Bedding and comfort retailer Purple (NASDAQ:PRPL) fell short of analyst expectations in the first quarter of 2024, with revenue up 12.5% year over year to $120 million. On the other hand, the company’s full-year guidance was close to analyst estimates, with revenue coming in at $550 million at the midpoint. It posted a non-GAAP loss of $0.19 per share, an improvement from the loss of $0.26 per share in the same quarter last year.
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Purple (PRPL) Q1 CY2024 Highlights:
- Gain: $120 million vs. analyst estimates of $122.1 million (1.7% miss)
- EPS (non-GAAP): -$0.19 vs. analyst estimates of -$0.16
- Company reaffirmed its full-year revenue expectations from $550 million at the midpoint
- Gross margin (GAAP): 34.8%, compared to 38% in the same quarter last year
- Free cash flow was -$19.85 million, compared to -$4.48 million in the previous quarter
- Market capitalization: $182.7 million
Purple (NASDAQ:PRPL), founded by two brothers, makes sleep and home comfort products such as mattresses, pillows and bedding accessories.
Home furnishings A healthy housing market is good for the demand for furniture, because more consumers are buying, renting, moving and renovating. On the other hand, periods of economic weakness or high interest rates discourage home sales and can suppress demand. In addition, home furnishings companies are dealing with changing consumer preferences, such as the growing tendency to purchase goods online, including big-ticket items like mattresses and sofas that were once thought to be immune to e-commerce competition.
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Sales growth A company’s long-term performance can be an indication of its business quality. Every company can enjoy short-lived success, but the best-in-class companies continue to grow for years to come. Purple’s annualized revenue growth of 11.3% over the past five years was weak for a consumer discretionary company. Within the consumer goods industry, a long-term historical perspective can ignore a company pursuing a successful new product or emerging trend. That is why we also monitor short-term performance. Purple’s recent history shows a reversal from its already weak five-year trend, as revenue has seen an annualized decline of 12.1% over the past two years.
This quarter, Purple’s revenue grew 12.5% year over year to $120 million, lagging Wall Street estimates. Looking ahead, Wall Street expects revenue to grow 6.3% over the next twelve months, a slowdown from this quarter.
Cash is KingIf you’ve been following StockStory for a while, you know that we emphasize free cash flow. Why do you ask that? We believe that ultimately cash is king and you can’t use accounting profits to pay the bills.
Over the past two years, Purple’s demanding reinvestments to stay relevant to consumers have drained the company’s resources. Free cash flow margin is among the worst in the consumer discretionary sector, averaging negative 9%.
Purple burned $19.85 million in cash in the first quarter, equating to a negative margin of 16.5%, reducing its cash burn by 20.7% year-over-year.
Key takeaways from Purple’s first quarter results We struggled to find many strong positives in these results. Revenue and earnings per share fell short of Wall Street estimates. On the positive side, full-year revenue expectations were in line, while the EBITDA forecast was better. Overall, the results were mixed. The stock is flat after reporting and currently trades at $1.7 per share.
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