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    PRPL
    Earnings call· Jun 2026(Q2 FY26)

    Purple Innovation Q2 FY26 earnings call PRPL

    Aug 10, 2026 Source

    Executive summary

    Purple Innovation Q2 FY26 — Showroom Strength and Profitability Improvement Amidst Wholesale Headwinds

    Purple Innovation navigated a challenging market in Q2 FY26, demonstrating improved profitability and operational discipline. The company's direct-to-consumer showrooms continued to be a strong performer, while e-commerce showed sequential improvement. Wholesale channels faced significant headwinds, leading to a revised full-year revenue outlook, though profitability guidance was maintained, reflecting cost management and strategic pricing actions.

    Highlights

    5

    • Showroom retail sales increased 16.6% year-over-year, with comparable revenue up 18% for stores open at least one year.

    • GAAP gross margin improved by 470 basis points year-over-year to 45.2%, reflecting tariff refunds and sourcing benefits.

    • Adjusted EBITDA was $2.1 million, a $4.4 million improvement from a loss of $2.4 million in the prior year period.

    • Cash flow from operations was positive for the second consecutive quarter, totaling $3.6 million year-to-date.

    • Operating expenses decreased by $8.1 million, or 14.3%, year-over-year due to non-recurrence of charges and payroll reductions.

    Concerns

    4

    • Net revenue decreased by 6.5% year-over-year to $98.3 million, primarily driven by lower wholesale revenue.

    • Wholesale revenue decreased 19.1% year-over-year to $37.4 million, impacted by $5.3 million in payments to customers and lower sales volume.

    • Full-year revenue guidance was lowered to a range of $420 million to $440 million due to continued softness in the category.

    • E-commerce revenue decreased 1.4% year-over-year to $42.5 million, despite sequential improvements.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $420M-$440M
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $20M-$25M
    high materiality
    High
    Full-year 2026 Gross Margin
    approximately 45%
    medium materiality
    High
    Showroom openings
    5 additional showrooms
    medium materiality
    High
    Showroom openings
    12 to 16 additional locations
    medium materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Direct-to-Consumer (DTC)
    DTC revenue growth was driven by strong showroom performance, with e-commerce showing sequential improvement despite a slight year-over-year decline. Showrooms achieved their fourth consecutive quarter of year-over-year growth and positive comps.
    Showroom revenue: $18.4MShowroom revenue growth YoY: 16.6%Showroom comparable revenue growth: 18%E-commerce revenue: $42.5ME-commerce revenue growth YoY: -1.4%E-commerce sequential improvement: 3rd consecutive quarter
    		$60.9M3.4%——
    Wholesale
    Wholesale revenue was significantly impacted by a $5.3 million increase in payments to customers (contra-revenue) for marketing programs and lower industry demand. The underlying sales volume decline was approximately 8% year-over-year.
    Impact of payments to customers: -$5.3MUnderlying sales volume decline (ex-payments): ~8%
    		$37.4M-19.1%——

    Operational metrics

    12
    GAAP Gross Profit
    $44.4Mup 44.5% YoY
    Q2 FY26

    Increased due to tariff refund and sourcing projects.

    Operating expenses
    $48.7Mdown 14.3% YoY
    Q2 FY26

    Reduction primarily from non-recurrence of restructuring charges and lower payroll expenses.

    GAAP Net Loss
    $3.2Mimproved $14.1M YoY
    Q2 FY26

    Compared to prior year.

    GAAP Net Loss per share
    $0.74vs $4.01 prior period
    Q2 FY26

    Compared to prior year period.

    Adjusted EBITDA
    $2.1Mimproved $4.4M YoY
    Q2 FY26

    Notable improvement from a loss in the prior year period.

    Cash and cash equivalents
    $23.3Mvs $24.3M on Dec 31, 2025
    Q2 FY26 end

    Balance at the end of the quarter.

    Net inventories
    $55.4Mdown $4.3M vs Dec 31, 2025
    Q2 FY26 end

    Reflects continued disciplined inventory management and improving working capital efficiency.

    Capital spending
    $3.6M
    H1 FY26

    Supported showroom expansion and investments in manufacturing operations.

    Gross margin reclassification impact
    505
    Q2 FY26

    This change makes gross margins more comparable to industry practice and does not impact operating loss, adjusted EBITDA, or cash flow.

    Pricing actions
    8-10%
    June

    Taken to help offset commodity and logistics inflation and preserve gross margins. Benefit to Q2 was limited, with more meaningful impact expected in H2.

    Showroom openings
    1
    Q2 FY26

    One new showroom opened, performing well.

    Showroom relocations
    1
    Q2 FY26

    One showroom relocated, performing well.

    Industry KPIs

    3
    MetricValueDetails
    Tariff refunds duties$5.3MUSD
    Tariff trade impact by segment$5.3MUSD
    Segment revenue operating income mixDTC: $60.9M, Wholesale: $37.4MUSD

    Deals & partnerships

    3
    Mattress FirmRollout of Purple Royale

    The rollout of Purple Royale at Mattress Firm was completed during the second quarter.

