Purple plant accident and shutdown delays shipments after all

LEHI, Utah — The fatal industrial accident that Purple Innovation said temporarily shut down operations but wasn’t expected to disrupt deliveries apparently is disrupting deliveries and sales.

Ahead of a virtual investors and analyst session earlier this week, the publicly held mattress maker and retailer updated its near-term outlook “to reflect isolated challenges that negatively impacted net revenue, gross margin, and adjusted EBITDA,” it said in a release.

It now expects second quarter 2021 net revenue to be between $175 million and $185 million, down from previous guidance of Q2 revenue in the $200 million to $210 million range. And it altogether withdrew its adjusted EBITDA guidance for the quarter, which was between $21 million and $25 million. It also withdrew full-year guidance (after earlier having increased its guidance for 2021 net revenue to the $860 million to $900 million range).

The reason: “isolated production challenges,” it said. “During the second quarter, following an accident and resulting safety improvements involving the Mattress Max machines, the company experienced production challenges caused by unanticipated mechanical and maintenance issues encountered bringing the machines back online,” it said.

Purple now projects “significantly reduced production levels for approximately 10 weeks causing shipment backlogs that will impact both second and third quarter revenue.” It expects production to be fully back online by mid-July.

That’s a different take than a Purple spokesperson offered in May, following the accident at its Utah operation and after Home News Now had learned the company was warning some retailers that the temporary shutdown could delay shipments. Purple denied this at the time.

In the May statement to HNN, Purple confirmed it had “temporarily paused areas of our production facility in Grantsville, Utah, and McDonough, Ga., to investigate the accident as well as install additional safety equipment and procedures to prevent similar accidents from happening again. … “However, at this time we do not expect our customers to be impacted and have not contacted customers regarding delays in shipments.”

While it’s now warning of backlongs that will affect revenue on into the third quarter, in the more recent public release Tuesday before the investors event, Purple said it doesn’t expect an impact on its plans to complete the previously announced addition of more Mattress Max machines and “is confident that these issues are an isolated event and will have no impact on its ability to scale beyond 2021.”

“Despite the recent challenges, management looks forward to sharing the company’s three- to five-year plan for growth with the analyst and investor community.” Among other things, it said it will outline its plans to hit $2 billion to $2.5 billion in annual revenue over the next three to five years.

Purple’s stock closed down about 4% on the update and after the investors session Tuesday, but has since rebounded.

Clint Engel

Clint Engel is a veteran home furnishings industry journalist and executive editor of Home News Now. Please share your feedback with him at clint@homenewsnow.com

View all posts by Clint Engel →

Leave a Reply

Your email address will not be published. Required fields are marked *

Subscribe to our Newsletter for breaking news, special features and early access to all the industry stories that matter!

Sponsored By: