Purple Innovation Q3 2025 Earnings Results & Report

Purple Innovation EPS Results

• Actual EPS: -$2.00
• Consensus EPS: -$2.25
• Beat/Miss: Beat by +$0.25
• One Year Ago EPS: N/A
• EPS Beat Rate: 7 of last 8 quarters

Purple Innovation Revenue Results

• Actual Revenue: $118.77 million
• Expected Revenue: $123.21 million
• Beat/Miss: Missed by -$4.44 million
• YoY Revenue Growth: N/A

Purple Innovation (NASDAQ:PRPL) is a direct-to-consumer and omnichannel comfort-products company best known for its Purple mattress brand. The company develops and sells mattresses designed around its proprietary GelFlex Grid, a flexible, pressure-relieving material intended to provide support, airflow and a responsive sleep surface.

In addition to mattresses, Purple offers pillows, seat cushions, mattress protectors, sheets, blankets, bed frames and adjustable bases. Its products are sold through the company’s e-commerce platform, branded retail stores and third-party retail partners, primarily serving customers in the United States.

Purple was founded by brothers Tony and Terry Pearce, inventors associated with the company’s cushioning technology, and the Purple brand launched its first mattress in 2016. Purple Innovation became a publicly traded company in 2018 through a business combination with Global Partner Acquisition Corp. The company is headquartered in Lehi, Utah.

Purple Innovation Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Company reported stabilization in Q3 with $118.8 million in revenue, a positive adjusted EBITDA (~$0.2M), and a smaller adjusted net loss, signaling improved operating performance.
• Positive Sentiment: Gross margin recovered nearly 700 bps sequentially to ~43% and management expects to finish the year above 40%, supporting the path to sustained profitability.
• Positive Sentiment: Mattress Firm expansion is a key growth driver — Purple is in ~9,200 slots today and is on pace for 12,000 slots by March 2026, representing incremental revenue of roughly $20M this year and ~$70M next year.
• Negative Sentiment: E‑commerce remains pressured (down ~10% YoY) and inventories rose ~9.8% YoY, which could weigh on near‑term cash flow and margin if online demand does not recover.
• Neutral Sentiment: The board is conducting a review of strategic alternatives and has engaged multiple parties, a process that could materially affect shareholder value but remains uncertain at this stage.

Presentation

[Operator]

Good day and welcome, everyone, to the Purple Innovation Third Quarter Earnings 2025. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Stacey Turnhoff. Please go ahead.

[Stacy Turnof, Head of Investor Relations at Purple Innovation]

Thank you for joining Purple Innovation's Third Quarter 2025 earnings call. A copy of our earnings press release is available on the Investor Relations section of Purple's website at www.purple.com. Before we begin, I'd like to remind you that certain statements made in this presentation are forward-looking statements. These statements reflect Purple Innovation's judgment and analysis as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. You should not place undue reliance on these forward-looking statements. For more information, please refer to the risk factors outlined in our filings with the SEC. Additionally, today's presentation will reference non-GAAP financial measures such as adjusted gross margin, adjusted operating expenses, Adjusted EBITDA, adjusted net loss, and adjusted net loss per share.

[Stacy Turnof, Head of Investor Relations at Purple Innovation]

A reconciliation of these measures to their most comparable GAAP measures can be found in our earnings release available on our website. With that, I'll turn the call over to Rob DeMartini, Purple Innovation's Chief Executive Officer.

[Rob DeMartini, CEO at Purple Innovation]

Thank you, Stacey. Good afternoon, everyone, and thank you for joining us. The third quarter unfolded largely as we anticipated, reflecting the continued execution of our strategic priorities. We delivered revenue of $118.8 million, up slightly compared to last year, marking an important inflection point following consecutive periods of year-over-year declines. We also achieved positive Adjusted EBITDA, consistent with what we anticipated. Our results demonstrate ongoing progress towards strengthening the business and building a foundation for sustainable growth. As we move into the final months of the year, we're encouraged by the early traction we are seeing across our core initiatives and remain focused on driving improved operational performance and long-term profitability. Gross margin improved nearly 700 basis points sequentially to approximately 43%. Even with tariff-related headwinds. Importantly, we remain on track to deliver positive Adjusted EBITDA for the year.

