Purple Innovation (PRPL) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Discretionary· Aug 10, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Full-year 2026 Revenue	$420M-$440M high materiality	FY26	High
Full-year 2026 Adjusted EBITDA	$20M-$25M high materiality	FY26	High
Full-year 2026 Gross Margin	approximately 45% medium materiality	FY26	High
Showroom openings	5 additional showrooms medium materiality	before year end · FY26	High
Showroom openings	12 to 16 additional locations medium materiality	FY27	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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	$60.9M	3.4%	—	—
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%	—	—

Deals & partnerships

Mattress Firm Rollout of Purple Royale

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

Costco Continued 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.

Amazon Strong 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

Continued softness in broader mattress category Q2 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 environment Q2 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 inflation Q2 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 actions Post-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

Showroom comparable sales growth

next quarter

Current 18%

Target Continued 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.

Find out whether PRPL delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.