- Innovative Product Design: Shawn detailed LoveSac's unique offerings, such as modular couches that are designed to last a lifetime, beanbags, and stealth tech features like built-in charging stations and surround sound systems. This innovation not only meets the evolving needs of customers but also stands out in the furniture market, especially during challenging economic times.
- Business Growth and Strategy: LoveSac reported substantial revenue of $700 million last year, highlighting strong growth and effective strategies in a competitive sector. Shawn emphasized the importance of the company's omnichannel approach and its ability to outperform industry benchmarks due to its strong brand reputation and product quality.
- Sustainability and Customer Engagement: The CEO discussed the sustainable aspects of LoveSac's products, which are made from recycled materials and designed for longevity. The modular design allows customers to adapt the furniture to their changing lives, which is appealing to environmentally conscious consumers.
- Corporate Philosophy and Future Goals: Shawn shared insights into LoveSac's corporate philosophy, focusing on long-term sustainability over short-term profits. He also mentioned ongoing investments in new product designs and technologies, aiming to expand LoveSac's market share and continue innovating within the home tech space.
Katie Perry (00:00):
I'm Katie Perry, and this is After Earnings, the show from Morning Brew and Stakeholder Labs that brings investors up close and personal with the executives behind the world's most interesting companies. Austin is out again this week, but we'll be back next week, so don't worry. Today we caught up with Shawn Nelson, the CEO and Founder of Love Sack, which is essentially a couch company, but it's kind of a lot more. They do modular couches that are built to last beanbags that they call Sacks and stealth tech, which are tech add-ons to their furniture, like charging stations and surround sound all coming from your couch. Lovesac made $700 million last year, and the company has been around since 1998. So if you think furniture brands aren't interesting, this episode will prove you wrong. Let's get into it. Wow. All right, Sean, welcome to the show. You are the CEO of Love Sac, publicly traded couch brand, but so much more. And you sold $700 million worth of products last year. You believe that. So tell us, what is Lovesac? What do you guys sell? What is the company all about?
Shawn Nelson (01:05):
Yeah, Lovesac is this originally giant, not beanbag company, beanbags filled with shredded foam that I started as a side hustle in college out of my parents' basement everywhere I took this thing, people loved it. So we opened a store back in 2001 called Love Sacks, selling those with a couch in the corner. People would ask about the couch, eventually started making couches that could also be shrunken down like the Sacks. And fast forward, I don't know, 20 plus years and we have 300 locations. We're a public company on Nasdaq, ticker, LOVE, which I'm very proud of.
Katie Perry (01:43):
Yeah, that's an amazing get, by the way, are people offering you money for that ticker?
Shawn Nelson (01:50):
I had to pry it out of someone's cold dead. No, look, the whole love sack story is kind of mythical and magical and plenty of crazy downs, the worst kind and ups, and I put it in a book, let me save you 25 years, tells the whole thing. It's actually pretty cool tale and mixed with my own kind of mistakes, miracles and lessons we say from the Lovesac story so you can get it all there. And yeah, really proud of our results. We're growing still rapidly. We're probably the only maybe furniture company growing right now. It's a really bad time for Furniture Post Covid. It was great during Covid with everyone staying home as it turns out, but we're still doing great. We're profitable, we're building cash and kind of unique in the landscape and the way we do things and in the results we're able to put up.
Katie Perry (02:42):
And I wanted to ask about the industry benchmarks because it does seem like, and you guys revealed in your earnings, you're outperforming the category. And I'm wondering what are the factors there? I know you have a strong omnichannel strategy, which we can get into, but are there other trends that sort of differentiating U guys and allowing you to win in an environment where a lot of your peers are not winning?
Shawn Nelson (03:05):
Yeah, look, I think the number one biggest thing is our brand. And by that I mean the power of our reputation. We make things that are built to last a lifetime and designed to evolve with you as your life changes, as you move house, as you relocate, as you grow, shrink, pair down, get divorced, split the couch in half. It's easy dark, but it's a really unique product that could be with you the rest of your life. This one I'm sitting on there is a SALs configured into an armchair. It's 16 years old. Wow. It's on its 10th covers and still viable and beautiful and really proud of that. So we've been building that for decades and that doesn't come overnight. And it's not just web marketing and roas. I mean all of that is necessary to building a business these days that can be sustainable and profitable, but the brand and the reputation. And so thankfully that Tailwind kind of helps carry us through. It's still look, it's a precarious time. We're always fighting for business and promoting and doing what we got to do to bridge to the next round of products that are coming. And we're really proud of what that's going to represent and we're investing, we would be more profitable if we weren't investing in new product design and new opportunities down the road.