[Rob DeMartini, CEO at Purple Innovation]

These results reflect solid execution across each of our strategic priorities. Our Mattress Firm rollout is progressing well, with Purple products now being represented in nearly 9,200 slots today, keeping us on pace for 12,000 slots in 2026. Our Rejuvenate mattress collection, Rejuvenate 2.0, also continues to outperform our initial expectations. As we continue to catch up with second quarter backlog, sell-through remained strong and drove 6.5% showroom sales gains, marking an acceleration from the prior quarter. Meanwhile, wholesale revenue grew 8% during the quarter, supported by the ongoing expansion of our Mattress Firm partnership. E-commerce was down 10% but showed early signs of improvement following our site refresh and growing traction with Amazon. It's been just over a year since we initiated the restructuring program in August of 2024, and it's important to reflect on how far we've come.

[Rob DeMartini, CEO at Purple Innovation]

At this time last year, we made the difficult but necessary decisions to consolidate our manufacturing footprint, to streamline our corporate structure, and to realign our distribution network. These changes were not easy, but they were essential to strengthen the durability of our business for the future. Importantly, we accomplished this transformation while maintaining uninterrupted customer service levels. The early results are clear. We have reduced our fixed costs and expect to deliver $25-$30 million in savings annually. We're on track to achieve positive Adjusted EBITDA, and our gross margins have improved from the low 30s to more than 40% today. We're improving our operating efficiency and creating a business model that can deliver more consistent performance even during difficult market conditions. As we look forward, this leaner and more agile Purple is allowing us to redirect resources back into what matters most: innovation, marketing, and our strategic partnerships.

[Rob DeMartini, CEO at Purple Innovation]

That's what's fueling the Rejuvenate 2.0 and the expansion with Mattress Firm, Costco, and others, and we see new opportunities to continue expanding our presence with new retail partners. Having made significant progress in stabilizing the business and improving the underlying profitability, we're increasingly focused on positioning our business for future growth. With a strong foundation firmly in place, our next chapter is centered on accelerating innovation and marketing investments. While there's still work to do, I am confident that Purple is on the right path. Now let me turn to our three strategic pillars and update you on our progress during the third quarter. Innovation remains at the heart of Purple's competitive advantage and continues to define our leadership in comfort technology. In the second quarter, we launched Rejuvenate 2.0, one of the most successful product introductions in our history, featuring our new DreamLayer Gel Grid technology.

[Rob DeMartini, CEO at Purple Innovation]

In our showrooms, Rejuvenate 2.0 has sold more than twice the number of units, doubling net revenue compared to Rejuvenate 1.0. Through our direct channels, we've sold more than 3,000 units at an average sales price of approximately $5,800, underscoring the strength of our premium positioning. We're also encouraged by the early performance of our Grid Cloud Pillow, which is outperforming expectations and demonstrates the versatility of our proprietary grid technology across new comfort categories. Our focus on differentiation continues to resonate with our customers across each of our channels and reinforces Purple's position as the leader in premium comfort. Starting with our showrooms, we delivered strong performance in the quarter. Net revenue grew 6.5% to $22 million, reflecting the strength of our premium positioning even in a softer traffic environment. Our showrooms remain a key driver of brand experience and sales conversion across all channels.

