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Dive Brief:
- Mattress maker Purple Innovation is closing two manufacturing sites in Salt Lake City and Grantsville, Utah, and consolidating operations into its McDonough, Georgia, facility, the company announced last week.
- The consolidation into the Georgia plant is expected to be complete by the end of the year, while the Utah factories are slated to close by the end of Q1 2025.
- The company also laid off an unspecified number of corporate positions at its Lehi, Utah, headquarters earlier this month, according to a securities filing. The cost-cutting moves are expected to save the maker of GelFlex Grid mattresses between $15 million and $20 million in EBITDA next year.
Dive Insight:
Purple has had a bumpy past year, with revenue down 10.9% year over year in 2023 to $510.5 million, while operating costs went up 13.8%. Sales were down for seven consecutive quarters before seeing a slight uptick at the end of last year.
The manufacturer has struggled with negative operating cash flow as well — net income was $0 in Q2 2024, up from a $50 million net loss the quarter before.
In 2024, the mattress manufacturer has been honed in on cutting costs in an effort to right its finances.
"We remain focused on the things within our control and are managing our costs, continuing our investments in innovation and marketing, and ensuring our company’s business model is more durable and suited for the market, [which] we expect to remain challenging for the balance of the year and maybe beyond," CEO Rob DeMartini said on an Aug. 5 earnings call.
Purple will remain headquartered in Utah, where it also has four showrooms. It also plans to open a new distribution center in the state as it increases production capacity in Georgia, the company said in its announcement.
Purple is one of multiple mattress makers navigating slowing demand. Tempur Sealy International, which is in the midst of acquiring Mattress Firm, saw revenues dip 2.8% in Q2 due to "softer than anticipated industry volumes," CEO Scott Thompson said in a statement.
For Purple, the industry slowdown has pushed the company to focus on cost efficiency, including lean manufacturing initiatives, COO Eric Haynor told analysts in August. The company is prioritizing supplier diversification over single sourcing for materials and focusing on its outbound freight network.
In Q2, Purple also deployed a systemic planning capability that is improving the manufacturer's visibility and inventory management.
"We've made great strides to figure out how to run the company profitably at this size, and we believe there's room for continued improvement on all of our input costs, inclusive of landed materials, conversion labor, plant yields, and outbound freight," Haynor said.
via https://www.aiupnow.com
Kate Magill, Khareem Sudlow
