Dive Brief:
- Purple’s third-quarter net revenue decreased 2% year over year to $140 million due to “soft demand for home related products,” according to a Thursday press release. Direct-to-consumer revenue dropped 5.2% while wholesale increased 2.6%.
- The mattress company’s operating expenses increased about 38% to $79.9 million while it reported an operating loss of $32.6 million compared to an operating income of $900,000 the year before. Purple generated a net loss of $36 million during the period compared to a net income of $2 million in 2022.
- Purple once again lowered its full-year 2023 guidance, now expecting net revenue to be in the range of $510 million to $520 million compared to the previous projection of $560 million and $590 million.
Dive Insight:
Purple’s latest earnings results come amid consumer pressures on the home sector.
"Our third quarter top-line performance demonstrates that our Path to Premium Sleep strategy is gaining traction," Chief Executive Officer Rob DeMartini said in a statement. "We are encouraged by the continued sequential acceleration in revenue and we are focused on driving further improvement across each of our distribution channels during the fourth quarter and into 2024. While market conditions and one-time costs associated with our new product transition have pressured our bottom line this year, we remain confident that we are well positioned to continue taking market share and deliver sustained, profitable growth over the long-term."
The mattress company’s drop in DTC net revenue was due to a decline in e-commerce revenue, which was partially offset by growth in Purple retail showroom revenue.
The brand added five showrooms to its roster over the past 12 months. Purple’s softened demand in its sector was “nearly fully offset” by a positive response to its latest product launches including its higher-priced collections.
“While our improving top-line performance is yet to translate into improved profitability, this has been due largely to temporarily elevated costs related to the transition to our new product and branding strategy,” DeMartini said on a call with analysts Thursday.
The company’s new CFO — former Party City executive Todd Vogensen — told analysts on the call that the filing of Purple’s 10-Q form for the third quarter will be delayed until Nov. 14 because the company “identified an error in our accounting for the warranty terms specified in contracts with our wholesale customers, and we’re evaluating the disclosure impact of such errors on our prior periods.”
Results from prior periods were revised for its latest earnings press release. Some revised numbers include Purple’s second-quarter net loss, which was updated to a loss of $40.5 million compared to the previously reported $37.7 million. The brand’s Q2 operating loss was updated to $40.3 million from $37.3 million.
On future showroom growth, Vogensen noted that “given current industry trends, we plan to moderate showroom expansion and currently are planning to add only a handful of new locations in 2024.”