[Rob DeMartini, CEO at Purple Innovation]

Our new selling model has empowered our teams to more effectively communicate Purple's technology and value proposition, driving 12% comparable sales growth in the quarter. These results demonstrate the value of the showroom as both a brand experience and a growth engine. Showroom four-wall profitability reached an all-time high with record mattress order values of about $4,500, further validating the success of our path to premium sleep strategy. Momentum within our luxury mattress assortment also remains strong. Rejuvenate mattress sales nearly doubled year-over-year, and 76% of showrooms are now profitable year to date versus 56% last year. E-commerce business is central to the shopping journey, and our website is often the first stop. It plays a critical role in building consumer confidence and guiding them towards the right products. While revenue in the channel remains pressured, we're encouraged by the recent signs of improvement.

[Rob DeMartini, CEO at Purple Innovation]

During the quarter, we enhanced our digital experience to reinforce Purple's premium positioning and highlight the less pain, better sleep benefits of our GelFlex and DreamLayer technologies. Our refreshed website, with simplified navigation and richer video content, has helped shift demand towards higher-priced mattresses. We also saw promising results in our Amazon channel as a growing share of sales moved to Fulfilled by Amazon, improving both conversion and delivery speed. While there's still work ahead, we're pleased with the sequential improvement and positive consumer response to these initiatives. The wholesale channel grew 8%, driven by the rollout of Rejuvenate 2.0 and our expanding partnership with Mattress Firm. Momentum accelerated through the quarter, and trends we are seeing early in Q4 point to sustained growth with our key wholesale partners. Today, Purple products are now in Mattress Firm's full store network.

[Rob DeMartini, CEO at Purple Innovation]

Representing approximately 9,200 slots today, and we are on pace to reach 12,000 slots by March of 2026. This expansion represents roughly $20 million in incremental revenue this year, and we anticipate approximately $70 million next year. We're working hard to unlock benefits for both partners through continued collaboration and execution. Beyond Mattress Firm, we're expanding with other partners as well. We're testing our entry into the Florida market with Mattress Warehouse, building on our existing 140-store footprint and broadening our reach through partners like Costco and QVC. Our Costco partnership is performing exceptionally well. We are currently in 54 Northwest stores, and later this year, we'll participate in Costco's Q4 furniture event in a minimum of 450 clubs, nearly double last year's footprint.

[Rob DeMartini, CEO at Purple Innovation]

On October 2nd, we tested our first Purple mattress program on QVC, offering another opportunity to share our technology with a wider audience in a live interactive format. For the new Rejuvenate mattresses, our non-Mattress Firm slot placement has now increased by 68%. Compared to last year, also highlighting Purple's growing relevance across the channel. Finally, turning to marketing, our Less Pain, Better Sleep campaign, launched in the third quarter, continues to perform well and has been expanded across digital and social media platforms. The message is simple but powerful, and it focuses on real sleep benefits and connects directly to our GelFlex Grid technology story. We also leaned into our expanded Mattress Firm partnership through joint campaigns, including their recent Sleep Easy promotion, which exceeded expectations and contributed to a strong Labor Day sales period.

[Rob DeMartini, CEO at Purple Innovation]

Across every touchpoint, from our showrooms to our website to our retail partners, we're driving consistency in message, look, and feel. Our differentiation has always been rooted in innovation, but how we communicate it is what turns that innovation into brand preference. We're confident this focus on differentiation will drive stronger engagement, higher conversion, and sustained growth across our channels in the quarters ahead. Turning to our third strategic pillar, prioritizing gross margins. Our margin discipline remains firmly intact. Gross margins recovered to approximately 43% in the third quarter from 36% in the second quarter. This improvement reflects direct material cost savings, the completion of the restructuring plan, and continued progress in warranty and scrap reduction initiatives. Tariffs only impacted us by roughly $2 million this quarter as mitigation efforts continue to pay off.

