equity in the Notes to the Financial Statements included in Part IV of this report.

The management's discussion and analysis of financial condition and results of operations is based upon our financial statements, which have been prepared in conformity with U.S.US GAAP. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and requires us to make significant estimates and assumptions. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions and conditions. In applying these policies, management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, and other various other assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. We continue to monitor the effects of global macroeconomic and geopolitical uncertainty,generaluncertainty, general market, political and economic conditions.

The Company has a bartering arrangement with a third-party vendor,vendor. wherebyThe Company has the Companyoption willto providerepurpose open-box inventory in exchange for media credits.credits, which are being used to support our advertising initiatives to create brand awareness and drive net sales growth. Barter sales transactiontransactions with commercial substance are recorded at a transaction price based on the estimated fair value of the non-cash consideration of the media credits to be received and the revenue is recognized when control of inventory is transferred, which is when the inventory is picked up in our warehouse. Fair value is estimated using various considerations, including the cost of similar media advertising if transacted directly, the expected sales price of product given up in exchange for the media credits, and the expected usage of media credits prior to expiration based on forecasted media spend subject to media credits under the barter arrangement. Projecting marketing spend requires estimating such factors as sales growth, inflation, overall economics of the retail industry, and changes in marketing trends, and are therefore subject to variability and difficult to predict, among other things. The Company recognizes an asset for media credits which is subsequently evaluated for impairment at each reporting period for any changes in circumstances. The Company did not recognize any barter sales in exchange for media credits in fiscal 2026. For fiscal 2025, 2024,2025 and 2023,2024, the Company recognized $9.0 million, $12.3 million,million and $21.3$12.3 million, respectively, of barter sales in exchange for media credits. The Company had $36.7$32.6 million and $32.8$36.7 million of unused media credits as of February 2,1, 2025,2026, and February 4,2, 2024,2025, respectively, and did not recognize any impairment.

In fiscal 2025,2025 and 2024, andthe 2023, weCompany did not recognize any impairment charges for any long-lived assets.

•Sactionals. Our Sactional product line currently represents a majority of our net sales. We believe our Sactionals platform is unlike competing products in its adaptability yet is comparable aesthetically to similarly priced premium couches and sectionals. Our Sactional products include a number of patented features relating to their geometry and modularity, coupling mechanisms and other features. Utilizing primarily two, standardized pieces, “seats” and “sides,” and approximatelyover 200 high quality, tight-fitting cover options that are removable, washable, and changeable, customers can create numerous permutations of a sectional couch with minimal effort. Customization is further enhanced with our specialty-shaped modular offerings, such as our wedge seat, angled sides and roll or swept arms. In September 2024, we launched the AnyTable®, a versatile table that seamlessly enhances any Sactionals living space, and in November 2024, we launched the Sactionals Reclining Seat, an innovation that integrates advanced reclining technology and delivers unparalleled comfort and flexibility while maintaining the sleek, sophisticated aesthetic of our Sactionals. Our custom features and accessories can be added easily and quickly to a Sactional to meet endless design, style, storage and utility preferences, reflecting our Designed for Life philosophy. Sactionals are built to meet the highest durability and structural standards applicable to fixed couches. Sactionals are comprised of standardized units and we guarantee their compatibility over time, which we believe is a major pillar of their value proposition to the consumer. Our Sactionals represented 90.9%91.1% and 92.0%93.1% of our net sales for the thirteen weeks ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025, respectively, and 91.0% and 92.6% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, respectively.

•Sacs. We believe that our Sacs product line is a category leader in oversized beanbags. The Sacs product line offers 5 different sizes ranging from 32 pounds to 95 pounds with capacity to seat 3+ people on the larger model Sacs. Filled with Durafoam, a proprietary blend of shredded foam, Sacs provide serene comfort and guaranteed durability. Their removable covers are machine washable and may be easily replaced with a wide selection of cover offerings. In May 2024, we launched the PillowSac Chair, an accessory that elevates the style and comfort of our existing PillowSac. In October 2025, the Company launched the PillowSac Chair Jr. which delivers the same comfort and premium materials as the PillowSac Chair, scaled for smaller spaces. Our Sacs represented 5.3%5.1% and 6.8%5.6% of our net sales for the thirteen weeks ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025, respectively, and 5.2% and 6.2% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, respectively.

