Front Page: Casper

“What Nike did for exercise, what Whole Foods did for organic foods, we want to do for sleep.” ~ Philip Krim, CEO of Casper

Overview

As a part of the direct-to-consumer model family that’s been disrupting nearly every industry, Casper, to put it simply, delivers comfortable mattresses directly to the end user. In addition to mattresses, they also sell other sleep products online, such as pillows, bed frames, bedding accessories, and other gifts. Launched in 2014 by founders Philip Krim (now CEO), Neil Parikh, T. Luke Sherwin, Jeff Chapin, and Gabriel Flateman, Casper later filed their S-1 in January 2020 and went public on February 6 of 2020 after raising close to $340 million all the way through a Series D round.

Stats

Here are some stats that best represent Casper’s growth:

• Gross margin has risen from 42.8% in 2016 to 47.9% in the last 4 quarters
• Returns made up 15.4% of gross sales in 2017, 18.4% in 2018, and 20.4% in the first three quarters of 2019
• 48 stores opened with plans to get to 200; it generates $1600 in revenue per square foot
• Grew 12% in revenue 2018 from $229 million to $259 million
• There is only a 16% repurchase rate and a 14% first-year repurchase rate – this means only 2% of customers end up purchasing from Casper after a year has passed

Differentiators

The good thing about Casper is that it currently holds the majority of the market share when it comes to D2C ecommerce. The reason Casper has been able to position itself as well as it has is because of both the lack of innovation with the more traditional retailers and manufacturers (Mattress Firm, Tempur-Pedic, etc) and that it was an early player in the ecommerce movement (although they are opening up more and more physical stores). In addition to this, Casper has been able to go past just selling mattresses and into other categories of sleep, which has allowed it to expand its revenue streams. By being in a market where repurchases on mattresses are extremely low, having multiple other products helps vastly.

Funding / S1 Info

Basic Fundraising / IPO Timeline:

• January 2014 – Raised $1.85 million in its first round of funding
• April 2014 – Casper officially launches
• August 2014 – $13.1 million in series A raised
• June 2015 – $55 million in Series B raised
• June 2017 – $170 million in Series C raised
• Early 2019 – $100 million in Series D raised; valued at $1.1 billion
• January 2020 – Casper files S-1 with SEC with intent to go public
• February 6, 2020 – IPOs at $12/share with market value of $476 million

Reasons to Worry

Casper is a great example of a market leader in a bad industry. In an industry where repurchases of the same product don’t happen for several years at a time, it can be tough to generate a significant amount of revenue over a long period of time. Even though Casper does diversify when it comes to its products and partnerships, it seems like that may be the best way to sustain its current position. Another thing to point out is that Casper continues to the trend of being a big-name brand that isn’t profitable but has decided to become public anyway. The market, like it’s done with previous companies in this position, has brought the sleep company back to earth – Casper started with a $1.1 billion market valuation before the IPO, and after the end of the first day, the stock went from $14.50 a share to around $13.50. The valuation also went down to less than $500 million, more than half of what it was originally valued at before ringing the bell.

Conclusion

Like many of the other companies in this position, I remain skeptical about the future of Casper from a performance standpoint. It’s extremely difficult to sell mattresses, so relying on other products and partnerships with other retailers is going to be a heavy focus. The good thing is that Casper is just innovative enough to leap ahead of the traditional retailers and manufacturers and carve out its own path. However, the lack of profitability is something that the public investors don’t like and hence it’s lackluster IPO. It will be interesting to see how Casper performs one year from today, but based on current standings and the market they play in, it will be difficult to keep up their pace.