[Rob DeMartini, CEO at Purple Innovation]

While April and May were challenging as the new rates took effect, our sourcing shifts and pricing actions have meaningfully reduced the overall impact compared to initial expectations. Looking ahead, we expect fourth-quarter gross margins will remain at roughly 40%, albeit lower than the strong third-quarter result, and we continue to be confident that we'll end the year above the 40% level. This progress highlights the operational discipline we've built into the business and the structural improvements that position Purple for sustained, profitable growth moving forward, supported by our full Mattress Firm rollout and the sustained momentum of Rejuvenate 2.0 and anticipated holiday momentum. We are reiterating our full year 2025 guidance, expecting revenue in the range of $465 million-$485 million and Adjusted EBITDA between break-even and $10 million positive. Looking forward into 2026, we see a clear path to positive cash generation.

[Rob DeMartini, CEO at Purple Innovation]

Our capital priorities will focus on reinvesting in showroom expansion and innovation while maintaining flexibility to reduce debt as appropriate. Before I close, I'd like to briefly address the board's review of strategic alternatives. This process remains ongoing. We have engaged with multiple parties about a broad range of opportunities to maximize shareholder value, including but not limited to a merger, a sale, or other strategic or financial transaction. We will continue to evaluate a range of options and provide further information as appropriate. We will not be commenting further or taking questions on this topic during the Q&A portion of today's call. Now, I'd like to turn it over to CFO Todd Vogensen.

[Todd Vogensen, CFO at Purple Innovation]

Thank you, Rob, and good afternoon, everyone. As Rob discussed earlier, we're pleased with our performance this quarter, which demonstrated our continued ability to deliver against our strategic initiatives.

[Todd Vogensen, CFO at Purple Innovation]

I'll now walk you through the financial metrics for the third quarter, starting with the top line. Net revenue for the three months ended September 30, 2025, was $118.8 million. Up slightly versus $118.6 million last year, driven by the timing of Rejuvenate 2.0 shipments and the expansion of our Mattress Firm relationship. We saw strength in both showroom and wholesale, though it was partially offset by softness in e-commerce. By channel, direct-to-consumer net revenue for the quarter was $67.2 million. Down 5.1% versus last year. Within DTC, net revenue for showrooms in the third quarter was $22 million, up 6.5% compared to last year, despite four fewer stores opened this year. Last quarter, we experienced timing issues related to Rejuvenate 2.0 launch, as demand for Rejuvenate 2.0 had significantly outstripped our ability to supply customers. Those issues have since been resolved.

[Todd Vogensen, CFO at Purple Innovation]

Our delivery schedule has normalized, and we've seen continued momentum in showroom sales trends. E-commerce continued to see softness and was down 9.8% during the third quarter but was a sequential improvement from the prior quarter. We also experienced a notable increase in our wholesale segment, where net revenue of $51.5 million was up 7.9% versus last year, driven by strength in our Rejuvenate 2.0 launch and our expansion with Mattress Firm. As we look toward the fourth quarter, we're encouraged that the sales trends should continue to improve even further. Gross profit for the third quarter increased to $50.9 million, or 42.8% compared to $35.2 million, or 29.7% in the prior year period. Adjusted gross margin, which excludes restructuring and related charges, expanded to 42.8% in the quarter compared to 40.5% last year.

[Todd Vogensen, CFO at Purple Innovation]

With the restructuring now complete, we also benefited as we delivered greater manufacturing efficiencies and direct material cost savings, in addition to improved warranty trends. While we expect some of those short-term benefits to moderate as we move into the fourth quarter over time, we do expect to continue realizing sustainable structural improvements as production continues to scale at our Georgia facility. And we also see greater manufacturing efficiencies and direct material cost savings opportunities in the future. Now, turning to operating expenses. Operating expenses were $63 million, down 23.2% versus $82 million last year. The improvement was largely driven by a reduction in restructuring and impairment costs in the current year, in addition to benefits from the restructuring and other cost savings initiatives that we've completed over the past few quarters. Excluding restructuring and impairment-related charges, adjusted operating expenses were $57.7 million, down 8.6% versus last year.