•Showrooms. We market and sell our products through 281284 showroom locations strategically situated at top tier malls, lifestyle centers, and street locations in 45 states in the U.S. We carefully select what we believe are the best small-footprint showroom locations in high-end malls and lifestyle centers for our showrooms. Compared to traditional retailers, our showrooms require significantly less square footage because of our need to have only a few in-showroom sample configurations for display and our ability to stock our inventory for immediate sale. The architecture and layout of these showrooms are designed to communicate our brand personality and key product features. Our goal is to educate first-time customers, creating an environment where people can touch, feel, read, and understand the technology behind our products. Our showroom concept emphasizes our unique product platform and utilizes technology in more experiential ways to increase traffic and net sales. Net sales generated by this channel accounted for 70.2%70.8% and 69.7%67.9% of total net sales for the thirteen weeks ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025, respectively, and 70.5% and 68.8% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, respectively.

•Ecommerce. Through our ecommerce channel, we believe we are able to significantly enhance the consumer shopping experience for home furnishings, driving deeper brand engagement and loyalty, while also realizing more favorable margins than our showroom locations. We believe our robust technological capabilities position us well to benefit from the growing consumer preference to transact at home and via mobile devices. Our net sales generated by this channel accounted for 25.8%24.9% and 24.1%26.5% of total net sales for the thirteen weeks ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025, respectively, and 25.4% and 25.4% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, respectively.

◦In store and online pop-up-shops. We utilize in store pop-up-shops to increase the number of locations where customers can experience and purchase our products, a low cost alternative to drive brand awareness, in store net sales, and ecommerce net sales. These in store pop-up-shops are typically 10-day shows and are staffed similarly to our showrooms with associates trained to demonstrate and sell our products and promote our brand. For the thirteen weeks ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025, we operated 159172 and 171157 in store pop-up-shops, respectively, and 96 and 23 online pop-up-shops on Costco.com, respectively, and for the twenty-six weeks ended August 2, 2026 and August 3, 2025, we operated 331 and 328 in store pop-up-shops, respectively, and 15 and 5 online pop-up-shops on Costco.com, respectively.

◦Shop-in-shops. Prior to discontinuing this touchpoint at the end of fiscal 2026, shop-in-shops were designed to be in permanent locations carrying the same digital technology of our showrooms and were also staffed with associates trained to demonstrate and sell our products. In June 2025, the Company discontinued its partnership with Best Buy, resulting in the closure of all remaining shop-in-shop locations as of the end of fiscal 2026. Prior to the discontinuation of the partnership, we operated 4943 Best Buy shop-in-shops as of MayAugust 4,3, 2025.

◦Barter inventory transactions. Our barter inventory transactions with a third party vendor are part of our Circular Operations ("CO"), Designed for Life, and Environmental, Social and Governance ("ESG") initiatives. CO is a way of doing business that is meant to reduce our footprint, while dramatically extending the life of products through more looped, localized, long-term, and sustainable practices, policies, and programs. Our barter inventory arrangement permits us from time to time to repurpose returned open-box inventory in exchange for media credits, which are being used to support our advertising initiatives to create brand awareness and drive net sales growth. See Note 2. Revenue Recognition— Barter Arrangements in the notes to the condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for more information about our unused media credits as of MayAugust 3,2, 2026.

◦Loved by Lovesac. In June 2025, we launched the Loved by Lovesac program which enables customers to purchase quality-assured, revitalized open-box products through our dedicated resale platform at www.lovedbylovesac.com. All items are inspected and verified for resale prior to listing. We believe this initiative aligns with our Designed for Life philosophy and supports our commitment to sustainability by extending the lifecycle of our products and reducing environmental impact. The Company has initiated a limited launch of Loved by Lovesac, which as of MayAugust 3,2, 2026, is currently available in 30 select states nationwide.

Other net sales, which includes pop-up-shop sales, shop-in-shop sales, barter inventory transactions, and the Loved by Lovesac program, accounted for 4.0%4.3% and 6.2%5.6% of our total net sales for the thirteen weeks ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025, respectively, and 4.1% and 5.8% of our net sales for the twenty-six weeks ended August 2, 2026 and August 3, 2025, respectively.

Gross profit is equal to our net sales less cost of merchandise sold. Gross profit as a percentage of our net sales is referred to as gross margin. Certain competitors and other retailers may report gross profit differently than we do, by excluding from gross profit some or all of the costs related to their distribution network and instead including them in selling, general and administrative expenses. As a result, the reporting of our gross profit and profitgross margin may not be comparable to other companies.

Advertising and marketing expenseexpenses include digital, social, and traditional advertising and marketing initiatives, that cover all of our business channels. Advertising and marketing expenses are projected to rise as the Company drives net sales growth, supported by ongoing investments in these areas and careful monitoring to ensure efficient resource allocation.

