Bedding and comfort retailer Purple (NASDAQ:PRPL) met Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 12.6% year on year to $105.1 million. The company’s full-year revenue guidance of $475 million at the midpoint came in 1.7% above analysts’ estimates. Its non-GAAP loss of $0.11 per share was in line with analysts’ consensus estimates.
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Purple (PRPL) Q2 CY2025 Highlights:
- Revenue: $105.1 million vs analyst estimates of $105.3 million (12.6% year-on-year decline, in line)
- Adjusted EPS: -$0.11 vs analyst estimates of -$0.12 (in line)
- Adjusted EBITDA: -$2.36 million vs analyst estimates of -$2.92 million (-2.2% margin, relatively in line)
- The company reconfirmed its revenue guidance for the full year of $475 million at the midpoint
- EBITDA guidance for the full year is $5 million at the midpoint, above analyst estimates of $1.83 million
- Operating Margin: -13.5%, down from -12.1% in the same quarter last year
- Locations: 3,290.5 at quarter end, down from 3,500 in the same quarter last year
- Market Capitalization: $84.72 million
StockStory’s Take
Purple’s second quarter results met Wall Street’s top- and bottom-line expectations, but the company’s 12.6% year-over-year revenue decline and negative market reaction reflected ongoing challenges. Management attributed performance to a mix of supply constraints in new product launches, evolving retail partnerships, and persistent tariff-related margin pressures. CEO Robert DeMartini noted that demand for the Rejuvenate 2.0 mattress exceeded supply, particularly in showrooms, and highlighted that the timing of inventory shipments to Mattress Firm and wholesale door exits from the previous year weighed on reported revenue. The company was candid about the temporary nature of these headwinds, emphasizing ongoing cost actions and operational improvements to support recovery.
Looking ahead, Purple’s guidance is anchored by the anticipated benefits from its expanded Mattress Firm partnership, new product launches, and margin recovery efforts. Management expects the rollout of Rejuvenate 2.0 and increased premium distribution to drive sequential revenue growth, while ongoing tariff mitigation and manufacturing efficiencies are projected to restore gross margins above 40% by year-end. CFO Todd Vogensen emphasized that improvements in both revenue and profitability are weighted toward the fourth quarter, as the company completes retail rollouts and addresses earlier supply chain bottlenecks. Purple is also focused on capital allocation priorities, aiming to invest in showroom growth and maintain a strong liquidity position as cash generation improves.
Key Insights from Management’s Remarks
Management pointed to product launch momentum, supply chain adjustments, and evolving retail distribution as the main influences on second quarter performance and the company’s near-term outlook.
- Rejuvenate 2.0 launch impact: The introduction of Rejuvenate 2.0, featuring the new DreamLayer gel grid technology, generated stronger-than-expected showroom demand, with unit sales doubling those of the prior model. However, supply constraints limited full revenue realization during the quarter.
- Mattress Firm expansion: Purple accelerated its partnership with Mattress Firm, preparing for a national rollout by mid-August. This initiative is expected to more than double the company’s retail footprint and drive wholesale revenue growth beginning in the second half of the year.
- E-commerce and wholesale channel shifts: E-commerce softness persisted, and wholesale revenues were affected by last year’s reduction in retail doors. Nonetheless, management reported sequential improvement and positive momentum in both direct-to-consumer and wholesale sales, particularly as Rejuvenate 2.0 shipments catch up to demand.
- Tariff-related margin headwinds: Gross margin declined to 36% due to new tariffs and ramp-up costs for product launches and retail expansions. Management stated that mitigation efforts—including price increases and sourcing outside China—are underway and expected to offset much of the cost pressure in coming quarters.
- Cost discipline and restructuring benefits: Operating expenses declined significantly, benefiting from lower advertising spend and recent restructuring initiatives. Management expects these cost controls, combined with operational improvements, to support a return to positive EBITDA in the second half of the year.
Drivers of Future Performance
Purple’s outlook depends on the success of new product launches, expanded retail partnerships, and the effectiveness of ongoing margin recovery strategies amid a cautious consumer backdrop.
- Retail rollout acceleration: Management expects the full rollout at Mattress Firm and a new partnership with a large retailer to be major revenue drivers in the second half, with incremental benefits carrying into next year. CEO Robert DeMartini highlighted that the expanded Mattress Firm footprint could more than double slot count and provide national scale.
- Gross margin rebound efforts: Margin improvements are expected to result from tariff mitigation (through price increases and new sourcing strategies), greater manufacturing efficiency, and a favorable product mix shift toward premium offerings. CFO Todd Vogensen projects gross margins to exceed 40% by year-end, assuming no further tariff increases.
- Showroom and e-commerce evolution: Purple’s evolving showroom strategy, focused on premium product education, is anticipated to enhance profitability at the store level in 2025. Website enhancements and targeted marketing are also expected to gradually restore e-commerce momentum, supporting growth across channels.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will focus on (1) the scale and effectiveness of the Mattress Firm rollout and other new retail partnerships, (2) the pace of gross margin recovery as tariff mitigation and cost-saving measures take hold, and (3) showroom profitability improvements alongside renewed e-commerce engagement. Further progress on distribution with large national retailers like Costco and Walmart will also serve as important indicators of Purple’s execution and brand traction.
Purple currently trades at $0.80, down from $0.85 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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