Purple Innovation (NASDAQ:PRPL) reported second-quarter revenue declined as softness in its wholesale business offset continued gains in company showrooms and sequential improvement in e-commerce. The mattress maker also lowered its full-year revenue outlook while maintaining its adjusted EBITDA guidance, citing direct-to-consumer momentum and cost discipline.
Chief Executive Officer Rob DeMartini said the operating environment remained difficult, with uneven demand across the broader mattress market. Still, he said the company made progress in areas it can control, including premium product mix, showroom performance, e-commerce execution and expenses.
Revenue Declines as Wholesale Remains Under Pressure
Second-quarter net revenue totaled $98.3 million, down 6.5% from $105.1 million a year earlier. The decline was primarily driven by wholesale revenue, which fell 19.1% to $37.4 million.
Management said wholesale results reflected both weaker category demand and higher payments to customers, including cooperative advertising investments with retail partners. Those payments are recorded as reductions of revenue. The company said the quarter included a $5.3 million increase in certain payments to customers and a manufacturer under common control with a customer, along with a $3.5 million reduction in wholesale sales volume tied to lower industry demand.
DeMartini said Purple deliberately invested more than $4 million in incremental marketing programs with retail partners during the quarter to support consumer activation and retailer engagement. Excluding incremental investments and other customer payments, wholesale revenue would have fallen about 8% year over year, according to the company.
In response to an analyst question, DeMartini said the lower full-year revenue outlook was “primarily” attributable to wholesale. He added that the company must apply a higher standard to cooperative advertising spending now that such payments are reflected directly as lower revenue.
Showrooms Lead Direct-to-Consumer Growth
Direct-to-consumer revenue increased 3.4% to $60.9 million. Showroom revenue rose 16.6% to $18.4 million, marking the fourth consecutive quarter of year-over-year growth. Comparable revenue at stores open at least one year increased 18%, supported by stronger traffic, improved conversion and demand for the company’s premium Rejuvenate collection.
DeMartini said Rejuvenate 2.0 represented more than half of total mattress revenue in the showroom channel. He attributed showroom performance to consumers’ ability to experience Purple’s GelFlex Grid technology in person and receive guidance from store associates.
“When we get people in stores onto our beds and we can explain the technology, what look like very expensive products become things they want to buy when they realize the benefit they’re going to get out of it,” DeMartini said during the question-and-answer session.
E-commerce revenue decreased 1.4% to $42.5 million, but management said the channel improved sequentially for the third consecutive quarter. Lower mattress sales were partly offset by growth in pillows and cushions, as well as continued strength on Amazon. Management noted that June benefited from the timing shift of Prime Day from July into June.
The company has been updating its online experience with product-comparison tools, revised navigation and consumer education content. It is also working to improve how its products appear in traditional search and artificial intelligence-powered research tools.
Margins Improve, Helped by Tariff Refund
GAAP gross profit rose 4.5% to $44.4 million, while GAAP gross margin expanded to 45.2% from 40.5% a year earlier. The improvement reflected a $5.3 million tariff refund received during the quarter, tariff mitigation through sourcing projects, favorable inventory adjustments and lower scrap.
Those gains were partly offset by higher freight and material costs, wholesale discounting and lower volume leverage. Management said it raised prices in mid-June by between 8% and 10% across mattresses and pillows to offset inflation and protect margins. The company expects a more meaningful contribution from those increases in the second half because the changes had limited time to affect second-quarter results.
A company representative said mineral oil, a significant component of the GelFlex Grid, remains a key cost consideration. Purple believes current pricing is sufficient for its expected cost environment in the second half but said it could take additional pricing if costs rise materially further.
Beginning in the second quarter, Purple also reclassified merchant credit-card processing and third-party consumer-financing fees from cost of revenue to marketing and sales expense. The change increased reported GAAP gross margin by 505 basis points in the quarter, with an equal increase in marketing and sales expense. The company said the reclassification did not affect revenue, operating loss, adjusted EBITDA or cash flow.
Operating expenses declined 14.3% to approximately $48.7 million, aided by the absence of certain prior-year restructuring, impairment and related charges, as well as lower payroll and professional-services expenses. GAAP net loss narrowed to $3.2 million, compared with a loss of $17.3 million a year earlier. Adjusted EBITDA was positive $2.1 million, compared with an adjusted EBITDA loss of $2.4 million in the prior-year period.
Outlook Revised as Store Expansion Continues
Purple lowered its fiscal 2026 revenue guidance to a range of $420 million to $440 million, citing continued category softness, particularly in wholesale. The company maintained its forecast for adjusted EBITDA of $20 million to $25 million.
The company revised its fiscal-year gross-margin target to approximately 45% from approximately 40%, reflecting the cost reclassification. Management expects margins to improve in the second half as seasonal volumes rise, pricing actions take fuller effect and sourcing and productivity initiatives continue.
Purple ended the quarter with $23.3 million in cash and cash equivalents and $55.4 million in net inventories. Cash flow from operations was positive for a second straight quarter and totaled $3.6 million through the first six months of fiscal 2026.
The company opened one showroom and relocated another during the quarter. It plans to open five additional showrooms before year-end and expects to add 12 to 16 locations in fiscal 2027, focusing on more productive open-air retail locations.
DeMartini also said Nasdaq confirmed following Purple’s July reverse stock split that the company had regained compliance with the exchange’s minimum bid-price requirement.
About Purple Innovation (NASDAQ:PRPL)
Purple Innovation, Inc is a consumer products company specializing in the design, development and manufacture of comfort technology for the sleep and home furnishings markets. Best known for its proprietary Hyper-Elastic Polymer “Grid” technology, the company engineers mattresses, pillows and cushions that aim to combine pressure relief, support and temperature neutrality. Purple offers an array of sleep products alongside related lifestyle and wellness solutions.
The company’s product portfolio includes mattress models in various sizes and thicknesses, adjustable bed frames, pillows, sheets and mattress protectors, as well as seat cushions and pet beds.