[Todd Vogensen, CFO at Purple Innovation]

Our adjusted net loss for the third quarter was $8.6 million, compared to an adjusted net loss of $13.8 million in the prior year. And third-quarter adjusted loss per share was $0.08, compared to an adjusted loss per share of $0.13 last year. Adjusted EBITDA for the third quarter was a gain of $200,000, an improvement from the loss of $6.4 million last year, driven primarily by our gross margin expansion and disciplined cost management. Now, turning to the balance sheet, we ended September with cash and cash equivalents of $32.4 million compared with $29 million on December 31, 2024. Net inventories on September 30, 2025, were $65.8 million, up 9.8% compared to September 30, 2024, and up 15.7% compared to December 31, 2024. We were pleased to exit the quarter with cash over $30 million again.

[Todd Vogensen, CFO at Purple Innovation]

As we move into the fourth quarter, which is traditionally a period of cash generation, we believe that we're well-positioned from a liquidity perspective to drive expected growth from our Rejuvenate 2.0 launch and the Mattress Firm expansion. Finally, guidance. As Rob discussed earlier, we are reiterating our full-year outlook. We continue to expect full-year revenue in the range of $465-$485 million, and Adjusted EBITDA between break-even and $10 million. As we move into Q4, we anticipate continued top-line growth driven by the seasonal lift in direct-to-consumer sales during the Black Friday and Cyber Monday holiday, an expansion of business at Costco, as Rob described earlier, our Mattress Firm expansion, and sustained momentum of our Rejuvenate 2.0. In addition, we expect a sequential acceleration in EBITDA that is fueled by our revenue expansion and the continued momentum from our restructuring initiatives and sourcing improvements.

[Todd Vogensen, CFO at Purple Innovation]

With that, I'll turn the call over to the operator for questions.

[Operator]

Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to join the queue. If you would like to withdraw your question, simply press star one again. We'll take our first question from Bradley Thomas at KeyBanc Capital Markets.

[Bradley Thomas, Managing Director and Equity Research Analyst at KeyBanc Capital Markets]

Hi. Thanks for taking that question, and congrats on the improvement in the business that you all are driving here. Rob, that's actually where I wanted to start off with my first question.

[Bradley Thomas, Managing Director and Equity Research Analyst at KeyBanc Capital Markets]

Just as you see the acceleration in sales in the business, I guess, could you speak to what, if anything, are encouraging green shoots that we might be seeing in terms of the industry overall versus how much this is coming from the multitude of initiatives that you all have underway right now?

[Rob DeMartini, CEO at Purple Innovation]

Thanks, Brad. And hard to put my finger exactly on it. I think most of the people in the category, ourselves included, in Labor Day thought the market was starting to show signs of improvement, and then the back half of September was pretty mixed and soft. I think we're the first reporting company in the category, but I'm expecting kind of flattish overall category results. So I think we own both the parts of our business that are working well and then the parts that still need a little bit of work.

[Rob DeMartini, CEO at Purple Innovation]

But wholesale is clearly growing behind expanded distribution. And I'd point out that we're encouraged on our performance because we've had a pretty significant expansion of slots, and slot productivity has remained about the same. It's down a little bit in Q1 or Q3 because of all the flooring that we did, but since then, we're seeing it pick back up. So that's the first point. The second is the showroom performance. 6.5% up, 12% comps. I think 12% comp is going to stand up against any retailer, and we're encouraged by that. And even in e-comm, as Todd talked about, we were down about 10% in the quarter, but during the quarter, each month got a little bit better, and we're starting to see the new marketing show some real early signs of success. Too early to declare anything, but we're encouraged on the direction.

[Rob DeMartini, CEO at Purple Innovation]

Finally, on the market, it doesn't feel like it's getting a lot better. It also doesn't feel like it's getting worse. So I think we're probably at the bottom, and we're certainly well-positioned to capitalize if the market gets better in Q4 or in early 2026.

[Bradley Thomas, Managing Director and Equity Research Analyst at KeyBanc Capital Markets]

That's really helpful. And maybe I could ask a question just on the margin front or the business front financially more broadly. Clearly, a number of the revenue initiatives that you have underway are going to wrap into 2026 and be a nice boost through the first half of the year. Can you talk to, I think, about flow-through to the bottom line and any other margin opportunities for you as we think to 2026?

