Yahoo Finance Purple (NASDAQ:PRPL) Misses Q1 Sales Targets
Bedding and comfort retailer Purple (NASDAQ:PRPL) fell short of analysts' expectations in Q1 CY2024, with revenue up 12.5% year on year to $120 million. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $550 million at the midpoint. It made a non-GAAP loss of $0.19 per share, improving from its loss of $0.26 per share in the same quarter last year.
Is now the time to buy Purple? Find out in our full research report.
Purple (PRPL) Q1 CY2024 Highlights:
Revenue: $120 million vs analyst estimates of $122.1 million (1.7% miss)
EPS (non-GAAP): -$0.19 vs analyst estimates of -$0.16
The company reconfirmed its revenue guidance for the full year of $550 million at the midpoint
Gross Margin (GAAP): 34.8%, down from 38% in the same quarter last year
Free Cash Flow was -$19.85 million compared to -$4.48 million in the previous quarter
Market Capitalization: $182.7 million
Chief Executive Officer, Rob DeMartini, said "We are encouraged by our start to the year as our first quarter performance was in-line with our guidance despite continued industry softness. Momentum in our business has been accelerating since the mid-2023 launch of our new product portfolio and brand repositioning, leading to market share gains and a return to growth. We are making important progress executing the key initiatives that we believe will deliver sequential top-line improvement as 2024 unfolds and allow us to generate positive adjusted EBITDA in the second half of the year. Longer-term, we are confident that Purple's innovative and differentiated sleep technology combined with the team and strategies that we have in place will fuel profitable growth and increased shareholder value."
Founded by two brothers, Purple (NASDAQ:PRPL) creates sleep and home comfort products such as mattresses, pillows, and bedding accessories.
Home Furnishings
A healthy housing market is good for furniture demand as more consumers are buying, renting, moving, and renovating. On the other hand, periods of economic weakness or high interest rates discourage home sales and can squelch demand. In addition, home furnishing companies must contend with shifting consumer preferences such as the growing propensity to buy goods online, including big things like mattresses and sofas that were once thought to be immune from e-commerce competition.
Sales Growth
A company's long-term performance can indicate its business quality. Any business can enjoy short-lived success, but best-in-class ones sustain growth over many years. Purple's annualized revenue growth rate of 11.3% over the last five years was weak for a consumer discretionary business.
Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Purple's recent history shows a reversal from its already weak five-year trend as its revenue has shown annualized declines of 12.1% over the last two years.
This quarter, Purple's revenue grew 12.5% year on year to $120 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 6.3% over the next 12 months, a deceleration from this quarter.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Purple's demanding reinvestments to stay relevant with consumers have drained company resources. Its free cash flow margin has been among the worst in the consumer discretionary sector, averaging negative 9%.
Purple burned through $19.85 million of cash in Q1, equivalent to a negative 16.5% margin, reducing its cash burn by 20.7% year on year.
Key Takeaways from Purple's Q1 Results
We struggled to find many strong positives in these results. Its revenue and EPS fell short of Wall Street's estimates. On the bright side, its full-year revenue guidance was in line while its EBITDA forecast beat. Overall, the results were mixed. The stock is flat after reporting and currently trades at $1.7 per share.
So should you invest in Purple right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