Katie Perry (04:26):
Tell me more about the sustainability of the products. That struck me in the earnings call, my mind immediately went to, a lot of companies are incentivized for the product to break down, so you buy another one. How does the modular system you've built help you continue to grow the business, even though, I mean you're sitting on a 12, 14-year-old couch right now. So tell me a little more about that.
Shawn Nelson (04:55):
Yeah, look, that whole dynamic is messed up and we hate it. And I will spend the rest of my life trying to make products that are built to last a lifetime and can evolve with you. So there that second part's the key. It's hard to design something that can be valid 16 years later and it requires forward thinking. It requires reverse compatibility of the new products. On the, for instance, we launched stealth tech, our surround sound system. This couch has it, I can lay my phone on this arm, it's charging it surround sound to watch movies or play video games. It's magical. You can feel it. You're inside. That's additive to the SALs pieces I already own. And that's kind of magical as a customer. And so it breeds more of that brand love. Now what does it imply? It implies that eventually when we're beyond let's say 2% of the category, which is how much we've taken so far, it's a massive category.
(05:53)
It's fragmented. So even at 700 million, let's say we've taken this much so we believe we can grow in this category still past a billion and beyond, no doubt. And there are other categories where we can take our COMT thing you've ever sat on in your life reputation and do well, we think as well as built to last a lifetime designed to evolve. So this design for life philosophy drives our innovation. It drives the way we think, and the end result is true sustainability stuff that actually sustains, by the way, these old SALs are not made from a hundred percent recycled fabric like the new ones we sell in the millions today. We are recycling more plastic bottles into fabric than all those T-shirt companies and shoe companies combined. We don't really talk about it because the true sustainable aspect of the brand is the sustainability of the product that it can sustain, will sustain, and it will force us to innovate. That's what Apple should have already been forced to do, but we keep buying the same thing from them every year. They don't need to.
Katie Perry (06:56):
Right. New operating system, all of a sudden the phone just stops working and then magically when you get the new one, you're right back there. I also want to talk to you about the sustainability aspect of the design itself because trends are always moving, things are changing in terms of home decor and I know you were the original designer of these products and currently are still involved in that capacity. So how do you think about making sure the actual look and feel of these products is still going to fit someone's home five, 10 years down the line?
Shawn Nelson (07:31):
We have whole teams of people and designers and engineers working on that exact problem. We launched Angled Side just this past year. It has quickly become our number one selling skew. All it is is a different shape SALs piece that will allow you to modulate the SALs you might already own and achieve, not just a different fabric, which we're constantly introducing, following the trends, et cetera. And by the way, allowing you eventually to trade in your old covers to get new covers that's already happening on Facebook because even though the covers are washable, unchangeable, they're still valid. You might just be sick of it, but someone else is brand new. So we're going to foster this entire circular platform where people can buy, sell, trade, and continue sustainability as well as shapeshift, like the angled side, stealth tech, new technologies, et cetera. So it just requires constant innovation, constant tracking of those trends, sussing out the biggest opportunities and then attacking them. And I think that's what really separates Lovesac from most of those firms we compete with is that we are not a merchant led organization. We have merchants involved in design and tracking these trends and we execute to them, but the bigger mover of our businesses gained through research, through understand. So we operate a little bit more like a CPG brand than we do traditional furniture brand. And look, that's I think an answer to the question you first asked of why I think we continue to have some success where others may not.
Katie Perry (09:02):
And I'm also curious to dig into right now today, who is your target customer and then is that different than who it was five, 10 years ago?
Shawn Nelson (09:13):
It continues to evolve, but I mean to put it really simply, the millennial generation has now been aging into that sweet spot, 35 to 45-year-old range affluent. I mean, our stuff's not cheap at the same time, what's amazing about SALs, I couldn't even list the number of celebrities. N-F-L-N-B-A Hollywood that owns SALs. I've sold to them. I've seen them come back and get 'em for their second, third, and fourth homes at the same time. We sell the Middle America people that want to hang out on the love sack or the SALs with their wine and dogs and kids and not have to restrict their pets from getting on for the preciousness of their friends. Why should you be oppressed by your sofa? In our case, you can watch it, you can change it, don't worry about it. Kick your feet up, watch a movie pass out. That is our customer. And frankly, that Netflix and Chill customer, as it were, is only getting stronger. We belong there. It's the brand for this generation the way that we live, and we're really proud of that. We intend to continue to lean into that.
