Dive Brief:
- In its second consecutive quarter of year-over-year sales growth, DTC mattress brand Purple last Tuesday reported first-quarter net revenue increased 12.5% to $120 million. Operating losses narrowed from $24.6 million to $23.1 million for the quarter. Net losses, however, widened from $25.9 million a year ago to $50.2 million.
- By channel, wholesale revenue increased 33.1% while DTC revenue was flat compared to a year ago. Within the DTC channel, e-commerce sales fell 4% and showroom sales increased 11.3%, executives said on a call with analysts.
- Gross margin declined to 34.8% from 38% year over year, partly due to the company’s shift from DTC sales to the lower margin wholesale channel.
Dive Insight:
In the first quarter, Purple Innovation expanded its wholesale floor slots and focused on its more premium product assortment to stay competitive in a tough sector.
“The collaborative partnerships we formed with our retail partners focused on expanding our premium assortment continued to yield positive results for both parties,” DeMartini said on the call. “We saw revenue per door in the wholesale channel increase around 25% versus last year, supported by strength from our top accounts and a mix shift into our premium collection. We also added approximately 100 new doors late in the quarter as the reception for our new mattress line continues to drive new demand from our wholesale partners.”
Changes made last year, including the launch of a three-tiered mattress line and a Sleep Better, Live Purple marketing campaign, are paying off and allowing Purple to capture market share and overcome many negative industry trends, according to DeMartini.
The brand’s shift to selling higher-ticket mattresses and addition of five new showrooms over the past year drove showroom growth. Purple drove traffic to existing stores with exposed grid bed demonstrations aimed at attracting mall goers.
DeMartini outlined five areas the company is focused on in its strategy to transform Purple into “the preeminent premium sleep brand” and drive long-term profitable growth: improving wholesale and showroom productivity; improving e-commerce mattress conversion; driving gross margin improvement; innovation and improving marketing efficiency.
“We are making important progress executing the key initiatives that we believe will deliver sequential top-line improvement as 2024 unfolds and allow us to generate positive adjusted EBITDA in the second half of the year,” DeMartini said in a statement.
A Wedbush investor note said Purple’s lower-than-expected Q1 revenue came amid intense promotional activity in the home furnishings sector and new product rollouts by competitors, including Tempur-Pedic’s Adapt line.
Wedbush said although Purple missed expectations, Purple’s increasing reliance on wholesale and DeMartini’s five-prong growth strategy bode well for the company.
“Overall, we look positively on the 1Q performance and see several green shoots emerging with success in the showroom channel … and wholesale initiatives taking hold,” said the Wedbush note.
Purple maintained its outlook of sales between $540 million and $560 million for the full year 2024.
