Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reported a 12.5% year-over-year increase in net revenue, indicating strong sales growth.
- Wholesale channel revenue increased by 33% year-over-year, with net revenue accelerating as the quarter progressed.
- Showroom revenues increased by 11%, driven by higher average selling prices and a shift to higher-priced collections.
- Successfully launched three new mattress lines (Essentials, Restore, Rejuvenate) which have been well received in the market.
- Implemented strategic initiatives aimed at improving e-commerce conversion rates, gross margin improvement, and marketing efficiency.
Negative Points
- E-commerce sales declined by 4%, impacted by price testing and changes to promotions.
- Gross margin rate decreased to 34.8% from 38% the previous year, affected by channel mix and other factors.
- Adjusted EBITDA was negative $13.2 million, compared to negative $7.1 million a year ago.
- Adjusted net loss increased to $20.4 million from $14 million in the previous year.
- Facing challenges in the broader industry environment, which continues to exhibit negative growth trends.
Q & A Highlights
Q: Can you discuss the opportunities for gross margin improvement throughout the year?
A: Todd Vogensen, CFO of Purple Innovation, highlighted several non-recurring items from Q1 that won't affect future quarters, such as airfreight costs and liquidation of discontinued products. He mentioned ongoing initiatives in sourcing and manufacturing efficiency that are expected to improve gross margins significantly as the year progresses.
Q: How are you anticipating sales to shape up for Q2, particularly given the industry's seasonal strength during this period?
A: Todd Vogensen noted that while Q2 typically sees stronger sales due to seasonal factors like Memorial Day, the industry is facing headwinds. However, Purple Innovation expects modest growth over the previous year, albeit not as strong as the 12.5% increase seen in Q1.
Q: Could you provide more details on the performance and strategies at your showroom and wholesale doors, especially those that transitioned earlier in the rollout?
A: CEO Rob DeMartini explained that longer exposure to the market typically leads to stronger results. He mentioned significant improvements in both showroom and wholesale channels, with wholesale same-store sales up about 25% from the previous year.
Q: What have you learned from the price testing and promotional changes in the e-commerce channel, and how will this inform your strategy moving forward?
A: Rob DeMartini acknowledged the challenges in balancing volume momentum with profitability. He noted that while some price adjustments had shown positive responses, the mattress category remains highly sensitive to promotions.
Q: With the industry facing volatility, how should we think about incremental or decremental EBITDA margins if sales deviate from plans?
A: CFO Todd Vogensen suggested that a range of 25% to 35% is a reasonable starting point for understanding the flow-through of sales variances on EBITDA margins, emphasizing the company's aggressive cost management.
Q: What is the expected improvement trajectory for gross margins for the remainder of the year?
A: Todd Vogensen projected a progressive improvement in gross margins, with expectations to approach 40% by year-end. He cited initial gains from operational initiatives and selective price increases as key drivers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
