There are apparently plenty of investors still looking for a good night's sleep.
Shares of Mattress Firm
The specialty mattress retailer -- with 640 company-owned stores and 117 franchised locations -- is making the most of two dynamic trends in the $11.6 billion U.S. mattress market.
The first wrinkle working in the industry's favor is that folks are paying up for high-end foam and air mattresses, pushing wholesale mattress prices higher at a 5% annualized clip over the past two decades. The other welcome trend in that time is that furniture retailers and department stores used to sell roughly two-thirds of all the mattresses in this country. These days, dedicated sleep retailers are selling 43% of the mattresses.
Some of the elite brands have their own stores and direct-marketing initiatives. Surely you've been swept into a late-night infomercial by Sleep Number air-chambered mattress maker Select Comfort
It's more than just a killer name. Mattress Firm stocks Tempur-Pedic, as well as the top traditional mattress brands including Sealy
There is an opportunity in this fragmented realm of geographical retailing favorites. Mattress Firm also points out that pent-up demand during recessionary downturns has led to sharp upticks in sales. History appears to be repeating itself right now. After flat revenue growth in fiscal 2009 -- and posting losses for all of 2008 and 2009 -- Mattress Firm turned a profit last year on a 14% increase in net sales. Fiscal 2011 has been even better. In its most recent quarter, net sales soared 40% on brisk expansion, timely consolidation, and an 18.6% spike in comparable-store sales.
Investors should know that this cuts both ways. Comps fell a staggering 23.7% in 2008. However, Mattress Firm is clearly timing its Wall Street debut at a time when its financials are turning up.
Specializing in one aspect of home-life improvement may be risky. Lumber Liquidators
Now that Mattress Firm is profitable and growing, it appears to be at least a short-term solution to a portfolio that tosses and turns at night.