Proprietary store traffic channel checks indicate trends further weakened for mattress sales over the crucial seasonal period. This could bode poorly for industry leader Mattress Firm (MFRM) which has seen its share price skyrocket an amazing 67% since its IPO in late 2011. Overall industry trends have been volatile in the last quarter, with industry pressures resulting in extremely negative sales trends for leading mattress resellers.
Recently, specialty bed retailer Tempurpedic (TPX) reported North American mattress sales nearly 18% lower compared with the same period a year ago. While Tempurpedic management did state it expected its consolidated sales including the Sealy acquisition to be up around 4% year over year for the second quarter, data indicates that the quarter has not gotten off to a strong start. Similar results were witnessed at the other leading specialty bed maker Select Comfort (SCSS), where comps declined nearly 9%. While Select Comfort management blamed a lapse in media buying and expected comp trends to return to positive single digits by 2H 2013. So far, store traffic patterns do not indicate an improvement has occurred.
Looking back, on the March call, Mattress Firm management guided Q1 comp trends down to low to mid single digits, so a slight erosion in sales is unlikely to hurt shares. However a failure to see sustained improvement in early Q2 would certainly be cause for concern. For the first quarter, the Street is expecting $0.36 on $276 million in revenue. More important than Q1 results however, will be commentary on early Q2 comp trends. As stated in the last call, comps are expected to be up nearly 500 basis points from the new inclusion of the former Mattress Giant stores into the comp base. On the Q4 conference call (transcript here), CEO Steve Stagner noted that the 180 Mattress Giant stores acquired in May of 2012 continue to deliver nearly 20% growth.
One challenge for Mattress Firm analysts has been attempting to normalize the comp base with volatile changes in store count. As recently as December in the fourth quarter, Mattress Firm acquired 27 former Mattress Source stores- bringing the store count up to 1057.
While analysts generally believe the industry will recover in the back half of 2013, partially due to easier comps, if no improvement is cited, shares could retreat. Most expect very low single digit unit growth, with a 2-3% boots in average unit price.