[Todd Vogensen, CFO at Purple Innovation]

Sure. So as we look at gross margin, we really are starting to see all of those benefits from the plant consolidation and our restructuring efforts.

[Todd Vogensen, CFO at Purple Innovation]

As we look at it, we've been hitting that 40% gross margin level pretty consistently and with the 42.8% this quarter. I think we've shown that we've been able to capture those efficiencies and would expect to be at around that 40% level going forward. From a break-even perspective, we used to talk about the business needing to be at $55-$60 million-plus a month in revenue. We're down to the point where basically at $40 million or even a little under that per month, we're able to break even and then scale from there to generate profitability very rapidly. The cash just flows through the bottom line very quickly with the model we've developed at this point.

[Bradley Thomas, Managing Director and Equity Research Analyst at KeyBanc Capital Markets]

That's really helpful. Thank you, Todd. Thank you, Rob.

[Rob DeMartini, CEO at Purple Innovation]

Thank you, Brad.

[Operator]

We'll go next to Matt Koranda at ROTH Capital Partners.

[Joseph Gonzalez, Equity Research Associate at ROTH Capital Partners]

Good afternoon, guys. It's Joseph on for Matt. I just wanted to see if you guys can kind of bridge us on your Adjusted EBITDA guide here. Implied EBITDA in the 4Q is roughly high single digits. Can you bridge us as we exit 3Q on a flattish margin?

[Rob DeMartini, CEO at Purple Innovation]

Sure. So a big part of what we're looking at in 4Q is the continued revenue acceleration from all the factors that we talked about, moving into what is traditionally our highest revenue quarter of the year. We are on the backs of continuing our expansion in Mattress Firm, the Rejuvenate 2.0 launch, continuing to pick up steam. We also have strong plans as we go into Black Friday and Cyber Monday from our direct-to-consumer channel. So a lot of things really pushing towards the positive on the top line.

[Rob DeMartini, CEO at Purple Innovation]

And while we do that, we're still able to maintain that 40%-ish level of gross margin and strong cost control. So that incremental revenue flows through very quickly.

[Joseph Gonzalez, Equity Research Associate at ROTH Capital Partners]

Got it. And then as we kind of approach the 1,200 mark or 12,000 mark, excuse me, on your Mattress Firm slots, how should we think about it going into 4Q? And then, obviously, you guys stated that that 12,000 should be hit in March 2026. Should it be an even split, or should we ramp up most of those slots early 1Q26?

[Rob DeMartini, CEO at Purple Innovation]

No, I mean, just to be clear, we're working on a specific collection of Rejuvenate, so a product that's already performing well in the market. And I think that incremental 2,800 slots, something in that neighborhood, will happen at the end of 1Q.

[Joseph Gonzalez, Equity Research Associate at ROTH Capital Partners]

Got it. Thank you for the clarification. We'll take the rest offline.

[Rob DeMartini, CEO at Purple Innovation]

Thanks, Joseph.

[Operator]

We'll move next to Bobby Griffin at Raymond James.

[Bobby Griffin, Managing Director and Consumer Equity Research Analyst at Raymond James]

Good afternoon, guys. Thanks for taking the questions.

[Rob DeMartini, CEO at Purple Innovation]

Hey, Bobby.

[Bobby Griffin, Managing Director and Consumer Equity Research Analyst at Raymond James]

Rob, just quickly on just how the quarter played out. I think we entered the quarter, or at least when we spoke last, up, I think, mid-single digits in revenue. And then we finished flat. Was that just a function of the softness of the last couple of weeks, or did some of the timing of the rollouts change a little bit where there was some expected revenue that just shifted into 4Q?

