PRPL - Purple Innovation stock plummets as losses widen activist rejects settlement

2023-03-16 16:51:55 ET

Purple Innovation ( NASDAQ: PRPL ) stock plunged nearly 10% in after hours trading on Thursday

The Utah-based mattress manufacturer posted a net loss of $70.2M, accelerating from a net loss of $21.8M in Q4 2021. On an adjusted basis, the company notched a $0.10 per share loss, wider than the $0.06 expectation. The widening loss came despite a 77.7% decline in advertising spend as compared to Q4 2021 and a 35% expansion in gross margins.

A 22.1% drop in revenue from the prior year was also slightly steeper than the Street consensus as direct-to-consumer revenue decreased 34.5% year over year. Inventories decreased 25.8% year over year to $73.2M

"Against a very challenging backdrop in 2022, our organization made substantial headway toward improving the efficiency of the business and strengthening our foundation for growth," CEO Rob DeMartini said. “While our financial performance is not yet where we expect it to be, we are encouraged with the way the year unfolded and are optimistic that our work has set the Company up to return to top and bottom-line growth starting in the back half of 2023.”

For 2023, the company expects full year revenue in the range of $590M to $615M, above the $587.19M consensus. An adjusted EBITDA between $13M and $17M against a $14.3M consensus.

However, the year is expected to start slowly as headwinds remain pronounced in Q1.

“The challenging market trends from 2022 have continued into the start of 2023. On top of this, with the upcoming new product launch in May 2023, the Company's first quarter performance is also being impacted by lower wholesale sales as its retail partners reduce on hand inventories by selling through Purple legacy mattress models without replenishing orders ahead of taking delivery of the new models in the second quarter,” the earnings release explained. “As a result, the company currently expects net revenue to be approximately $105M and adjusted EBITDA loss of approximately $9.5M.”

Shares of Purple Innovation ( PRPL ) plunged 9.09% shortly after the earnings announcement .

Elsewhere, the company announced a delay in the release of its 10-K filing and updated investors on its negotiations with activist investor Coliseum Capital Management. A special committee indicated that the activist has not accepted the company’s attempts to reach a resolution.

“We would like to ensure that the Public Shareholders, who own approximately 55% of Purple, continue to have influence over the Company and a voice in its governance,” said Dawn Zier, Chair of the Special Committee of the Purple Board of Directors. "Unfortunately, Coliseum has rejected our proposal, which provided that Coliseum-nominated directors would fill three of the six non-management director seats on the Purple Board, giving them influence over the Board in proportion to their ownership stake in the Company. We will continue to work towards reaching a solution that treats all parties – including Coliseum – fairly.”

Read more on the special committee’s proposals .

For further details see: