So what: Though Mattress Firm's revenue skyrocketed 61.2% year over year to $661.1 million, much of that growth was due to incremental sales from acquired and new locations -- comparable-store sales rose just 2.8% from the same year-ago period. Meanwhile, adjusted net income climbed only 13.1% to $23.8 million, or $0.67 per share. Both figures fell short of analysts' consensus estimates, which called for revenue of $663.6 million and earnings of $0.72 per share.
Mattress Firm CEO Steve Stagner explained the first half of the quarter was strong, but the second half of the quarter saw softness on renewed headwinds in oil-affected markets.
Now what: Even so, Mattress Firm increased the midpoint of its revenue guidance by $30 million to $2.53 billion to $2.55 billion -- or growth of 41% from the prior fiscal year -- thanks to the solid performance of its Sleep Train brand and anticipation of 30 incremental net new locations for the year. However, it also lowered the midpoint of guidance for adjusted earnings per share by $0.225 to a range of $2.30 to $2.45, because of a combination of the aforementioned headwinds and the discontinuation of its Mattress Pro concept. Analysts, on average, were modeling much higher full-year earnings of $2.59 per share on lower revenue of $2.5 billion.
In the end, shares look somewhat compelling trading at 14.5 times next year's expected earnings. But given Mattress Firm's recent guidance reduction, I prefer watching the stock for at least another quarter to see whether its recent weakness shows signs of persisting as top-line growth decelerates. If that turns out to be the case, I fear Mattress Firm investors will be in for more pain going forward.