[Rob DeMartini, CEO at Purple Innovation]

No, we were chasing Rejuvenate all through the second quarter and into the third. But. I think the difference when. The first half of the quarter looked like it was developing more strongly and was pacing at a stronger development, and then post-Labor Day, the market was just, for us at least, was really soft.

[Rob DeMartini, CEO at Purple Innovation]

The discussions I've had with others is it was mixed at best. So I don't think we were unique there, but luckily, we've seen kind of a return to the. Strength we were hoping in October, but it was after Labor Day.

[Bobby Griffin, Managing Director and Consumer Equity Research Analyst at Raymond James]

Okay. That's helpful. And then I wanted to clarify the gross margin. You guys ended. 3Q at, call it, 43% round numbers, 42.8%. You expected to be down sequentially, and that would be down pretty meaningful year-over-year. And is that just what exactly is driving that? Just a mix going more to wholesale with these launches, or what exactly is driving that? Because you talked kind of about 42.8% and then 40% as a round number.

[Bobby Griffin, Managing Director and Consumer Equity Research Analyst at Raymond James]

So just wanted to kind of clean up where we actually expect grosses to be at in the fourth and what is a sustainable gross margin given the changing mix here of Purple's customer base.

[Rob DeMartini, CEO at Purple Innovation]

Yeah. Let me come at that backwards and see if it gets you what you're looking for. I mean, I think. 40% and north is clearly sustainable, okay, period. We think that. I don't want to pin a number to it yet, but we can get and stay north of that with our current. Wholesale mix because the mix hurt DTC to wholesale is being offset by the premium positioning of the product and the way the mix is changing. Both in wholesale and. In e-commerce and showrooms towards the premium product. So I think that's a mix.

[Rob DeMartini, CEO at Purple Innovation]

The down in Q4, we're planning is a pretty competitive environment, and you spend a lot of the quarter on promotion, and I think that's the biggest drain to that gross margin.

[Bobby Griffin, Managing Director and Consumer Equity Research Analyst at Raymond James]

Okay. That's helpful. And then it does seem like, look, you got the wholesale business now growing with some accounts, nice comp in showrooms. There's still some work to be done on showroom profitability. So I would be curious to kind of see you unpack, if you could unpack kind of that aspect of the stores that are not EBITDA profitable. I think you gave some statistic. I missed it on the call. And then the second part of the question is just. Maybe it's more strategic, but as this business kind of continues to evolve, you got two of the parts of the house growing. E-commerce remains pressured.

[Bobby Griffin, Managing Director and Consumer Equity Research Analyst at Raymond James]

Just kind of what do you think of the long-term e-commerce opportunity here for Purple? Has it changed now given some of the success with wholesale and what you're seeing out of some momentum in the showrooms? Just curious thoughts there, Rob.

[Rob DeMartini, CEO at Purple Innovation]

Yeah. No, Bobby, we're still very bullish on e-com, and we think we've had a bit of a communication problem that we refreshed the website at the end of September and early October. The early signals of that are that we are moving in the right direction. The mix is improving in e-com as well, not as rapidly as showrooms, but it is improving. So we're not stepping away from e-com at all.

[Rob DeMartini, CEO at Purple Innovation]

And we also are recognizing that as we expand our distribution footprint, e-com as a standalone channel will continue to have to work very hard to make the sales that they make, but we're not going to step away from it. And the first part of your question was on showroom profitability. The numbers I quoted is 76% of them were profitable in Q3 versus 56% last year. This channel is going to be profitable. Showrooms is going to be profitable for us. We've made nice progress. And I would suggest that we probably always have somewhere between 5% and 10% of stores that just either aren't working the way we'd hoped or are structurally going to be a challenge because of high rent. But it's going to be a vibrant channel that we will go back to investing in in the future.

[Rob DeMartini, CEO at Purple Innovation]

And we're encouraged by the profitability that they're driving right now.

[Bobby Griffin, Managing Director and Consumer Equity Research Analyst at Raymond James]

Very good. Well, I appreciate the details and congrats on some of those moving parts, especially the showroom comp and getting the launch going. So best of luck here in fourth quarter.

[Rob DeMartini, CEO at Purple Innovation]

All right, Bobby. Thank you.

[Operator]

We'll move next to Daniel Silverstein at UBS.

[Daniel Silverstein, Equity Research Analyst at UBS]

Hey, Rob and Todd. Thanks for letting us ask a question. Maybe just to start. If we want to unpack the third quarter a bit, how much of the improvement in the wholesale segment was driven by the additional Mattress Firm slots? And maybe a different way of asking is just how is productivity in other retail partners trending today?

[Rob DeMartini, CEO at Purple Innovation]

Thanks, Dan. So a couple of things. I talked about our Costco business. That continues to grow very nicely. We've been online broadly for them for about almost two years.

[Rob DeMartini, CEO at Purple Innovation]

We're now in permanent—Permanent's the wrong word—We're in in-aisle distribution in 54 of them. And then the year-end year start event, their furniture mod, will be in 450. So that's a nice piece of growth that has a lot of upside. On mattress productivity, the Mattress Firm launch actually hurts your productivity in the short run as you load in all those floor samples. But we are seeing that the overall productivity held with a significant increase in slots. So to me, that's encouraging. And then we've got a number of other customers that are doing well. And maybe a couple that are not doing as well as we want. So it's better than a mixed bag, but there is a mix of performance across our wholesale network.

[Daniel Silverstein, Equity Research Analyst at UBS]

Very helpful. And then just one follow-up.

[Daniel Silverstein, Equity Research Analyst at UBS]

So to your point, it seems like there's some pretty good visibility into the sales-building blocks next year. Specific to the $70 million from Mattress Firm, what's in your control to drive that number potentially higher? And then if the mix skews a bit more to wholesale next year, how might that impact profitability from a margin standpoint? Thank you so much.

[Rob DeMartini, CEO at Purple Innovation]

All right, Dan. I think the wholesale growth doesn't concern me on a margin basis. I think the performance of the premium business will continue to be able to offset that degradation. And the Mattress Firm forecast is built on us performing at levels we've been at. We have not assumed improved slot productivity, but we have held it. So you could build an argument that there's a little bit of risk in that. But we've got to work with them to make sure we're getting the most.

[Rob DeMartini, CEO at Purple Innovation]

And we also have to compete to perform in those slots that we're in. So we're spending more money at retail with them. We're spending more money on marketing and demand creation. And we have a lot of excitement behind the Rejuvenate product that they'll put in in the first quarter. So it's a difficult environment. They're a challenging partner, but all for the good. We've got to perform and make sure we grow their business. If we do that, ours will develop as we outlined.

[Daniel Silverstein, Equity Research Analyst at UBS]

Thank you, and best of luck.

[Rob DeMartini, CEO at Purple Innovation]

All right. Thanks, Dan.

[Operator]

And that concludes our Q&A session. I will now turn the conference back over to Rob DeMartini for closing remarks.

[Rob DeMartini, CEO at Purple Innovation]

I'd just like to close by saying thank you to the Purple employees all across the country that have worked so hard to stabilize this business and get it more durable.

[Rob DeMartini, CEO at Purple Innovation]

And I think we're incredibly well positioned as the market eventually improves. And I want to say thank you to our partners who have stayed with us and showed faith in our efforts. So with that, I'll close the call and thank everybody for attending.

[Operator]

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Rob DeMartini, CEO
• Todd Vogensen, CFO
• Stacy Turnof, Head of Investor Relations

Analysts

• Joseph Gonzalez, Equity Research Associate at ROTH Capital Partners
• Bobby Griffin, Managing Director and Consumer Equity Research Analyst at Raymond James
• Daniel Silverstein, Equity Research Analyst at UBS
• Bradley Thomas, Managing Director and Equity Research Analyst at KeyBanc Capital Markets