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.
The Motley Fool owns shares of Lumber Liquidators Holdings. Motley Fool newsletter services have recommended buying shares of Lumber Liquidators Holdings and Select Comfort. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.