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Casper Officially Reveals How COVID-19 Impacted Their Business

Casper mattress with box

Casper Sleep (CSPR) just announced their financial results from the first quarter of 2020 that ended on March 31. Since this quarter encompassed the beginning of the coronavirus pandemic it gives us a glimpse of how the virus has affected one of the biggest names in the mattress industry (and presumably the bed-in-a-box industry as a whole).

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How did Casper respond to COVID-19?

When releasing their first quarter financial results, Casper included a section specifically on how the company is responding to the coronavirus crisis. The section, titled “Covid-19 Update & Recent Initiatives” specifically details how the mattress titan is dealing with the current situtation.

According to Casper, the company has developed “preparedness plans” to “help protect the safety of our employees and customers, while safely continuing business operations.” The company didn’t go in to details about what exactly their preparedness plans consist of, so it’s reasonable to assume that this is corporate PR speak for “we didn’t have a plan and now we’re making shit up so we sound like we were prepared”.

Casper’s home offices were severely affected by the disease.

“Due to the global spread of the outbreak, the severity of the pandemic in New York and California where we have corporate offices, and in line with guidance from public health officials, we have temporarily restricted access to our offices and implemented a mandatory remote work policy during this period. Our offices will remain closed until we are able to safely and responsibly re-open them in accordance with governmental and public health guidance,” the company stated.

The company also mentioned that their physical retail stores have been closed since March 17, meaning that all of their revenue since has came from their e-commerce presence.

Casper plans to offer “virtual consultations” from retail stores starting this week

Casper will open their physical stores using a phased approach beginning this week. The company announced that they will begin “virtual consultations” from select stores starting this week as the first phase of their reopening plan.

The second phase of Casper’s reopening plan will be one-on-one appointments in their stores so consumers can actually try out their mattresses before they buy. The third phase will the “curbside pickup” phase. Casper didn’t give any details about a timeline for when these phases will be implemented other than “once we are able to responsibly do so in accordance with government and public health guidance,” which is a reasonable strategy given these uncertain times we’re living in.

The company will reduce the number of new retail store openings in 2020 and are expecting total capital expenditures to be under $15 million.

How the pandemic affected Casper’s supply chain

Casper announced that some of their suppliers had to temporarily shutter their factories but that the impact on their operations was minimal.

From the announcement:

“With respect to our supply chain, we have worked with our manufacturing, logistics and other supply chain partners to build communication and monitoring processes for all aspects of our product and delivery supply chain. To date, while certain of our suppliers have temporarily shut down their facilities due to the COVID-19 outbreak, we have experienced only minor impacts to our inventory availability and delivery capacity since the outbreak, none of which has materially impacted our ability to service our customers, due in part to the new suppliers and increased sourcing capabilities we on-boarded throughout 2019 and into 2020.”

Casper is laying off employees to deal with the crisis

As we previously reported, Casper was forced to lay off 21% of their corporate workforce, mainly in North America and Europe. The reduction in personnel affected 80 of their corporate employees.

Casper revealed that they wound down their European operations on April 21, 2020. The wind down is expected to be completed by the end of the year. The company hopes to achieve $10 million in annualized savings from the initiative and will incur $1 million in employee expenses.

“Coupled with the $116.1 million in cash and cash equivalents on our balance sheet as of March 31, 2020, we believe these restructuring initiatives will further strengthen our balance sheet position and provide us with the flexibility and resilience to weather the COVID-19 pandemic,” the company stated.

Changing consumer behavior

“We are also carefully monitoring shifting consumer behavior from physical retail stores to our online platform. As of the date of this press release, we have observed continued strength in our e-commerce sales since the end of the quarter ended March 31, 2020, due in part to changing consumer behavior during the COVID-19 pandemic and a multi-year high in e-commerce marketing efficiency due to recent declines in advertising costs,” Casper said in their earnings announcement.

Since many mattress consumers are afraid to buy a mattress during the coronavirus pandemic, it seems like many of them have opted to purchase their bed sight-unseen from bed-in-a-box companies like Casper. Is this a permanent shift in consumer behavior or is it merely a temporary response to an unprecedented disaster?

Casper doesn’t know either. “It remains uncertain, however, whether these trends will continue as the pandemic and the responses to it evolve,” the company said.

Retail partners make up a huge percentage of Casper’s revenue, and fortunately for the company it seems like those partnerships have held up throughout the crisis.

“In addition, while certain of our retail partners have temporarily closed their stores due to the COVID-19 pandemic, we have not experienced a material impact on retail partnership sales, as our online sales with retail partners have remained stable and the majority of our largest retail partners’ stores have remained open for business. Further, we have not experienced any material issues to date with respect to our accounts receivables from our retail partners, nor have we needed to materially increase our allowances for accounts receivable balances. We are, however, continuing to work closely with our retail partners to monitor the situation,” Casper revealed in their earnings announcement.

Casper left us hanging with an uncertain conclusion regarding their 2020 financial guidance.

“At this time, there is significant uncertainty relating to the trajectory of the COVID-19 pandemic and impact of related responses. While we observed certain favorable developments in our operating results since the quarter ended March 31, 2020, there is no guarantee that such trends will continue, or that our business, financial condition or results of operations will not be further impacted by the continued spread of the pandemic. Given the evolving economic and operating environment, we will not be providing full-year financial guidance for 2020 at this time,” the company stated in their ominous conclusion.

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