The remarkable rise of Mattress Firm
The combination of acquisitions, new unit expansion and same-store sales growth enabled Mattress Firm to achieve record third quarter results and the company’s biggest deal ever is expected to close in 2016.
Mattress Firm has been on a buying binge the past few years. It has opened stores at a rapid pace and grew same store sales 3.8% during the quarter ended Nov. 3., on top of an 8.5% comp increase during the third quarter the prior year. That combination of acquisitions, new unit expansion and improved productivity enabled the nation’s largest mattress retailer to grow sales by 51% to $700 million and increase net income to $23.9 million from $15.6 million. The company opened 87 new stores in the third quarter to end the period with a total of 2,295 locations.
“Our third quarter adjusted (earnings per share) grew 17% from the prior year, as we continue to execute on our plan and integrate the nine acquisitions, totaling over 600 stores, that we completed in fiscal 2014,” said Steve Stagner, CEO of Mattress Firm. “Our Sleep Train business continues to perform extremely well with strong sales growth as we convert the Mattress Discounters stores to the Sleep Train banner. With our recently streamlined organizational structure and initiatives in place, we believe we are well-positioned to execute on our growth strategies and capitalize on our relative market share strategy.”
The company’s growth strategies consist of more new stores and the recently announced acquisition of its largest competitor which could create the first truly national specialty retailer of mattresses and related products. By year end, Mattress Firm expects to increase its store count by 250 to 270 units, compared to a net increase of 201 units last year. A huge surge in the company’s store count is expected to come during the first half of 2016 when more than 1,000 locations are added as a result of the acquisition of Sleepy’s parent company HMK Mattress Holding. Sleepy’s is the nation’s second largest specialty mattress retailer with more than 1,050 stores and Mattress Firm announced on Nov. 30 that it had agreed to pay $780 million to acquire HMK.
“This transformational acquisition unites the nation’s two largest mattress specialty retailers, providing customers with convenience, value and choice through our truly border-to-border and coast-to-coast, multi-brand retail stores and distribution network,” Mattress Firm CEO Stagner said when the deal was announced. “The acquisition of Sleepy’s is an important next step in building our national store network, and expands our footprint into major markets in the Northeast and Mid-Atlantic. With pro forma sales of over $3.6 billion through approximately 3,500 retail locations in 48 states, our combined company will be able to further benefit from national scale in key areas including distribution, customer delivery, advertising, sourcing and procurement, and operating expenses.”