Katie Perry (10:22):
Yeah, when you talk about the way, especially millennials live, obviously a lot of us do not own our own homes. We're more likely to rent. And I'm wondering if you think the modular nature of what Lovesac offers is actually a benefit even as homeownership trends are a little shaky for that generation.
Shawn Nelson (10:43):
There's no doubt about it. I was just on a call with this buddy in finance out of New York who's, Hey, two out of my five closest friends owned SALs. Now one of them is in the Air force and it's moving all the time. And for him, that's the answer. And that's the amazing thing. You could be a Hollywood celebrity, you could be a millennial renting, and the product works for you for different reasons. Whether it be, Hey, I couldn't find a couch big enough to fill my whole basement, or whether it's, Hey, I need to pick this thing up and move it in the back of a cab, and it can be done alone with no friends, no help, no pivot around the staircase to quote the friends episode. We've all experienced one way or another. And so SELs just solves all these problems. We're really proud of it.
(11:29)
And it's on top of that. People associate modularity with cheapness. I think there are different brands out there that have kind of done it a disservice by making a lot of cheap stuff that falls apart. We're the antithesis of that. So look, it's a long battle to kind of overcome that stigma that something extremely modular can be lasting. In fact, we're the most lasting and there's no tools involved with Lovesac, right? You can arrange it, rearrange it, change it, and do it all without tools, without help. But it's just a different way of thinking about buying stuff. But that's our whole purpose, our stated purpose to inspire humankind to buy better so they can buy less. And I know that's controversial as a CEO of a public company telling you I'm passionate about people buying less stuff, but it's okay. We will do fine. We will grow like we have. And it will force us, like I said, to innovate into other categories, capture those with the same brilliant business model and put out better stuff in the long term. We may never be the size of Apple, but I think we can be more loved.
Katie Perry (12:34):
And when you mentioned those trends, it almost feels like the stealth wealth trend where it's about investing in quality, not necessarily name of the brand, but obviously you all have, like you said, a strong brand established. I want to jump next into some highlights from your earnings. You guys reported $700 million in revenue during 2023, expanded your gross profit margins by over three and a half percent flipped operating cashflow positive. Seems like you got a lot done. What really catalyzed this success last year and how do you plan to build on it in the subsequent quarters?
Shawn Nelson (13:12):
Yeah, look, there are some macro factors that have worked in our favor, like on the supply chain side. Things have finally freed up post covid and on the container side and whatnot, it's really helped our gross margins as well as a very active sourcing team, constantly working on first cost to help our customers achieve better costs, allow us to even promote a little bit more, which is ultimately good for the customer and take more gross margin. Meanwhile, continued investments in marketing is the big thing. I think we spend more than anyone does in this category communicating the benefits of our product.
(13:54)
You'll never see a Lovesac ad on TV, for instance, that offers a discount or a promo or something like that. This is brand building advertising that happens to have a performance component to it. And look, without the stake, you really can't sell the sizzle for long. And so SALs do have all these attributes that are good, that are useful, that are competitive, and that's what really drives the business paired with a really diligent management team from supply chain to finance to marketing, product development, design, et cetera, all executing at a very high level. So I think sometimes Lovesac is underestimated. We got this goofy name and we came up the back way and I didn't burn through a billion in capital to get here. We played the long game, but we're here and I think we'll continue to compete and dominate and hopefully get into other categories
Katie Perry (14:50):
In a similar fashion story behind the name because it is an interesting name for a couch company. Is it just the fact that you want people to love the product and you kind of put 'em together or how did that come about?
Shawn Nelson (15:02):
Well, look, it was 1998 and I made a giant bean bag and it was hippie bean bag, seventies retro love bag love sack. Oh, that's cool. Paid 25 bucks at Utah State Tax Commission and I'm in business. But fast forward all these years, there's a lot of equity built behind this name. And as goofy as it may sound to the first hearer has been very useful. It's sticky. You're going to hear it like it or hate it, doesn't matter. You're not going to forget it. And at this point, what's amazing is we observe is the consumers on social media, they don't say, oh, check out my SALs. They say, check out my love sack. And they're talking about their couch. And so this name is now shown just like Apple. If I said, Hey, I'm going to start Banana Computer Company, it sounds ridiculous. That's how Apple sounded in the beginning. A name can become what the name represents. And I think that's happening to Lovesac and I'm really proud of that. It's been controversial for a long time and we're proud to deliver love on Nasdaq and we're here for the long term. Our goal is to be here for 50 or a hundred years. We're building that kind of a brand. I'm not trying to get rich and exit and sell it to whatever. We're really here to stay. And so to us, this name matters.
