PRPL Q3 Deep Dive: Margin Recovery and Wholesale Expansion Shape Outlook

Bedding and comfort retailer Purple (NASDAQ:PRPL) missed Wall Street’s revenue expectations in Q3 CY2025, with sales flat year on year at $118.8 million. On the other hand, the company’s full-year revenue guidance of $475 million at the midpoint came in 0.6% above analysts’ estimates. Its non-GAAP loss of $0.08 per share was 17.9% above analysts’ consensus estimates.

Is now the time to buy PRPL? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Purple’s third quarter was marked by operational improvements and early progress on strategic initiatives, leading to a positive market reaction. Management credited margin recovery to cost savings from last year’s restructuring, higher sales in showrooms and wholesale channels, and the success of the Rejuvenate 2.0 mattress collection. CEO Robert DeMartini stated, “We have reduced our fixed costs and expect to deliver $25 million to $30 million in savings annually,” emphasizing the company’s focus on sustainable profitability. While e-commerce sales remained pressured, management highlighted sequential improvements and strong showroom performance.

Looking ahead, Purple’s guidance is anchored by continued expansion with major retail partners, new product innovation, and operational discipline. Management expects further growth from its Mattress Firm rollout and increased exposure at Costco’s upcoming events. CFO Todd Vogensen noted, “We anticipate continued top line growth driven by the seasonal lift in direct-to-consumer sales...and sustained momentum of our Rejuvenate 2.0.” The company aims to maintain gross margins above 40% as it balances promotional activity with premium product positioning and prepares for a competitive holiday season.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to showroom and wholesale expansion, margin gains from restructuring, and a strong luxury product mix that offset ongoing e-commerce softness.

• Showroom performance improved: Purple reported 12% comparable sales growth in showrooms, with 76% of locations profitable year-to-date. The new selling model helped drive higher conversion and order values, with CEO Robert DeMartini calling showrooms “a key driver of brand experience and sales conversion.”
• Wholesale channel momentum: The wholesale segment grew 8%, fueled by the rollout of Rejuvenate 2.0 and expanded Mattress Firm distribution. The company noted that productivity held up despite a significant increase in slots, and management anticipates $70 million in incremental revenue from Mattress Firm next year if slot productivity is sustained.
• Premium product strategy: The Rejuvenate 2.0 collection, featuring the DreamLayer gel grid technology, has doubled net revenue compared to its predecessor. Management highlighted that 3,000 units sold through direct channels averaged $5,800 each, supporting a shift toward higher-value offerings.
• E-commerce channel stabilizing: Although e-commerce sales were down nearly 10% year over year, management pointed to improvements following a site refresh and increased traction on Amazon. The shift to higher-priced mattresses in online channels was cited as an early positive sign.
• Structural cost savings realized: The restructuring program completed last year resulted in lower fixed costs and improved manufacturing efficiency, with annual savings of $25 million to $30 million expected. Gross margins rose to approximately 43% as a result, despite tariff-related headwinds.

Drivers of Future Performance

Purple’s outlook is shaped by further wholesale expansion, premium product launches, and disciplined cost management amid a still-competitive retail environment.

• Wholesale rollout acceleration: Management expects the ongoing Mattress Firm expansion to be a primary revenue growth driver, with slot count increasing to 12,000 by March 2026. The company is also broadening its reach with Costco and Mattress Warehouse, aiming to capture incremental sales through larger retail footprints and special events.
• Focus on premium innovation: Sustained momentum from Rejuvenate 2.0 and new comfort technology products like the GridC Pillow are central to Purple’s growth strategy. Management believes continued investment in product development and differentiation will offset market pressures and position the brand for higher margins.
• Margin discipline and risk management: The company plans to maintain gross margins above 40% through ongoing sourcing improvements and cost controls, while acknowledging that heavy promotions and a shifting channel mix could create short-term margin volatility. Management also pointed to structural improvements that have lowered the revenue threshold for break-even profitability.

Catalysts in Upcoming Quarters

In future quarters, the StockStory team will be closely monitoring (1) the pace of incremental slot growth and sales productivity at Mattress Firm and other wholesale partners, (2) the effectiveness of the Rejuvenate 2.0 and GridC Pillow launches in driving higher average order values, and (3) whether e-commerce channel improvements translate into sustained online growth. Execution on cost savings and margin stability will also remain key areas of focus.

Purple currently trades at $0.85, up from $0.80 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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