Update: Mattress Firm's Earnings Soared

| About: Mattress Firm (MFRM)


For the quarter, Mattress Firm reported revenue and earnings that skyrocketed, beating out analyst expectations, which sent shares higher on Sept. 4.

This news reaffirms my opinion that, while shares are high, the business offers investors some interesting long-term prospects.

While an acquisition was not anticipated, the possibility of strong results was indicated in my previous article.

One of the best performing stocks on Sept. 4 was Mattress Firm Holdings (NASDAQ:MFRM). After news broke that the retailer's revenue and earnings beat expectations, shares of the business rose about 12% in late morning trading. According to its press release, revenue soared nearly 36% from $302.5 million to $410 million year-over-year, coming in higher than the $406.6 million analysts anticipated. The big driver behind this growth was the increase in store count management announced, with the number of locations in operation shooting up 32% to 1,480 from the 1,121 reported the same time last year, accompanied by a 9.7% improvement in comparable store sales.

Earnings Overview
Last Year's Forecasted Actual
Revenue (millions) $302.5 $406.6 $410.0
Earnings per Share (adj.) $0.43 $0.60 $0.61
Click to enlarge

From a profit standpoint, the business did even better. For the quarter, Mattress Firm reported earnings per share of $0.41, coming in line with the $0.41 seen last year. After accounting for one-time expenses, profits hit $0.61, $0.01 above forecasts and 42% greater than the $0.43 in adjusted profits reported a year earlier. This growth was driven largely by the jump in sales the company reported, but can also be chalked up to a drop in its general and administrative expenses from 9% of sales to 6.5%.

In a previous article I wrote on Mattress Firm, I indicated that, while expectations are high, the business's long-term performance suggests that it might make for an interesting prospect. This is now especially true after the retailer announced the acquisition of Sleep Train for $425 million, which will help push its store count to around 2,000 locations. However, for those who aren't interested in Mattress Firm after its share price rose so much, Tempur-Sealy International (NYSE:TPX), a company that receives over 10% of its sales from Mattress Firm, might make for an interesting play.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.