LEHI, Utah — It was a “record-breaking quarter” for Purple Innovation, according to CEO Joe Megibow.
The maker of the Purple Mattress reported second quarter net revenue increased 60.3% to $165.1 million. Direct-to-consumer revenue was up 127.9%, and wholesale revenue dipped 49.3%.
Purple reported a net loss of $5.8 million compared to a net loss of $7.3 million in the same quarter of its previous fiscal year. Adjusted EBITDA was $35.2 million compared to $6.2 million.
“It was a record-breaking quarter from both a revenue and operating income standpoint as our organization successfully capitalized on the strengths of our business model and the changes in consumer buying behavior brought on by COVID-19,” said Joe Megibow, CEO.
“In addition to driving an increase in online purchasing, shelter-at-home directives also fueled higher demand for many categories tied to the home,” he continued. “This was certainly true for Purple as our direct-to-consumer mattress business grew triple digits as did several of our other categories led by seat cushions, pillows and sheets. Our exceptional digital performance more than offset the decline in wholesale revenue, which was down due to significant store closures and reduced traffic, particularly during the first half of the quarter.”
Megibow said the company is optimistic as the momentum continues into the third quarter. He cited the new Georgia plant set to open later in the year and a resurgence in wholesale sales and stores reopen.
The increase in Purple’s net revenue was driven by strong growth in mattress sales in the DTC channel along with higher demand for pillows, sheets and seat cushions, partially offset by lower wholesale revenue due to the disruption in partner store operations including temporary closures in response to COVID-19.
Net revenue, compared with order totals announced during the quarter, include the impact of customer returns and cancellations as well as timing of deliveries that drive revenue recognition. With order totals exceeding capacity for a portion of the quarter, some orders placed in the quarter will not be fulfilled and recognized as revenue until the third quarter, the company said.
Gross margin for the second quarter improved to 49.4% compared to 41.5% in the year ago period. The 790 basis point increase in gross margin year-over-year was primarily attributable to the higher proportion of DTC channel revenue, which carries higher gross margins than the wholesale channel as well as other cash preservation efforts early in the quarter, the company said.
In addition, given constraints imposed by COVID-19, Purple said it has temporarily suspended white glove delivery to the home, passing along the cost savings to its consumer and thereby maintaining gross margin dollars, while showing an increase in gross margin percentage.
DTC revenues comprised approximately 88% of net revenue for the quarter, compared with approximately 62% in the same quarter last year and 66% in the first quarter of 2020.
Going forward, the company expects wholesale revenue to increase as a percentage of overall revenue during the second half of 2020 compared with the second quarter.