The following tables summarize key components of our results of operations for the thirteen and twenty-six weeks ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025:

(1) During the second quarter of fiscal 2026, the Company made the decision to repurpose its 2 mobile concierges, and subsequently closed its last remaining kiosk in the fourth quarter of fiscal 2026. Showrooms open as of MayAugust 4,3, 2025 included 1 kiosk and 2 mobile concierges.kiosk.

Thirteen weeks ended MayAugust 3,2, 2026 compared to the thirteen weeks ended MayAugust 4,3, 2025

Net sales decreasedincreased $0.2$0.7 million, or 0.1%,0.4%, in the thirteen weeks ended MayAugust 3,2, 2026 compared to the prior year period driven by new showroom openings, partially offset by a 1.9% decrease in omni-channel comparable net sales and the closure of the Company's Best Buy shop-in-shop locations and a 1.0% decrease in omni-channel comparable net sales, partially offset by new showroom openings.locations. In the thirteen weeks ended MayAugust 3,2, 2026, the number of repeat and new customers decreased by 1.2%0.5% and 2.5%,1.9%, respectively. In the comparable prior year period, the number of repeat and new customers increased by 23.0%8.6%, andpartially 1.2%,offset respectively.by a 7.4% decline in new customers.

Showroom net sales increased $0.6$5.1 million, or 0.6%,4.6%, in the thirteen weeks ended MayAugust 3,2, 2026 compared to the prior year period.

Internet net sales (sales made directly to customers through our ecommerce channel) increaseddecreased $2.4$2.3 million, or 7.1%,5.3%, in the thirteen weeks ended MayAugust 3,2, 2026 compared to the prior year period.

Other net sales, which include pop-up-shop sales, shop-in-shop sales, and the Loved by Lovesac program, decreased $3.1$2.1 million, or 36.3%,23.2%, in the thirteen weeks ended MayAugust 3,2, 2026 compared to the prior year period. The decrease was primarily attributable to the closure of the Company's Best Buy shop-in-shop locations as a result of the discontinuation of its partnership with Best Buy.

Gross profit decreasedincreased $2.4$19.7 million, or 3.2%21.7% in the thirteen weeks ended MayAugust 3,2, 2026 compared to the prior year period. Gross margin decreasedincreased 1601,200 basis points to 52.1%68.4% of net sales in the thirteen weeks ended MayAugust 3,2, 2026 from 53.7%56.4% of net sales in the prior year periodperiod. Gross margin increased primarily due to recoveries of IEEPA tariffs, which contributed 1,240 basis points, and a 250 basis point improvement in product margin driven primarily by price increases, partially offset by higher promotional discounting. These favorable impacts were partially offset by increases of 380160 basis points in inbound transportation and tariff costs and 110130 basis points in outbound transportation and warehousing costs,costs. partiallyDuring offsetthe byquarter, anwe increasereceived $21.0 million of 330IEEPA basistariff points in product margin driven by price increasesrefunds and related interest. Approximately $20.0 million was recognized through cost reductionof initiatives,merchandise partiallysold, offset$0.3 bymillion higherreduced promotionalinventory, discounting.and $0.7 million was recognized as interest income.

SG&A expenses increased $1.5$0.2 million, or 2.2%,0.3%, in the thirteen weeks ended MayAugust 3,2, 2026 compared to the prior year period. The increase was primarily related to increases of $1.0$1.9 million in payroll associated with severance and higher incentive compensation and $0.5$0.8 million in other overhead expenses.expenses, partially offset by $1.5 million of impairment charges related to the Best Buy partnership termination that were recognized in the prior year period, and a $1.0 million decrease in equity-based compensation. As a percentage of net sales, SG&A was 49.6%44.8% for the thirteen weeks ended MayAugust 3,2, 2026 compared to 48.5%44.9% in the prior year period.

Advertising and marketing expenses decreased $2.0$0.7 million, or 10.7%,2.9%, in the thirteen weeks ended MayAugust 3,2, 2026 compared to the prior year period, primarily due to the strategic timing of marketing investments and continued emphasis on efficiency. Advertising and marketing expenses were 12.0%14.1% of net sales in the thirteen weeks ended MayAugust 3,2, 2026 compared to 13.4%14.6% of net sales in the prior year period.

Depreciation and amortization expenses increased $0.6$0.4 million, or 15.7%,9.7%, in the thirteen weeks ended MayAugust 3,2, 2026 compared to the prior year period primarily driven by capital investments for new showrooms.

Interest and other income, net was $0.7$1.2 million for the thirteen weeks ended MayAugust 3,2, 2026 compared to $0.3$0.1 million in the prior year period. The increase in interest income was primarily the result of interest earned on IEEPA tariff refunds and higher cash deposits in the Company's interest-bearing bank accounts.

