Dive Brief:

• Casper on Monday reported third quarter net revenue decreased 3.3% year over year to $123.5 million, which CEO Philip Krim attributed largely to supply challenges leading to significant out of stocks in its direct-to-consumer and retail partnership channels.

• The online mattress brand said its direct-to-consumer revenue decreased 11.4% to $89.9 million, while its retail partnership revenue increased 28.3% to $33.6 million, according to a company press release.

• Casper's net loss in the quarter was $15.9 million, an improvement of 31.1%, or $7.2 million, from last year.

Dive Insight:

While the home goods category broadly has benefited in recent months as consumers invest more in their homes, Casper doesn't appear to be reaping the benefits its competitors are.

Purple Innovation last week reported third quarter net revenue increased 59.4% to $187.1 million, while Tempur Sealy in late October reported net revenue in its most recent quarter ticked up 37.9% year over year to $1.1 billion.

CEO Philip Krim told analysts Monday that the company "saw record interest for our products, evidenced by our website traffic reaching its highest level since we started the company," but the component supply shortages Casper faced meant the company wasn't able to fill over $10 million worth of orders, Wedbush analyst Seth Basham said in an emailed note.

The company also formed new partnerships over the past year with retailers like Macy's, Sam's Club and Nordstrom, with the company adding the latter just last week, a surprise to analysts as the company struggled with inventory constraints.

The reliance on its retail partners in lieu of its own direct-to-consumer channel limited the company's profitability by hurting margins, in addition to its sales, Basham said.

Krim, however, said that he believes the "worst of our supply chain disruptions are behind us," adding that the company formed partnerships with new vendors to prevent future problems. "We are well-positioned going forward to both grow the top line and further preserve the growth to the bottom line and achieve adjusted EBITDA profitability."

A large hindrance to its profitability ambitions has been problems with acquiring customers online and the high marketing costs involved in that. Casper in the third quarter spent $42.6 million on sales and marketing expenses, a 4.5% decline from last year, mainly due to reduced media costs across the industry since the start of the pandemic. But the degree to which it declined is cause for alarm for analysts.

"We remain concerned about the company's marketing efficiency, with spending accelerating in the second half of 2Q not yielding online sales growth acceleration," Basham said.

"With the company able to adjust its marketing spend on a daily basis, we are surprised the company did not pull back further as it started to encounter larger supply chain challenges in August and sales conversion from traffic began to drop," he said.

Historically, other DTC brands struggling to acquire customers online have turned to stores as an added marketing channel. Krim told analysts the company expects to open up to 10 stores over the next four to five quarters, adding to its existing 65 locations.