Katie Perry (16:22):
On the marketing front, I'm very curious about where your brick and mortar locations fit within marketing because it feels like for you guys in your category, there is a, people want to sit on a couch, they're going to buy, if they're going to invest in, they want to see it, they want to feel it, they want to touch it. So when you talk about your brick and mortar sales versus online, I assume most are online, but what role does the actual physical location play in getting some people to convert and how do you see that within the marketing and sales mix?
Shawn Nelson (16:56):
Yeah, I think that this is fundamental to our success. We have a true omnichannel brand. We have a truly direct brand. We don't wholesale to anyone even where we operate in Best Buy. These are our locations, our people, our iPad, our checkout, and therefore we can maintain the relationship with them after, which is the most valuable thing to us are these relationships back to this LOVE in our name. We really believe that we want 'em to be happy, we want to take care of them, we want 'em to have it forever, and we want 'em to buy the next thing from us. So these physical locations are critical, at least in this category. To your point, people might take a risk on a $5 T-shirt or $50 pair of pants, but you're going to spend five grand, 10 grand, 15 grand. You would love to see this thing, try it one time, even if we offer you free returns, which we do, no one wants to mess with. Everyone knows what that means to their life,
Katie Perry (17:51):
Especially for a giant couch that seems like a nightmare.
Shawn Nelson (17:55):
Bingo. And so the combination of the physical with the digital has been so tremendous. And I think what's magical is that we came up, I think backwards from most direct consumer brands were digital first and now they're kind of running around opening stores. It took us 20 years to get this good at operating multi-units, hundreds of units across 50 states, almost, not quite, but across the nation. And we're 300 locations ahead of most. And so I think Lovesac has this tremendous strength that has come compounded over many, many years, not just in the number of locations and the CapEx that it represents that we own already, but in our acuate at operating them. And really what they are are touch points in the end. Most transactions happen in those showrooms, not because almost not a hundred percent, but whatever. 90% of those buyers were digital first, but now they're in a showroom.
(18:58)
Our people are friendly, they're good at what they do, they have this relationship, they'll transact there. We don't stock inventory, so we don't call them stores, but no matter where you transact there, or by the way, sit on the sack in the corner and order it on your phone. We don't care. We don't care. Our people are incented to help you no matter what. They're going to get paid well no matter what, and we just want you in the family. And we're really proud of that. I just left Costco down the street, we're there for 10 days. We rotate through and it's the same experience there. And no matter what you do, you're in our fold. You're our customer will take care of you. You won't need to go through some weird channel to get customer service. And that's the brand that we've built.
Katie Perry (19:38):
I'm glad you brought up the brick and order to direct to Consumer Path, which is a lot of the stories we follow now are the direct to consumer going into physical. And I'm curious, when you started, I assume it was just brick and mortar locations, when did you first start thinking about selling these online and then when was the tipping point of when the online sales overtook or kind of leveled out with what was happening in the stores?
Shawn Nelson (20:08):
Well, I am old, but I'm not that old. Thankfully we had a website from the outset, but it was always at that time, this is all the way back in the early two thousands. It was store first and there's a website. And somewhere in those mid two thousands, maybe, I don't know, 2010 range digital really became the driver at least of the information and the marketing. And it was really 20 14, 15 as we observed all the success, at least in momentum that the Caspers and the Warby Parkers and the even Tesla locations were achieving. We thought, man, what would a love sack more like a Tesla showroom look like? We dropped 90% of our skews. We dropped all the bowls, baskets, decorative accessories, everything we learned from West Elm for instance, and focused on direct marketing for these couches and the combination of traditional media, digital media and these showrooms now not stores remixed to really provide a sales environment focused on selling more, like communicating the attributes of these unique products.
