What happened 

Shares of direct-marketing retail stock Casper Sleep (CSPR) fell as much as 18.6% in trading on Tuesday after the company reported less than stellar second-quarter 2021 earnings results. Shares bounced around during the day but were down 17.5% at 2 p.m. EDT today. 

So what

Quarterly revenue jumped 33.7% to $151.8 million, and the net loss ballooned from $24.9 million a year ago to $33.8 million, or $0.81 per share. Analysts were expecting a loss of $0.33 per share on revenue of $151.2 million.

Person with their hand on a new mattress.

Image source: Getty Images.

Demand was great, but costs are what hampered the bottom line. Management said that raw material, freight, and labor costs were all higher than expected, and that's why you see losses growing despite the rise in revenue. 

To make matters worse, management said it expects $152 million to $159 million in revenue in the third quarter and a loss of $19.6 million to $22.6 million, or about $0.47 to $0.55 per share. Analysts were looking for revenue of $156 million and a loss of just $0.21 per share.

Now what

It's clear that costs are climbing quickly and are out of Casper Sleep's control. We are also seeing that the company doesn't have the ability to raise prices to combat higher materials prices. Given the losses that are mounting and the weak strategic position that Casper Sleep is in, I don't see how the company gets out of this situation. That's why I'll stay out of the stock, despite today's drop in shares.