Purple’s first quarter was marked by a significant year-on-year sales decline, yet the market responded positively due to operational improvements and strategic progress. Management highlighted ongoing cost savings, margin expansion, and robust growth in its showroom channel—showroom revenues increased for the fifth consecutive period, with comparable sales rising 11%. CEO Rob DeMartini emphasized the company’s focus on differentiating its products at retail and continuing to optimize its distribution mix. Notably, Purple’s restructuring and cost control initiatives drove adjusted EBITDA and gross margin improvements, even as wholesale and e-commerce channels remained soft.
Is now the time to buy PRPL? Find out in our full research report (it’s free).
Purple (PRPL) Q1 CY2025 Highlights:
- Revenue: $104.2 million vs analyst estimates of $104.5 million (13.2% year-on-year decline, in line)
- Adjusted EPS: -$0.11 vs analyst estimates of -$0.14 (23.3% beat)
- Adjusted EBITDA: -$4.73 million vs analyst estimates of -$7.59 million (-4.5% margin, 37.7% beat)
- The company reconfirmed its revenue guidance for the full year of $475 million at the midpoint
- Operating Margin: -13.9%, up from -19.3% in the same quarter last year
- Locations: 3,350 at quarter end, down from 3,500 in the same quarter last year
- Market Capitalization: $81.65 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Purple’s Q1 Earnings Call
- Brad Thomas (KeyBanc Capital Markets) asked how the $70 million estimate for incremental Mattress Firm revenue was calculated; CEO Rob DeMartini explained it was based on existing slot productivity extended to the new distribution footprint, with possible benefits from brand training and positioning.
- Bobby Griffin (Raymond James) inquired if the expanded wholesale opportunity would shift Purple’s distribution strategy; DeMartini replied that the company aims for a balanced mix between direct-to-consumer and wholesale, while remaining bullish on showroom profitability.
- Bobby Griffin (Raymond James) also questioned the timing and P&L impact of tariffs; DeMartini confirmed tariff costs will begin affecting results in the second quarter and are reflected in current projections, with mitigation strategies ongoing.
- Dan Silverstein (UBS) requested details on wholesale margin impact and cooperative advertising in the Mattress Firm partnership; DeMartini noted margins are favorable at a macro level and that new marketing efficiencies are likely as Purple becomes a core brand partner.
- Brian Nagel (Oppenheimer) asked about manufacturing capacity requirements for the new partnership; DeMartini clarified that Purple will retain all proprietary grid manufacturing, with Sherwood Bedding assembling certain product lines to support the expanded distribution.
Catalysts in Upcoming Quarters
Over the coming quarters, the StockStory team will monitor (1) the rollout and performance of Purple’s expanded Mattress Firm partnership, including the pace of slot growth and incremental revenue realization; (2) the trajectory of gross margin improvements and continued cost discipline amid rising tariffs; and (3) consumer demand trends in both showroom and e-commerce channels. Continued progress in product innovation and operational execution will also be critical indicators.
Purple currently trades at $0.77, up from $0.76 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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