Purple Innovation Shows Resilience Amidst Challenging Industry Conditions
Purple Innovation's third quarter 2026 earnings call provided insight into the company's mixed performance amidst a difficult mattress environment. Despite facing industry trends expected to decline in the second half of the year, Purple saw encouraging signs of improvement in its direct-to-consumer business.
Chief Executive Officer Rob DeMartini acknowledged the challenges posed by higher interest rates and product pricing, which have weighed on housing and overall mattress demand. However, he expressed confidence in Purple's continued role as an innovator in the sleep category and the opportunities ahead for the brand.
Purple has taken steps to improve its cost structure and is consistently generating cash. The company ended the quarter with more than $28 million of cash, compared to approximately $23 million at the end of the second quarter. Operating cash flow was positive for the third consecutive quarter, a meaningful progress given the industry pressure on demand.
The direct-to-consumer business experienced uneven performance, with July and the period around July 4th being weak due to the price increases implemented in June having a greater impact on demand than anticipated. However, the business improved meaningfully around mid-August, with better performance during the Labor Day promotional period.
Labor Day was particularly encouraging, with direct consumer sales slightly above last year during the holiday period. The entire holiday weekend occurred in September this year, compared to most of it falling in August last year, which affects the monthly year-over-year comparisons.
Across the two months, direct-to-consumer net sales increased approximately 1% year over year. July performance caused DTC revenue for the full quarter to decline 9% versus last year. E-commerce sales were down 6% versus last year, driven by weakness in July. Trends improved in August and September, with overall e-commerce sales up 2% year over year across the two months combined.
The company's e-commerce sales growth was driven by increases at Amazon and purple.com. Purple has made changes to its website to provide consumers with the information they need and make it easier for them to understand which product is right for them. This includes connecting advertising more directly to the website, taking consumers to the right product based on what brought them to Purple in the first place, and creating a more seamless customer journey from advertising through purchase.
Purple has never introduced new mattresses across two collections at one time, and the company believes these launches represent a significant opportunity to reinvigorate its business, strengthen its competitive position, and reach more customers. The new mattresses will be showcased at the Las Vegas market in January.
