What happened
Shares of direct-to-consumer mattress maker Purple Innovation (PRPL 1.00%) were falling today after the company issued a disappointing second-quarter earnings report.
As of 2:26 p.m. ET, the stock was down 14.5%.
So what
Revenue in the quarter fell 16.1% to $120.9 million, missing estimates at $131.8 million. Both wholesale and direct-to-consumer revenue were down by about the same percentage as overall revenue.
Gross margin in the quarter fell 210 basis points to 31.8%, though the company said with adjustments for its product refresh, gross margin was 38.6%, or up 470 basis points, which was due to cost-saving and efficiency initiatives.
Operating expenses also rose from $60.9 million to $75.7 million due to an increase in legal and professional fees, and an increase in ad spending to support the launch of its new premium and luxury lineup.
Its operating loss widened from $12.1 million to $37.3 million, and with adjustments, its per-share loss expanded from $0.11 to $0.20, short of the consensus at a loss of $0.11.
CEO Rob DeMartini said, "This was an important quarter for Purple Innovation, marked by the largest product and brand refresh in the company's history as we introduced 11 all-new, innovative products supported by a more premium brand position."
Now what
While management expressed enthusiasm about the new product launch, saying that run-rate revenue in June was 18% higher than the first five months, the company lowered its full-year revenue guidance due to industry weakness. It's now calling for revenue of $560 million to $590 million, which implies flat growth from a year ago and is below the consensus at $588.4 million.
On the bottom line, it expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to range from breakeven to a loss of $10 million.
The mattress market is highly fragmented and competitive. While the new brand launch could drive sales growth, the company has a long way to go before the business is stable and profitable.
