What happened

Actions of Casper Sleep (NYSE: CSPR) fell on Monday morning, after the company released its results for the third quarter of 2020. Management said demand for its mattresses was strong, but problems in its supply chain did not help the company take full advantage of it. Investors didn’t like it, which caused the stock to drop 19% at 11:30 a.m. EST.

So what

For the third quarter, Casper’s revenue was down 3.3% year-over-year to $ 123.5 million. According to management, website traffic was at an all time high. But some of his foam suppliers didn’t have what they needed to make it, which resulted in the sale of many Casper mattresses. Management said it was an industry-wide problem.

However, a quick glance at the results of other mattress manufacturers gives a different perspective. Violet innovation, Sleep number, and Tempur Sealy International all reported year-over-year revenue growth in their third quarters, although investors should note that Purple has better control of its supply chain since its mattresses are made in-house.

For its part, Sleep Number noted in its third quarter earnings call: “Although supplies are tight, we did not experience any significant disruption for our customers in the third quarter. And Tempur Sealy management, on its third quarter conference call, said the company had increased revenues, “despite the significant impact of supply chain constraints on our operations.”

Now what

Casper says supply chain issues are now in the rearview mirror and shareholders are certainly hoping that’s true. This growth stocks is still operating at a loss ($ 7.2 million net loss in the third quarter) and needs to grow revenue quickly to justify its sales and marketing expenses. For example, the company spent $ 42.6 million on sales and marketing in the third quarter, or 34.5% of its revenue. It is a significant expense, especially when there were no products to sell.