Mattress Firm Announces Second Fiscal Quarter Financial Results
Furniture Industry News Update -
Furniture World Magazine
Mattress Firm Holding Corp. announced its financial results for the second fiscal quarter (13 weeks) ended July 31, 2012. Net sales for the second quarter increased 45.6% to $262.0 million, compared to $179.9 million in the second quarter of 2011, reflecting comparable-store sales growth of 5.0% and an increase in store units from new store openings and acquisitions. The Company reported second-quarter GAAP earnings per diluted share ("EPS") of $0.30. Excluding $5.9 million in acquisition-related costs attributable to the acquisition of the equity of MGHC Holding Corporation (Mattress Giant), which closed on May 2, 2012, adjusted earnings per diluted share ("adjusted EPS") for the second fiscal quarter were $0.42 compared with $0.16 in the second quarter of 2011. See "Reported to Adjusted Statements of Operations Data" below for a reconciliation of net income as reported to adjusted net income.
Steve Stagner, Mattress Firm's president and chief executive officer commented, "Our performance demonstrates the tremendous capacity of this organization as we successfully integrated and absorbed levels of growth unprecedented in this industry in such a compressed timeframe, while achieving record sales and profitability during the same period. By accomplishing this, it reaffirms that our core strategy of further penetrating our existing markets concurrently with expanding into new markets is driving market share and profitability. With sales results from Labor Day coming in at the levels we anticipated, we remain confident that our comparable-store sales trends will improve during the second half of fiscal year 2012, relative to the second fiscal quarter. Furthermore, comparable-store sales growth should accelerate in the fourth fiscal quarter with the addition of the first wave of approximately 50 former Mattress Giant stores acquired in November 2011 in the comparable-store base."
On September 4, 2012, the Company entered into an agreement to acquire the assets and operations of Mattress XPress, Inc. and Mattress XPress of Georgia, Inc. (which are referred to collectively as Mattress X-Press), including 30 mattress specialty stores located primarily in South Florida and five stores in Georgia, for approximately $15.8 million, subject to customary adjustments. The closing of the transaction is expected to occur in the third fiscal quarter of 2012 and remains subject to the prior satisfaction of customary closing conditions. The Company, which currently operates Company-owned stores in South Florida and Georgia, intends to rebrand the Mattress X-Press stores as Mattress Firm within one month of closing and expects to see the benefits of future advertising on all Mattress Firm stores in these markets. The average sales per store of the Mattress X-Press stores are comparable to the Company's overall average for Mattress Firm stores nationwide.
"The pending acquisition of the Mattress X-Press operations further fortifies our market-leading position in South Florida," stated Mr. Stagner. "The addition of the high-performing Mattress X-Press stores complements our earlier acquisition of Mattress Giant stores in the same markets. Combining these recently acquired stores with the Company's existing operations in South Florida and Georgia results in an increasingly strong presence by the Company in these markets, which we believe will lead to increased sales and profits and, most importantly, drive long-term value creation for our shareholders."
Second Quarter Financial Summary
Net sales increased $82.1 million, or 45.6%, to $262.0 million in the second quarter of fiscal year 2012. The increase in net sales was the result of comparable-store sales growth of 5.0%, adding $8.8 million in net sales, and incremental net sales of $75.3 million from the opening of new stores and acquired stores prior to their inclusion in comparable-stores sales results, with such increases offset by a reduction in net sales of $2.0 million related to closed stores.
During the second quarter of fiscal 2012, the Company acquired 181 Mattress Giant stores on May 2, 2012 for approximately $44 million, and opened 27 new stores, while closing six stores, bringing the total Company-operated stores to 957 as of July 31, 2012.
Acquisition-related costs of the Mattress Giant transaction totaled $5.9 million during the second fiscal quarter and consisted of $1.3 million classified as cost of sales attributable to duplicate warehouse facilities and costs of remerchandising the former Mattress Giant stores, and $4.6 million classified as general and administrative expenses related to direct costs of the transaction, costs of retraining Mattress Giant personnel and duplicate costs of the Mattress Giant corporate office. The acquisition-related costs, as a percentage of sales, increased cost of sales by 50 basis-points and general and administrative expenses by 175 basis-points during the second fiscal quarter. The Company has completed the majority of the transition of corporate office support functions to its Houston corporate office and continues the process of consolidating warehouse facilities, which is expected to be substantially complete by the end of fiscal 2012.
Income from operations for the second fiscal quarter was $17.6 million. Excluding $5.9 million of acquisition-related costs, adjusted income from operations was $23.5 million, an increase of $9.1 million, or 63.1%, over the prior year, and adjusted operating margin during the quarter improved 100 basis points from 8.0% in 2011 to 9.0% in 2012. This adjusted operating margin growth was driven primarily by a 25 basis-point improvement in gross profit margin and a 125 basis-point improvement in general and administrative expenses, net of a 30 basis-point expense leverage reduction in selling and marketing expense and a 20 basis-point decrease from other categories. See "Reported to Adjusted Statements of Operations Data" below for a reconciliation of income from operations as reported to adjusted income from operations.
Net income was $10.1 million in the second quarter of fiscal year 2012 and EPS was $0.30. Excluding acquisition-related costs, and related tax effects, adjusted net income was $14.2 million for the quarter and adjusted EPS was $0.42. See "Reported to Adjusted Statements of Operations Data" below for a reconciliation of net income as reported to adjusted net income.
Year-to-Date Financial Summary
For the two fiscal quarters (twenty-six weeks) ended July 31, 2011, net revenues increased $140.0 million or 42.2% to $471.8 million, from $331.8 million in the comparable prior-year period. The increase in net sales was the result of comparable-store sales growth of 10.1%, adding $32.8 million in net sales, and incremental net sales of $111.3 million from the opening of new stores and acquired stores prior to their inclusion in comparable-stores sales results, with such increases offset by a net of a reduction in net sales of $4.1 million related to stores that were closed. For the first two fiscal quarters of 2012, the Company opened 57 new stores and acquired 181 stores, while closing 10 stores.
Net income was $19.8 million for the two fiscal quarters ended July 31, 2012 and EPS was $0.59. Excluding acquisition-related costs, and related tax effects, adjusted net income was $24.7 million for the two fiscal quarters and adjusted EPS was $0.73. See "Reported to Adjusted Statements of Operations Data" below for a reconciliation of net income as reported to adjusted net income.
About Mattress Firm: Houston-based Mattress Firm is one of the nation's leading specialty bedding retailers, offering a broad selection of both traditional and specialty mattresses from leading manufacturers, including Sealy, Serta, Simmons, Stearns & Foster and Tempur-Pedic.
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