Dive Brief:
- Purple’s board of directors has initiated a review of strategic alternatives. The move follows “inbound expressions of interest,” the company said in a Thursday statement.
- The review outcome may include a sale, merger or other financial transaction, Purple said. The board has not set a timetable for the evaluation.
- Purple also reported Q4 and full-year earnings Thursday. The company ended the fourth quarter with a net revenue decline of 11.6% to $129 million. For the full year, net revenue fell 4.4% to $487.9 million. Purple shrank its annual net loss to $97.9 million from $120.8 million the prior year.
Dive Insight:
Despite ongoing challenges in consumer demand and industry softness, Purple is in a positive business position overall with positive cash flow and achieving positive adjusted EBITDA for the first time in eight quarters, CEO Rob DeMartini said in a Thursday statement.
That’s why it’s appropriate to consider the latest expressions of interest in the company as Purple is “well positioned for market share gains over time, independent of the conclusion of this evaluation,” DeMartini said during a Thursday earnings call.
Board members Gary DiCamillo, D. Scott Peterson and Claudia Hollingsworth comprise the special committee that will evaluate the strategic alternatives. The company also retained Jefferies as a financial adviser. Although Purple said it wouldn’t answer questions about the review, DeMartini did respond to an analyst’s request during the earnings call to elaborate on the strategic review’s timing.
“Because we’ve had some inbound interests, we felt now was the right time to formulate the special committee and ask for the help from Jefferies to really investigate all potential outcomes and options, including none, right? I mean, one of the outcomes is we don’t do anything differently,” DeMartini said.
The current review comes about two years after Purple rejected an unsolicited takeover bid from Coliseum Capital Management. Purple said at the time the deal undervalued the company. Coliseum had offered $4.35 a share. The bid would have allowed Coliseum to acquire the balance of Purple’s common stock that it didn’t already own. At the time, the private investment firm owned about 44% of Purple’s shares.
Beyond the review, DeMartini said Purple plans to refocus its messaging on what differentiates its offering from mattress and sleep segment rivals. The goal of that initiative is to improve in-store and online customer conversion and boost retailer sales in wholesale.
“We know that the closer we are to the customer, the stronger our sales are, which is why our highest converting sales are in our own showrooms where we can directly demonstrate and educate, followed by our wholesale doors where retail associates can speak to our technology,” DeMartini said.
Purple’s showrooms performed strongest last year, seeing a 5.8% increase with sequential improvement during the last four quarters. Full-year DTC revenue declined 4.4% to $283.7 million. Wholesale revenue for the year also declined 4.5% to $204.2 million. E-commerce fell nearly 8%.
For Q1, the company’s guidance is for total revenue ranging from $102 million to $107 million. For the full year, guidance is for revenue ranging from $465 million to $485 million.