Income tax benefit was $5.6$0.9 million for the thirteentwenty-six weeks ended MayAugust 3,2, 2026, compared to $3.8$5.9 million in the prior year period. The change in benefit was primarily driven by alower higher netpre-tax loss before taxes and ana increasedecrease in the effective tax rate.

Our business relies on cash flows from operations, our revolving line of credit (see “Revolving Line of Credit” below) and securities issuances as our primary sources of liquidity. At MayAugust 3,2, 2026, we had $57.0$68.8 million in cash and cash equivalents. Our primary cash needs are for marketing and advertising, inventory, payroll, showroom rent, capital expenditures associated with opening new showrooms and updating existing showrooms, as well as infrastructure and information technology. We periodically use cash to repurchase shares of our common stock under our share repurchase program. The most significant components of our working capital are cash and cash equivalents, merchandise inventory, prepaid expenses, accounts payable, accrued expenses, customer deposits, and other current liabilities. We believe that cash expected to be generated from operations, the availability under our revolving line of credit and our existing cash balances are sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months. Our long-term cash needs will depend on, among other things, our profitability and our ability to manage working capital requirements, and if needed, our ability to identify and secure other potential sources to fund future working capital needs and meet capital expenditure requirements.

Historically, we have invested significant capital expenditures in opening new showrooms and updating existing showrooms. These capital expenditures have increased in the past and may continue to increase in future periods as we open additional showrooms. Capital expenditures are anticipated to support our showroom growth, including capital outlays for leasehold improvements, fixtures and equipment, and the construction of new showrooms. Capital expenditures also include patents and trademarks used in the normal course of our business. Cash paid for capital expenditures was $5.3$12.2 million in the thirteentwenty-six weeks ended MayAugust 3,2, 2026.

Net cash used in operating activities was $35.4$11.4 million in the thirteentwenty-six weeks ended MayAugust 3,2, 2026, compared to $41.4$29.2 million in the prior year period. The decrease was primarily attributable to the receipt of IEEPA tariff refunds and net working capital fluctuations,changes, drivenincluding bythe timing of vendor payments and strategic investments in inventory to vendors.support future demand.

For the thirteentwenty-six weeks ended MayAugust 3,2, 2026, net cash used in investing activities was $5.3$12.2 million, primarily driven by continued investments in new showrooms. For the thirteentwenty-six weeks ended MayAugust 4,3, 2025, net cash used in investing activities was $8.7$13.2 million, primarily driven by one-time capital expenditures related to our new corporate office and the continued investments in new showrooms.

For the thirteentwenty-six weeks ended MayAugust 3,2, 2026 and MayAugust 4,3, 2025, net cash used in financing activities was $4.2$9.4 million and $6.8$7.1 million, respectively, mainly due to the repurchase of our common stock and taxes paid for the net share settlement of equity awards.

For additional information regarding our line of credit with Wells, see Note 7. Financing Arrangements. As of MayAugust 3,2, 2026 and February 1, 2026, the Company’s borrowing availability under the line of credit was $34.9$34.0 million and $36.0 million, respectively, and there were no outstanding borrowings under our credit facility.

During the thirteen weeks ended MayAugust 2, 2026, we repurchased and subsequently retired 274,426 shares of common stock, costing $4.9 million, including broker commissions and fees. We did not repurchase any shares of common stock during the thirteen weeks ended August 3, 2025. During the twenty-six weeks ended August 2, 2026 and MayAugust 4,3, 2025, we repurchased and subsequently retired 141,482415,908 and 306,325 shares of common stock,stock costingfor $2.4$7.2 million and $6.0 million, respectively, including broker commissions and fees.

As of MayAugust 3,2, 2026, approximately $51.7$46.9 million remained available for future purchase under our share repurchase program. For additional information, see Note 8. Stockholders' Equity in the notes to the condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We have no material off balance sheet arrangements as of MayAugust 3,2, 2026, except for employment agreements entered in the ordinary course of business.

The discussion and analysis of financial condition and results of operations is based upon our condensed financial statements, which have been prepared in conformity with US GAAP. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Refer to Note 1 of our financial statements included on Form 10-K for the fiscal year ended February 1, 2026 for a complete description of our significant accounting policies. There have been no material changes to the significantcritical accounting policies during the thirteentwenty-six weeks ended MayAugust 3,2, 2026.

Refer to Note 1. Basis of Presentation and Summary of Significant Accounting Policies, contained in the Condensed Notes to Financial Statements in Item 1 of Part 1I of this Quarterly Report on Form 10-Q for a full description of the recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial condition.