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Sleep Country: Growth Catalysts And Attractive Dividend Outweigh Risks

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Value Alpha


  • Sleep Country is the leading specialty retailer of mattresses and sleep accessories in Canada.
  • The company delivered solid top-line growth in Q3-19; however, slow same-store growth is a concern.
  • There are several potential catalysts that can aid future growth, and with the company's market leadership position, it can take full advantage.
  • Shares are fairly valued; however, the dividend yield is quite attractive with no threat of a dividend cut.
  • Investors should consider establishing a long position.

Investment Thesis

Since our last article, Sleep Country (OTCPK:SCCAF) has delivered decent Q3-19 results and has various catalysts at its disposal to continue growing. Having said that, there are some areas of concern such as organic same-store growth and a general slowdown in the industry. The stock price has taken a bit of a plunge and is currently trading at a fair valuation. Given the current valuation and the attractive dividend yield (~4.2%), which we feel is quite safe, investors should consider establishing a long position.

Stock price since last article; Source: Yahoo finance

Company Overview

Founded in 1994 in Vancouver, Canada, the chain has since grown to over 275 stores across Canada. The company’s products consist of top brands geared towards providing a better sleep with the main source of revenue being mattress sales. The other product category sold by the company is sleep accessories including pillows, duvets, sheets, headboards, frames, mattress protectors, pillow protectors.

Sleep Country is Canada’s largest mattress retailer and the only retailer in Canada to offer Sealy, Serta, Simmons, Kingsdown, Tempur-Pedic, Dormeo, Bloom™ and Sunset Collection beds all under one roof. The company has ~31% national mattress market share and reaches customers through its retail stores and e-commerce platforms. The company operates under 3 mattress banners and has 17 distribution centers across all major Canadian provinces. Sleep Country’s stores average approximately 5,000 square feet and are all corporate-owned.

Sleep Country's national footprint; Source: Investor Presentation

In Q2 2017, the company launched its new e-commerce platform and the Bloom™ brand in response to the growing popularity of online mattress sales and new online-only vendors chipping away at market share. This ultimately culminated in the acquisition of Endy which was arguably the most popular online-only mattress brand in Canada. This has also allowed the company to reach more

This article was written by

Value Alpha profile picture
Many years of strategy, M&A and finance/accounting experience in various business lines including technology, services, healthcare, telecom and banking.I tend to focus on fundamental analysis (price x quantity) to identify potential mispricing situations. Also lean towards companies that have multiple growth levers available to them which are not being priced in by the market.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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