(21:16)
And that's what we're good at. And I think that for these digital companies, look for us to get even better at digital marketing that's an agency or a higher away for the digital companies to get really good at operating multi-unit locations profitably. It's a decade long pursuit. And so I think that our unlikely come up is one of the reasons that we perform as well as we do, especially in a downturn like this for this category, we have a lot of grit. We've been through it all. I've been through many cycles with this brand and we've watched the whole arc of digital DT C. Now DTC is almost a dirty word, so look, we don't care what we call it. Lovesac is I think a strong business with a strong, we call it the infinity flywheel kind of engine. People learn about it, people talk about it, they buy it somewhere in there and they keep talking about it. And we're grateful to have these kind of results.
Katie Perry (22:14):
And can you tell me a little more about these partnerships? You referenced Best Buy, you referenced Costco and spoke to the importance of owning your data and really having a CRM that you guys can build from as a company. How do you vet those partnerships? It's specifically Best Buy because I think that's relatively new. How does that work? Where do you guys fit in the Best Buy ecosystem?
Shawn Nelson (22:36):
Yeah, so in Best Buy, we operate our own shop and shops. It's a love sack space that we've designed and it's our people and our checkout. And it's been a fantastic partnership. It really what caused us to seek out Best Buy is the stealth tech, right? Like we are planting a foot in technology. We've done nine figures in stealth tech sales. We're not a small player already in home audio and we're called Love Sack and we're not joking around. And we intend to not just sell speakers and couches. We have, in my humble opinion, the best surround sound system that exists. And certainly the only one you can pick up and take with you when you move house or whatever, that's not cut into the ceiling or that's not ugly on stands, it's invisible. That's what's amazing about Steal tech and it's immersive full 5.1 perfect, no sound quality loss audio embedded underneath the foam, underneath the fabric, through the cover fabric with perfect audio tuned to that fabric so that inside of a Best Buy, there's nothing like it. There's nothing like it anywhere. And there are people looking for surround sound solutions inside of Best Buy. So what a fantastic partnership. The fact that we're able to your point, maintain that CRM, own that customer relationship, not be hidden behind Best Buy's data for instance, or Costco's. So how do we build those relationships? We foster them over a very long time. We test our way into them and look, we have, I hope, the best product to make it worth from their standpoint to make the relationship worthwhile.
Katie Perry (24:18):
And I think the Best Buy is interesting because it's one of the disadvantages of having such a strong brand affiliated with one product is how do you get people to think about Love Sec, yes, this is the couch I love, but also this is very sophisticated technology for surround sound and things like that. And so as part of the Best Buy, almost just being adjacent with something that's more tech electronics to get people to think of you guys more in that terrain and not just the furniture itself.
Shawn Nelson (24:49):
100%. I mean listen, given enough time, love Sack will be known for this space where home overlaps with tech. We have one toe in tech so far, but trust me, it will be a powerful leg to the stool. We think that the way we're innovating the patents we're generating, the way we're thinking about it, there is no one else doing it and no one else who's positioned to do it. Because even if Sony, I dunno, pick a brand started selling couches tomorrow, is that the couch you want in your home? What makes S Actional so special is all of the modularity and flexibility and design opportunity combined with this very flexible and useful and high-end. Well-executed technology without the combination of those. You're kind of either stuck with a really techy couch that you may or may not like in a few years, or a couch that has some speakers inside. And that's not what we're trying to do. We're trying to deliver a perfect no sound quality loss audio. And that's hard to do, but we've done it. And by the way, we'll do more. And so look, the home is a big space. We consider all of it our territory. We haven't yet revealed what comes next from Lovesac, but you can bet it will be where home overlaps with tech and there's a lot for us to continue to develop in those spaces.
Katie Perry (26:14):
So before, when you were alluding to investing in the company, is a lot of that the patents you referenced, new innovations coming down the line and sort of what's next with this tech enabled vision?
Shawn Nelson (26:26):
Absolutely. Our biggest investments are in innovation. Our design team has grown from me and a couple of designers to a whole team of engineers, industrial designers. These are not just trend pickers, these are not just merchants. We have that aspect as well, but it's much more focused on fundamental design patented innovations. And it doesn't come overnight and it doesn't come cheap, especially when your ambition is to make things that are built to last a lifetime and designed to evolve. That's a heavy lift. But the nice thing is if you put it through that product development crucible, you come out the other end with truly innovative products like SALs that can generate billions in sales. And that's our aspiration. And so we're just playing the game very differently than those we compete with. And meanwhile, we kind of ballooned from a hundred million bucks in 2018 when we came public to less than six years later, seven x that. That's a lot of
Katie Perry (27:27):
That's pretty decent. That's a decent runup.
Shawn Nelson (27:30):
It's a decent run. And by the way, we haven't yet been rewarded really except for our few days in the sun where we eclipsed a billion in valuation. What I'm talking about is our stock is back to the same price. It was after our IPO six years ago at one seventh, the sales and won 1000th the profitability.
Katie Perry (27:53):
Real quick. Why do you think that is?
Shawn Nelson (27:56):
Look, I think that right now if the world sees Lovesac as one of these direct consumer brands, most of them are toast. And I don't mean to be a jerk, but so many will not survive. And it's because really there isn't the passion for the product. These are web slingers that are very good at converting digitally, but whether they're selling couches or beds or shoes, they don't really care. And ultimately, it's hard to build a brand when there isn't that kind of passion. Look, we think in decades and we're here to build a brand that's here for the decades, and so our stock price, whatever, we would love to see it be higher. We think it will be for sure. But in the meantime, we're doing the right things to build a brand that stays. And so I think we're in that bucket of companies that no one's sure if they're going to be around next year or whatever, we're in that bucket of furniture, which is in the toilet right now because post covid, there was so much pull forward.
(28:57)
I respect that. But in a way I love it because we're busy, we're busy innovating, we're busy cooking. And so when this category turns around and it will, I think we're going to be in a position to just crush again and to launch into new areas and new territories that we will similarly dominate. So look, there are those investors who understand that, and I think most who just see the name Lovesac and think we're this silly company that had its day in the sun, and that's okay. We've always been underestimated by everyone. And I guess
Katie Perry (29:29):
Not bad to have a chip on your shoulder, but what you talk about is interesting. I do think for retail investors, the name of the game is helping them understand the business operating in and why you're different. I'm wondering if you have any idea how many of your Lovesac customers are also shareholders and is there any crossover there? Because it seems like there might be people who tend to buy things, will invest in those brands and vice versa. Do you have any sense of what that looks like?
Shawn Nelson (30:01):
That's a great question that I'd love to answer. We haven't ever formally asked that and I think we should. I think look, Lovesac is a worthy investment. We're a long-term investment. We're a long-term thinking brand. And look, we've been here for 25 years, we're going to be here 25 more. And for those who have ears to hear, they'll find their way here and that's fine. In the meantime, we'll just do what we do. But I like the question and I'll look to answer it in the future.
Katie Perry (30:31):
Cool. And I do want to talk about your book a little bit, not just that we're a show to promote books, but I actually, based on the title, thought this book sounded very interesting because essentially it sounds like you're just giving a raw take on all of the bad things and good things that happened on the journey. So I'm curious for our listeners, young entrepreneurs, people building their wealth, young investors, what are a couple nuggets of wisdom from the book that you think are most relevant for that audience at that life stage?
Shawn Nelson (31:04):
Look, I read all the business books. I try, business books have been my mentor. I'm surrounded by them, I read them, I love them. And I wanted to write something different, something that was look, so it's almost like a coffee table book. It's loaded with the old photographs, full bleed just to make it very real for people. So it's a story about our crazy come up and ups and downs and every kind of look. I want a million dollars on TV with Richard Branson. We had to endure a full chapter 11 reorg. I've been through venture capital, private equity, public markets, and now I think we're on our way to building it into the billions. So there's a real fun story there that I think there's a lot of draw from. So mistakes, miracles, and lessons. And so these 25 little micro chapters of the story, and it is a short read in 60, 90 minutes are paired with 25 little lessons that I then extend to my podcast.
(32:03)
Also called Let Me Save You 25 years where I unpack these schisms, I call them just these lessons in great detail with really successful people like Sarah Blakely, coach Evan Meyer, Gronk, Sean White, the snowboarder, all kinds of big names that what's cool is anyone doing anything ambitious. We ultimately all learn the same stuff. So I've given them names and titles, but we go into depth. So it's not another interview podcast. There's a lot to learn there. And it's not another just business book. I try to be really honest, really raw, and hopefully the spirit is hopefully you can learn from some of my mistakes. So you don't make the same ones, you don't need to.
Katie Perry (32:45):
Yeah. Speaking of mistakes, I'm wondering if you'd be willing to share the lowest low or the worst mistake that you're glad happened because it led to something else or caused a change in behavior, way of thinking. What's one where it was like, man, that was rock bottom, but I'm glad it happened. I'm glad I got through it.
