Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Shares of Purple Innovation (PRPL 8.05% ) , the direct-to-consumer mattress company, were climbing after it delivered better-than-expected results in its first-quarter earnings report, even though it lowered guidance for the year. As of 3:02 p.m. ET, the stock was up 7.2%.
Similar to other e-commerce and home-furnishings companies in the first quarter, Purple saw a decline in revenue as it lapped the last quarter before COVID vaccines became available to the general public.
Revenue in the period fell 23.2% to $143.2 million, but that still beat estimates of $129.3 million. Gross margin fell sharply from 46.9% to 36.1% as the sales mix shifted in favor of the wholesale channel, which carries lower gross margins. Adjusted EBITDA was down from a profit of $22.8 million to a loss of $9.6 million.
On the bottom line, Purple posted an adjusted loss per share of $0.24, which compared to expectations of a loss of $0.35.
CEO Rob Martini acknowledged the headwinds the company is facing, saying, "While we are making progress, and believe we will see sequential improvements including second-half profitability during this year, evolving economic and post-pandemic headwinds such as a shift in consumer buying behavior from online to in-stores and away from home related categories toward experiences and travel, has caused us to adopt a more conservative view on the remainder of 2022."
Purple lowered its full-year guidance from $790 million-$830 million to $650 million-$690 million and cut its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) range from $26 million-$33 million to $21 million-$27 million. This was ahead of $11 million a year ago, as cost-cutting will help lift profits. Management still expects performance to improve sequentially over the course of the year and called for profitable growth in the second half.
Investors seemed to be encouraged enough by the update to bid the stock higher, despite the guidance cut and sharp decline in sales. Part of the reason for the gains is that Purple shares had already fallen sharply and were trading in penny stock range, so the headwinds Martini discussed were already priced into the stock.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Market-beating stocks from our award-winning service.
Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/13/2022.
Discounted offers are only available to new members. Stock Advisor list price is $199 per year.
Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
Making the world smarter, happier, and richer.
Market data powered by Xignite.