Shares of innovative modular furniture maker Loveac(NASDAQ: LOVE) were up 6.5% as of 12:45 p.m.  ET on Thursday. Lovesac reported fourth-quarter earnings Thursday morning that far surpassed analysts' expectations for sales and net income.

This performance, paired with a 90-day pause on most of the tariffs implemented last week, has the market moving Lovesac's shares higher.

Lovesac is well prepared for battle in a challenging environment

During its critical holiday season Q4, Lovesac delivered net income growth of 14% despite a 4% slide in sales.

While this revenue dip may seem worrisome at first blush, the broader furniture industry saw sales drop by 9% over the last year, whereas Lovesac's full-year decline was only 3%. This ability to add market share in a challenging consumer environment -- paired with the company's higher profits in its all-important Q4 -- shows that Lovesac is more than capable of surviving its industry's cyclical whims.

Best yet for investors, despite the challenges the company could face from tariffs, it is well prepared to battle harsh conditions. Lovesac's gross profit margin of 58% is more similar to luxury furniture peer Ethan Allen Interiors than to "traditional" furniture makers like La-Z-Boy, which only has a 44% margin.

These high margins give the company valuable pricing wiggle room to deal with import tariffs. Furthermore, Lovesac only manufactures 13% of its products in China (which has drawn the majority of the ire in the most recent tariff talks) and hopes to get this figure below 10% by year's end.

Home to a debt-free balance sheet, some of the best customer satisfaction scores out there, and eco-friendly products, Lovesac looks deeply discounted at just 0.4 times sales.

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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool recommends Lovesac. The Motley Fool has a disclosure policy.

Why Lovesac Stock Is Jumping Today was originally published by The Motley Fool

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