Bob’s Discount Furniture (NYSE:BOBS) reported higher third-quarter sales and adjusted profit as customers bought more premium furniture and new stores contributed to growth, but the retailer lowered its full-year gross margin outlook because of rising fuel costs.
Net revenue rose 10.3% to $680 million, while comparable sales increased 3.8% on top of an adjusted 12.3% gain a year earlier. Adjusted net income rose to $38.8 million from $32.7 million, and adjusted diluted earnings per share were $0.28.
Adjusted EBITDA increased 18% to $75.5 million, with the margin expanding to 11.1% from 10.4% a year earlier. Both adjusted EBITDA and adjusted net income excluded a $4.9 million tariff refund benefit.
President and CEO Bill Barton said furniture demand appeared to stabilize during the quarter and that Bob’s continued to gain market share. But he cautioned during the question-and-answer session that the company was not calling a bottom or forecasting an industry upturn.
Fuel Costs Pressure Margin Outlook
Adjusted gross margin fell 30 basis points to 45.7%, excluding the tariff refund benefit. CFO Carl Lukach said higher fuel and inventory-related costs more than offset the benefits of targeted price increases and a shift toward premium products.
Lukach said diesel prices were up roughly 80% year over year, affecting raw materials, ocean freight surcharges, line haul and delivery expenses. He expects elevated fuel costs to remain a gross margin headwind into the new year.
The company now expects full-year gross margin to decline approximately 20 to 30 basis points from the prior year, compared with its previous expectation of roughly flat performance. It maintained the rest of its 2026 outlook, including:
- Net revenue of $2.6 billion to $2.63 billion.
- Comparable sales growth of 1.5% to 2.5%.
- Adjusted net income of $121 million to $129 million.
- Adjusted EBITDA of $255 million to $265 million.
Lukach said fourth-quarter sales trends so far were tracking in line with the company’s long-term framework of low-single-digit comparable sales growth. He also said the implied fourth-quarter gross margin outlook would benefit from comparison with a prior-year quarter affected by an unfavorable shift toward lower-priced products.
Bob’s took approximately 3.5% in price increases during the third quarter, Lukach said, adding that the resulting customer response was generally in line with expectations. Barton said pricing is the last step in the company’s cost-mitigation playbook, after actions involving sourcing and other operations.
Lukach said the company’s line-haul fuel exposure was fully hedged for the rest of 2026, but it had no hedges in place for 2027 or beyond.
Premium Sales and Online Growth
Higher average order values drove comparable sales growth, while traffic remained a headwind, Lukach said. Online conversion contributed slightly to growth, while brick-and-mortar conversion was modestly unfavorable.
Barton said customers continued to trade up into higher-priced products. Better and best merchandise represented around 60% of the business, Lukach said. Strength in living room furniture, motion products and recliners helped offset softer mattress performance.
E-commerce sales grew approximately 28% year over year and accounted for 17.6% of total sales, up roughly 250 basis points. Barton said the company’s Omnicart tool, which lets customers continue purchases across stores and online, contributed to that growth.
Some customers who visit a store may complete their purchase online rather than return for another visit, Barton said, though he described the evidence as anecdotal and difficult to quantify. Customers shopping across both channels spend nearly 20% more per order than average, he said.
Store Expansion Continues
Bob’s opened 11 stores during the quarter, bringing its total to 229 across 28 states. The openings included its first four Nashville-area stores over Labor Day weekend. The company plans to open one more store in the fourth quarter.
Barton said stores opened in 2025 and 2026 were generally performing ahead of initial expectations. Lukach said North Carolina locations entering the comparable-sales base contributed an outsized lift during the quarter.
The company continues to target 10% unit growth in 2027, with Atlanta among its planned markets. Its distribution center in Macon, Georgia, remains on track to open in spring 2027, Barton said.
Bob’s ended the quarter with $110 million in cash and cash equivalents, approximately $288 million in total liquidity and no debt. Asked about a potential share buyback, Lukach said growth investment remains the company’s highest priority, though it would consider opportunistic returns of excess capital to shareholders at the right time.
About Bob’s Discount Furniture (NYSE:BOBS)
Bob’s Discount Furniture is a U.S. furniture retailer that sells a broad selection of furniture and home furnishings at value-oriented prices. Its merchandise includes living room, bedroom, dining room and home office furniture, as well as mattresses, rugs, lighting, décor and other household products.
The company was founded in 1991 by Robert “Bob” Kaufman in Newington, Connecticut. Bob’s operates an omnichannel retail model that combines a network of showrooms with online shopping and related delivery and service capabilities.
