Dive Brief:
- Purple on Tuesday announced its board of directors appointed Robert DeMartini as its chief executive officer. DeMartini was appointed acting CEO in December after Joseph Megibow stepped down from the role.
- Prior to joining Purple, DeMartini was the CEO of New Balance for 12 years during which time the company increased its annual sales to over $4 billion. He also held leadership positions at P&G and USA Cycling, according to a company press release.
- “Our search process was exhaustive, and Rob’s experience, leadership, and focus on execution made him the obvious choice to lead Purple to its next phase of success,” Paul Zepf, Purple’s chairman of the board, said in a statement. “His demonstrated leadership in developing our go forward execution-oriented strategy over the past couple of months allows the Company to move forward quickly.”
Dive Insight:
After two months of serving in the interim, DeMartini has officially taken the helm at the mattress brand.
The leadership appointment comes as Purple navigates through waning demand across the home category. The brand saw strong sales increases during the early days of the pandemic as many consumers invested more in their homes, where they were spending a majority of their time. But even as demand shows signs of slowing, Purple appears to be holding on to some of the gains it made over the past several years.
The brand on Thursday announced fourth quarter net revenue increased 7.2% year over year to $186.4 million. Its wholesale channels increased 35.9% year over year, while its direct-to-consumer channels decreased 4% from the year-ago period. Compared to 2019, wholesale and DTC revenues increased 48.7% and 50.7%, respectively.
The company’s gross margin, however, decreased by around 12 percentage points from 2020 and 2019 to 34.7%. Operating expenses as a percent of net revenue increased to 51.4% from 42.9% a year ago. Purple swung to an operating loss of $31.1 million from a profit of $7.5 million in 2020, but it was able to shrink its net loss in the quarter to $21.8 million from $73.5 million last year.
For the full year, net revenue increased 12% to $726.2 million, in line with the company’s revised outlook. Wholesale revenue for the year increased 54.5% while DTC revenue decreased 2.3%. Gross margin fell to 40.6% from 47% in 2020, while operating expenses as a percent of net revenue increased to 43.8% from 36.1%. While the company posted an operating loss of $23.4 million from a profit a year ago, it reported a net income of $3.9 million from a net loss of $229.8 million in 2020.
While the brand has seen significant growth from its wholesale business over the past year, it continues to invest in its direct-to-consumer channels where the company made over 65% of its annual revenue in 2021. Purple this year has already opened two showrooms on top of the 19 it opened last year, pushing its total to 30 locations across the U.S. The company says it plans to continue opening showrooms throughout the year and targets 200 locations “eventually,” according to the company’s 10-K filed with the Securities and Exchange Commission.
“Following several years of hyper growth and increased investments to support current and future expansion, we are now focusing on right-sizing our operations, improving our execution and refining our strategies to drive profitable growth in the current market environment,” DeMartini said in a statement. “This work is already underway and we are making good progress but we are still in the early stages of building the framework for strong operational maturity and accountability.”
