Casper CEO: ‘We’re still very bullish on the retail store experience’

Yahoo Finance’s Alexis Christoforous and Brian Sozzi speak with Casper CEO Philip Krim about the company’s latest earnings report, and future outlook.

Video Transcript

BRIAN SOZZI: Let's just say Casper sold more than a few mattresses in the second quarter as consumers upgraded their bedroom during their work-from-home life. Joining us in a first on Yahoo Finance interview chatting the company's earnings out this morning is Casper Co-Founder and CEO Phil Kim. Phil, good to-- always good to speak with you. Appreciate you taking the time this morning here.

You guys, your sales were up in the second quarter 15.7%. You pulled forward, I think, or at least reiterated your profitability timeline. Anything you could point to why the stock would be down? To me, it seems as though you checked a lot of buttons off.

PHILIP KRIM: Thanks for having me, Brian. Always good to chat. Yeah, not sure why the stock's doing what it's doing. We delivered a really strong second quarter. We grew our business 16% globally, 18% in North America. Our retail partnership business was up 61% in the quarter, well ahead of expectations on adjusted EBITDA. So we feel like the business performed really well. Our team came through the COVID crisis and delivered a strong quarter. And long term, we think we're really well positioned to continue to build the world's first sleep brand.

BRIAN SOZZI: And, Phil, you're still on track for that middle of 2021 EBITDA profitability?

PHILIP KRIM: We are, and we talked about being on track there, but I would say we're ahead of expectations on how we're going to get there. So we obviously had a strong second quarter, well ahead of our expectations. And so we think we're marching our way into profitability, very quickly and are well positioned to continue to be a very dynamic company in this consumer backdrop.

ALEXIS CHRISTOFOROUS: And part of that business model, Philip, is all of these partnerships that you're forming. You just announced that you're going to be able to find Casper mattresses at Sam's Clubs and Ashley Furniture stores. Also I think two other furniture and mattress retailers will be carrying your items. What does that do for the brand? But also I would imagine it helps not have to open up your own brick-and-mortar stores to get that footprint.

PHILIP KRIM: Yeah, Alexis, we're really excited about the partnerships that we announced this week, which you mentioned-- Ashley Home Stores, Sam's Club, Denver Mattresses, and Mathis Brothers. And they're added to great retailers that we've had a longer relationship with, folks like Costco, Target, Amazon, and others.

And what this does is it allows us to help build our brand, which we're still a young brand and business. We've only been in business a little over six years. And so whether it's leveraging the 85 million Costco members who are now seeing our products in all of their warehouses or leveraging the relationships that we'll have through Sam's and Ashley, who are two of the top-five biggest sellers of mattresses in the country, all of this helps us build brand awareness.

But we think it's complementary to our owned-and-operated retail stores. So we're excited with the 60 stores that we have online today. We think our retail stores offer an elevated experience to shop for mattresses unlike anything else in the ecosystem of home furnishings. And we think our retail stores are going to continue to be a great point of customer experience and a great way for us to build our brand and business.

ALEXIS CHRISTOFOROUS: So are the stores-- and I'm surprised to hear this, only because during this pandemic, especially with more people shopping from home and the expensive brick and mortar, have the stores become an increasingly vital part of business for a direct-to-consumer business model such as yours?

PHILIP KRIM: You know, I think it's important to point out that buying a mattress is a highly considered purchase. It's hugely impactful to people's lives. People are spending a third of their life on a mattress. And so that's where I think the stores are still a really important part of the overall shopping experience. Not so much in Q2 where our stores were largely closed because of the COVID pandemic, but long term we're still very bullish on the retail-store experience and that consumers are going to want to try these products out.

And that's why launching with trial partners like Denver Mattress and Mathis Brothers as well as continuing to expand our footprint-- we just opened a store in Las Vegas-- and trying to build a national presence of stores is really accretive to the overall customer experience because consumers want to make a well-informed decision. They want to shop online to get smarter. They want to shop offline to try these products. And ultimately, we think these all work together in a very synergistic way for consumers.

BRIAN SOZZI: Phil, I've been in the market the past month for some big-ticket home goods-- a new fridge that's going to take me a month to get, three weeks for a dishwasher. Have you seen capacity constraints? It seems to be impacting a lot of the larger-ticket people, and the delivery times have been extended.

PHILIP KRIM: You know, unfortunately, our delivery times are a bit extended from our normal one- to three-day delivery window. And this is in part just an e-commerce problem. You know, UPS, FedEx, and delivery companies are having trouble keeping up with the surge in e-commerce demand, broadly speaking, and it's a bit of a supply-chain challenge. We didn't expect to see the demand that we saw happen, especially in the second half of Q2 and into Q3.

And so given the strong demand, it's going to take us a little bit to catch up on the supply chain, and we continue to monitor that. We don't want our customers staff to wait to receive our products, and so we're trying to increase capacity. But this is something that I think it's going to take a little time for just the e-commerce network overall to adjust to, this new normal for consumer shopping online.

BRIAN SOZZI: Phil, when we talked back in March-- it feels like yesterday-- I know product innovation remains top of mind for you and the company. Where else are you looking to go into over the next 12 months? I know you've dabbled in some new areas. Can you still get product innovation to market in this type of environment?

PHILIP KRIM: You know, we've seen strong consumer demand for other products that Casper offers outside of the mattress. We have an expanded pillow line where we've expanded that this year, and our pillow business has been doing exceptionally well, and we're going to continue to expand that both online and offline with additional partners.

And so we're seeing people look for sleep products holistically. We think that this is a part of people focusing on health and wellness, people wanting to invest in a great night of sleep. We have some exciting products that are coming down the pipeline.

But I think that the focus now has been offering expanded products that help people feel great at home. We call it a cocooning effect. Our weighted blanket has been selling really well, and that was really popular during the last holiday period in 2019. We think that's going to be another big seller. Our glow light is one that continues to sell really well that creates a really nice bedroom environment. And we think that demand for sleep products is going to continue as people emphasize sleep as part of their overall wellness routine.