0001628280-26-032149
SEC filingRevenue grew 8.5% driven by new stores, but net income fell 80.9% due to debt costs and IPO expenses; adjusted EBITDA was nearly flat.
Revenue for the first quarter of fiscal 2026 totaled $578.1 million, an 8.5% increase compared to $532.8 million in the prior-year period. The growth was primarily attributable to non-comparable sales from new stores ($43.3 million) and a 1.2% increase in comparable sales, driven by higher conversion and average order value in both retail and eCommerce channels. However, comparable sales growth decelerated from 6.2% in the prior year, partly due to exceptional winter weather impacting in-store traffic.
Gross profit rose 8.4% to $256.5 million, while gross margin held steady at 44.4%. Favorable product mix (shift to the 'Better' category), lower freight costs, and higher protection plan margins offset fixed costs from the new Midwest distribution center and inventory growth.
Selling, general and administrative (SG&A) expenses increased 9.0% to $235.1 million, or 40.7% of revenue (vs 40.5% a year ago). The rise was driven by payroll for new stores ($6.0M), higher occupancy ($6.0M), increased marketing ($4.8M), and a $2.0M fee to terminate the Bain Capital advisory agreement post-IPO.
Operating income edged down 2.3% to $17.3 million, resulting in an operating margin of 3.0% (vs 3.3%). Net income plummeted 80.9% to $2.5 million, heavily impacted by a $10.7 million non-cash charge from accelerating debt issuance costs upon Term Loan repayment, as well as higher interest expense ($15.3M vs $0.9M). Adjusted net income fell 21.5% to $11.1 million, while adjusted EBITDA remained nearly flat at $37.6 million (0.9% increase), reflecting the underlying profitability of the core business.
The company operates as an omnichannel retailer with two primary channels: retail (store) and eCommerce. Retail revenue grew 7.6% to $482.6 million, bolstered by five new store openings during the quarter, bringing the total to 214 showrooms across 26 states. eCommerce revenue surged 13.5% to $95.5 million, driven by improvements in conversion and average order value. The eCommerce channel continues to outpace retail growth, representing 16.5% of total revenue.
Comparable sales growth of 1.2% was modest, with management noting lower in-store traffic during weather-affected periods but higher conversion and AOV in both channels. The company's focus on value positioning and curated SKU selection is supporting steady demand despite macroeconomic uncertainties.
Management did not provide explicit revenue or earnings guidance but highlighted strategic priorities: continued store expansion (targeting over 500 stores by 2035), development of a Midwest distribution center to support growth, and navigation of tariff risks. Capital expenditure guidance for fiscal 2026 is set at $110-115 million, primarily allocated to new and remodeled stores and distribution infrastructure.
The company expects liquidity needs to be met through cash from operations and its $200 million revolving credit facility (amended post-quarter). Key risks include tariff policy uncertainty (especially for upholstered wooden furniture) and the impact of geopolitical events on consumer spending and supply chains. However, the recent IPO strengthened the balance sheet, allowing repayment of the Term Loan and providing flexibility for growth investments.
Cash and cash equivalents fell to $27.7M from $53.2M, while restricted cash rose slightly to $10.2M. Total debt was slashed to $25.0M (all drawn on the Revolving Credit Facility) from $350.0M in Term Loan at year-end, after the IPO proceeds of $304.2M (net) plus $64M revolver borrowings funded the $350M Term Loan payoff. The revolver capacity stood at $99.4M post-draw. Stockholders' equity ballooned to $472.2M from $163.9M, reflecting the IPO issuance of 19.45M shares at $17.00 and the retirement of all treasury shares (9.25M shares). Inventory decreased modestly to $336.8M from $350.3M.
The Notes disclose $244.7M in undiscounted future lease payments for 19 not-yet-commenced non-cancellable leases (18 retail stores, one distribution center). Total recognized lease liabilities were $859.9M ($798.5M operating, $61.5M finance). A subsequent lease extension for a distribution center will add ~$17.4M to the liability. The DECD forgivable loan of $7.0M (2% interest) is not recognized on the balance sheet as the Company believes it will meet all forgiveness conditions. Outstanding letters of credit totaled $10.2M.
No dividends were declared. Share repurchases were minimal ($0.1M, 8,725 shares). The primary capital allocation event was the IPO-driven debt repayment: $350M Term Loan fully repaid, replaced by a $25M revolver draw. Capex was $31.6M (5.5% of sales), up from $15.9M in the prior-year quarter. No new buyback authorization was announced.
The Company operates as a single reportable segment. Revenue is disaggregated into Retail ($484.4M, +7.6% YoY) and eCommerce ($93.7M, +13.5% YoY). No segment operating income, geographic mix, or asset allocation by segment is disclosed.