Utah-based Purple Innovation is Closing its Two Manufacturing Plants in Utah, Will Layoff Approximately 13% of its Staff, and Expects Restructuring Costs of $35 Million to $45 Million

Purple will consolidate its manufacturing operations to its 520,000-square-foot facility in McDonough, Georgia facility (which it opened in 2020).

With this restructuring, Purple has laid-off employees from its Lehi, Utah headquarters and expects to shutter its Grantsville, Utah and Salt Lake City plants sometime in Q1 2025, with ~220 total employees being dismissed.

Following these actions, Purple expects to generate $15 million to $20 million annually in increased EBITDA starting in 2025.

Lehi, Utah-based Purple Innovation (NASDAQ:PRPL) is shuttering its two manufacturing plants in Utah, will lay-off approximately 13 percent of its staff (~220 workers), and expects to incur restructuring costs of between $35 million to $45 million.

According to Purple's news release about these moves, the company will consolidate "... its mattress production operations into its McDonough, Georgia facility and (will correspondingly close its) two manufacturing facilities in Salt Lake City and Grantsville, Utah."

In Purple's Form 8-K filing with the U.S. Securities and Exchange Commission about these activities, Purple wrote that it:

• Has "... reduced headcount at its Lehi, Utah headquarters to additionally drive operating efficiencies" (which it reported was completed 22 August 2024); and
• Expects to reduce its total headcount by approximately 13%.

Based upon the fact that Purple reported in its most recent Annual Report that it had ~1,700 employees (as of 12 March 2024), that means Purple has eliminated (or will eliminate) roughly 220 positions in this restructuring.

The closure of Purple's Utah manufacturing facilities is expected to happen sometime in the first quarter of 2025 (ended March 31).

According to both its news release and Form 8-K, Purple expects these actions will result in "... restructuring-related costs and charges of $35 million to $45 million," specifically

• "$4 million to $6 million related to employee terminations,
• "$5 million to $7 million in wind-down expenses related to the closure of the Utah manufacturing facilities and relocation to the McDonough, Georgia facility and
• "$26 million to $32 million in non-cash charges related to disposition of equipment and other write downs."

Purple also "... estimates it will incur future cash expenditures in the range of $9 million to $13 million related to the restructuring."

According to Rob DeMartini, Purple's CEO,

"This decision was not made lightly. Over the past year, we have driven savings through manufacturing efficiency and supply chain initiatives, and we are confident that the consolidation of our manufacturing footprint is an important step to ... set Purple up for positive operating cash flow and market share growth over the long-term."

Following the layoffs and manufacturing consolidation, Purple expects that it will produce between $15 million to $20 million in incremental new Earnings Before Income Tax, Depreciation and Amortization (EBITDA) on an annualized basis, starting in 2025.

According to its news release, the company plans to keep its headquarters in Utah.

Purple also reported in its news release that it plans "... to open a new distribution center in Utah," but where or when was not disclosed.

A Bit of Financial Context

To provide some context to this news, according to Purple's 2023 Annual Report,

• Purple had a net loss of ~$120.7 million in 2023 (ended 31 December) on net revenue of $510.5 million, versus
• A net loss of ~$92.5 million in 2022 on net revenue of ~$573.2 million.

In other words, its revenue dropped by nearly 11% on a year-over-year basis, while its net loss grew by nearly one-third ... in one year.

Additionally, as of the end of trading yesterday, Purple's common stock closed at $1.29/share, giving the company a market capitalization of ~$138.9 million.

That's down from an all-time high of $40.05/share on 16 February 2021, which is simply a staggering drop in share price.

Bottom line, tough times in the Purple ecosystem, and for the roughly 220 people who have been let-go or are awaiting the fall of the HR axe.

Given that Utah's unemployment rate stood at 3.2% for July 2024, hopefully each of those individuals who were/are caught in Purple's Reduction In Force will be able to find new work opportunities quickly.

Thoughts and prayers, y'all. 🙏 🙏 🙏

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