Mattress manufacturer Purple Innovation is shutting down its production facilities in Salt Lake City and Grantsville, Utah, and plans to centralize its mattress production in a single factory located in Georgia.
This restructuring will also involve corporate layoffs and the termination of operations at its Utah locations. The transition to the Georgia facility is projected to finish by the end of this year, with the Utah sites expected to close by the end of the first quarter of 2025.
Key Takeaways
- Factory Consolidation: Purple Innovation is shutting down its production sites in Salt Lake City and Grantsville, Utah, to consolidate manufacturing at its Georgia facility. The project is expected to be completed by early 2025.
- Corporate Layoffs: The restructuring will lead to Purple Mattress layoffs, affecting fewer than 300 employees. The company offers impacted staff the option to relocate to Georgia with full financial relocation support.
- Cost-Cutting Measures: The company estimates that the restructuring will cost $35 million to $45 million but will save $15 million to $20 million annually in EBITDA.
- Focus on Innovation and Expansion: While reducing costs, Purple reinvests in technology and marketing to drive long-term growth, emphasizing its “Path to Premium Sleep” strategy to increase market share and improve profitability.
Source: Yahoo Finance
Purple Innovation’s Strategic Restructuring and Operational Improvements in 2024
Purple Innovation, a mattress manufacturer, has struggled financially over the past year. In 2023, the company’s revenue fell by 10.9% to $510.5 million, while operating expenses increased by 13.8% due to higher costs. The company saw a consistent decline in sales across seven quarters before showing some signs of recovery towards the end of 2023.
In the second quarter of 2024, Purple Innovation broke even, a significant recovery from a $50 million net loss in the previous quarter. This recent performance indicates operational improvement, with the operating loss reduced to $14.5 million from $40.3 million in the same quarter last year. Total revenue for the quarter increased by 2% to $120.3 million. Wholesale sales increased by 7.2%, though direct-to-consumer sales fell by 1.8%.
Throughout 2024, the company has focused on reducing costs to alleviate cash flow issues and enhance profit margins. As part of its strategy to streamline operations, the mattress manufacturer will shut down its production sites in Salt Lake City and Grantsville, Utah, with plans to complete these closures by the first quarter of 2025. Manufacturing consolidation will take place in its Georgia facility.
Additionally, Purple plans to open a distribution center in Utah in February to handle light assembly tasks. All manufacturing processes will be transferred to the 850,000-square-foot facility in McDonough, Georgia. Alongside shutting down its factories, Purple is also cutting jobs at its corporate headquarters. Rob DeMartini, Purple’s CEO, informed Furniture Today that the restructuring will impact fewer than 300 employees.
Rob DeMartini, CEO of Purple, stated that these changes are crucial for enhancing operational efficiency and will allow the company to reinvest in technology and marketing efforts to expand the market. Over the past year, Purple has achieved cost savings through enhanced manufacturing and supply chain management. DeMartini expressed confidence that manufacturing consolidation sites are vital to advancing their Grid technology and reinforcing their “Path to Premium Sleep” strategy. This strategy aims to achieve positive cash flow and increase market share over the long term.
Discussing the Purple Mattress layoffs, Rob mentioned that today marks a difficult day for those adversely affected. He noted that there is significant enthusiasm for the company and its activities. DeMartini mentioned that Purple has allowed employees to move to Georgia, where their job status, salary, and seniority would be preserved. The company is also providing full financial support for relocation.
Although Purple Innovation is shutting down its manufacturing operations in Utah, it will keep its headquarters in Lehi, Utah, and continue its research and development activities at its Draper-based Innovation Center. The company has also announced plans to establish a new distribution center in Utah and will maintain four showrooms in the state.
Rob clarified that this strategy is not about defense but about aggressively investing in innovation and marketing to better position the company for increased demand. He admitted that he had been mistakenly waiting for the market conditions to improve, which did not happen. As a result, they will boost their spending on marketing and innovation starting today.
The Georgia plant, which opened in 2020, represents Purple’s initial venture outside Utah. It incorporates production, fulfillment, and customer service functions. Situated approximately 30 miles southwest of Atlanta, the facility underwent an expansion one year following its inauguration.
DeMartini explained that the expansion is not driven by financial necessity; the company is not running low on funds. Instead, he pointed out that their financial reserves are stable and that the existing facility can support a tripling of their business volume.
He further highlighted that the Georgia site is newer and larger, potentially expandable to one million square feet, and it is the production location for Purple’s innovative new grid technology.
Purple Innovation has presented its employees affected by these changes the opportunity to transfer to the Georgia facility, assuring them that their roles, salaries, and seniority will remain intact. The company has pledged to cover all relocation costs. Additionally, as mandated by the U.S. Worker Adjustment and Retraining Notification Act, employees affected by these changes will receive severance based on their tenure. They will continue to receive compensation until October 22, despite ceasing certain operations on October 1.
The company estimates that the restructuring will incur costs ranging from $35 million to $45 million from the third quarter of 2024 to the second quarter of 2025, including $26 million to $32 million in non-cash charges due to equipment disposals and other adjustments. These cost-cutting measures are expected to result in annual EBITDA savings of $15 million to $20 million.
About Purple Innovation
Image source
Purple Innovation, Inc. is a company based in the United States that creates and produces sleep-related products and other items domestically and internationally. Under the Purple brand, the company offers various products, including mattresses, cushions, pillows, sheets, bases, adjustable bases, mattress protectors, duvets, blankets, seat cushions, duvet covers, and pet beds.
Purple Innovation distributes its products through several channels: its e-commerce platforms, physical retail and wholesale partners, third-party online retailers, and dedicated Purple showrooms. Additionally, products are available on its website, Purple.com. The company, established in 2010, is headquartered in Lehi, Utah.
Conclusion
Purple Innovation’s decision to close its Utah manufacturing plants and centralize operations in Georgia represents a significant restructuring to improve efficiency and reduce costs. Despite the Purple Mattress layoffs and the operational changes, the company remains committed to innovation and enhancing its market position.
By consolidating its production and reinvesting in technology and marketing, Purple aims to recover financially and increase profitability in the long run. These changes are intended to streamline operations while maintaining core functions like research and development, ensuring the company remains competitive in a challenging market.