    CostcoContinued strong performance and volume growth

    Costco continued to perform well during the quarter, and year-to-date volume was well ahead of last year, with meaningful opportunity seen with this partner.

    AmazonStrong quarter with double-digit growth

    Amazon had another strong quarter delivering double-digit growth as Purple further optimized its product assortment and fulfillment strategy.

    Risks & headwinds

    4
    Continued softness in broader mattress categoryQ2 FY26 and ongoing

    Wholesale revenue down 19.1% YoY

    Mitigation: Focus on premium products, showroom experience, and strategic marketing investments with retail partners.

    Uneven demand environmentQ2 FY26 and second half

    Overall net revenue down 6.5% YoY

    Mitigation: Operating from a stronger foundation with operational improvements and sourcing initiatives.

    Commodity and logistics inflationQ2 FY26 and ongoing

    Higher freight and material costs

    Mitigation: Pricing actions taken in June (8-10% increase), ongoing sourcing teams identifying cost improvement opportunities.

    Consumer reaction to pricing actionsPost-June pricing actions, to be observed through Labor Day

    Consumer reaction 'a little bit more downward than we would have expected'

    Mitigation: Monitoring consumer response; current pricing is set to average out costs for H2.

    What to watch in Q3 FY26

    5

    Showroom comparable sales growth

    next quarter
    Current18%
    TargetContinued positive growth

    Why it matters

    Showrooms are a key driver of DTC strength and premium product sales, critical for overall revenue and margin expansion.

    I know we've got four quarters in a row of positive comps in that channel, and we do expect that to continue.

    Q&A highlights

    6

    Is the reduced sales guidance solely due to wholesale, and do you still expect DTC sales to grow in the back half, especially showrooms?

    The reduction in sales guidance is primarily from the wholesale business, allowing the profit guide to remain stable. While Q3 DTC might be tricky due to prior year delivery issues, the company is confident in showroom growth and expects e-commerce to continue improving towards flat.

    “primarily the reduction is our wholesale business, and that's what allows us to keep our profit guide at the bottom half of it in the same place of where it was and really just taking off some of the top.”

    asked by Matt Koranda · answered by Robert DeMartini

    2 min read6 chapters

    Detailed Narrative

    01

    DTC Channel Resilience and E-commerce Improvement

    Purple's direct-to-consumer (DTC) channel demonstrated resilience, with showroom revenue increasing 16.6% year-over-year to $18.4 million, marking the fourth consecutive quarter of growth. Comparable revenue in stores open for at least one year rose 18%. E-commerce, while down 1.4% year-over-year to $42.5 million, showed sequential improvement for the third consecutive quarter, driven by better marketing execution and stronger Amazon performance, particularly during Prime Days.

    02

    Wholesale Channel Challenges and Strategic Investments

    The wholesale channel remained challenged, with revenue decreasing 19.1% year-over-year to $37.4 million. This decline included a $5.3 million impact from increased payments to customers (contra-revenue) for marketing programs and a manufacturer under control. Excluding these investments, the underlying wholesale sales volume decline was approximately 8% year-over-year, reflecting broader industry softness🌐. Management views these investments as necessary for consumer activation and long-term positioning.

    03

    Profitability Gains and Cost Discipline

    The company delivered higher gross margins and improved profitability despite lower sales. GAAP gross margin increased 470 basis points to 45.2%, primarily due to a $5.3 million tariff refund, year-over-year tariff mitigation from sourcing projects, and favorable inventory adjustments. Operating expenses decreased by $8.1 million, or 14.3%, driven by the non-recurrence of restructuring charges and lower payroll expenses from workforce reductions. Adjusted EBITDA improved by $4.4 million to $2.1 million.

    04

    Strategic Priorities and Marketing Shift

    Purple's strategy continues to focus on consumer understanding, product experience, expanded distribution, and financial discipline. A shift in marketing approach emphasizes brand building and consumer education outside of key holiday periods, aiming to convert strong awareness into stronger consideration for the GelFlex grid technology. Enhancements to the e-commerce journey, including improved comparison tools and site navigation, support this objective.

    05

    Product Innovation and Distribution Expansion

    Premium products, particularly the Rejuvenate 2.0 collection, continued to perform well, accounting for over half of showroom mattress revenue. The pillow business also delivered strong results. The company expanded its owned retail footprint with one new showroom opening and one relocation in Q2, with plans for five more by year-end and 12-16 in FY27. Partnerships with Mattress Firm (Purple Royale rollout completed), Costco, and Amazon also contributed to distribution efforts.

    06

    Accounting Reclassification of Fees

    Beginning this quarter, merchant credit card processing and third-party consumer financing fees are reclassified from cost of revenues to marketing and sales expense. This change increased GAAP gross margin by 505 basis points in Q2, with a corresponding increase in marketing and sales expense. The reclassification does not impact previously reported revenue, operating loss, adjusted EBITDA, or cash flow, making gross margins more comparable to industry peers.

    AI-generated summary of the company’s earnings call. Not investment advice.