Shawn Nelson (33:05):
One comes to mind, we had no love sex stores. We had had one big order we completed, we had to build a factory. So realized toward the end of the deal that we're going to break even, not make any money. We have this factory, people want to keep working. So we scramble. We go to all the big furniture retailers, the Raymore and Flanagans, the RC Willies of the world. And there was one in particular. We drove through the night to get there with our samples in the back of Shrunken Sack. We had just invented sucking all the air out of them so they could be UPS, so they could be internet able, the covers could come off and the sack got freezing cold during the drive. And when we showed up at 8:00 AM for our appointment with the buyer who was rather snobby and Hey, I buy a million dollars of furniture every day, and here we are in bag, get out
Katie Perry (33:55):
Of here with your beanbags.
Shawn Nelson (33:56):
Yeah. And he ends up on his hands and knees trying to fluff this thing, this frozen shrunken sack with us. And it just was an abject failure. All of our sales calls were a failure like that. And so we scrambled and opened our own store. Wow. And as it turns out, it was the better path. And I guess we could have found that out through some consultant or who knows what we were a bunch of 20 something kids. So sometimes these miserable failures can lead you to a silver outcome. And in our case, it's been happen like that over and over again. It's all in the book.
Katie Perry (34:33):
Love that. And it's all about perspective when you hit those phases and what you do with them. Before I let you go, I want to ask you just priorities next quarter, next couple quarters, what are you laser focused on? It seems like you have a million, you got the podcast, you're running, the company, you're in the design. When you wake up in the morning, what are the things that are inked on your head that you're really thinking of in the next few months?
Shawn Nelson (34:57):
Right now, it is a race to innovate. And so the furniture categories and the doldrums love sack's doing okay, we're still going to generate cash, we're still going to generate profits still, we believe going to grow. We put out our projections for the year. And frankly, they're mild compared to even some of our competitors who are hoping, I don't know why, for a big uptick in the second half. We're not. We have put out really mild guidance and we'll do fine. And we've built the company to be profitable and to achieve a little bit of growth, even in this morass of this that the furniture category is in, it's the worst moment for the furniture category since 2000 8, 9, 10, worse than that, worse than that. And there was just so much pull forward during Covid and we recognize that. But the nice thing is we can operate the business like I described, and do well even as we're cooking for the future.
(35:51)
So there are those investors who would love to see us be super profitable today, and we could, if our ambition was just kind of hold here and squeeze this business for profit, but we have ambitions to grow and to extend into other categories. So that's what I wake up thinking about are those new product extensions, those new product innovations, some of them take years for us to cook and we're years into it. So we're not taking our foot off the gas now and look. So we're trying to walk that nice edge balancing profits, which we have and cash generation, which we do with investments in our future, which we're making. And so our head is down. And I kind of like this moment because I think it will weed out a lot of brands who shouldn't be here and who have burned through significant amounts of capital blindly in the name of growth. And I don't believe in that business model. I believe in sustainability, not just for products, but for businesses and for brands. And we're just going to stick to our guns and see that through.
Katie Perry (36:50):
Awesome. Love that. Well, for one, I'm very excited to see what comes out of all of that. And I know our listeners are too. And Sean, thank you so much for taking the time with us today. It was great hearing about you and the company. You'll have to come back on again soon.
Shawn Nelson (37:05):
Thanks for having me.
Katie Perry (37:06):
Okay. That episode was really, really fun. I'm not going to lie, I did not think a furniture company would be interesting, but Sean's story coming up out of his parents' basement, making beanbags to being on the public market, the CEO of this company that's continuing to grow and really outperformance category was really fascinating. A couple things that stood out for me, Sean, speaking from the perspective of a CEO that's really building for the longterm. He talked about investing and not just taking profits and aiming for short-term growth. He's really looking to invest in this company and make it sustainable for the next 25 years. I thought that was a really interesting perspective. And he also candidly said, sometimes people in the market and investors don't really get that. They bucket them in with D two C with furniture. And to him, this is about building a brand that people will love into the future.
(37:56)
So it was great to get that perspective. He also talked about some mistakes he's made in the past, what he's learned as well as his target customers, which are millennials that are facing a tough housing market right now. And so he explains where they fit in that picture as well. So for after earnings, I'm Katie Perry, please like, follow, share, send it to your friends. And by the way, send us recommendations for the CEOs you want to hear from. We would love to hear from you. We'll try to make it happen. And we're listening to those suggestions. Thanks and we'll catch you again next week.
