Mattress Firm Reports Q1 Earnings; Eyes Acquisition Costs

Shares of Mattress Firm MFRM traded up two percent Wednesday following its first quarter earnings release and conference Tuesday.

Below are some of the highlights and key takeaways:

Sales and Store Growth:

• Very encouraged by the steps it has taken to grow the business, evidenced by both its same-store and total store growth during the first quarter.
• Many of the initiatives we put in place had already started contributing positively as we move into the important summer selling season.
• Our growth during the first quarter was highlighted by a strong net sales increase of approximately 21 percent.
• Our third consecutive quarter of positive same-store growth.
• The completion of three acquisitions during the quarter that added 92 stores and the signing of a fourth acquisition that is expected to add approximately 75 stores.
• Company currently has 1300 units.
• Our acquired stores continued to outpace the overall chain as demonstrated by their approximately eight percent same-store sales growth.
• Comparable store sales growth of 4.3 percent was comprised of a 3.9 percent increase in unit sales and a 0.3 percent increase in AUP.
• Sales of specialty mattress products comprised 40.9 percent of our net sales, compared with 47.0 percent during the prior-year quarter.
• Sales of conventional mattresses comprised 49.1 percent of our net sales, compared with 44.0 percent during the prior-year quarter.

Acquisitions:

• The company borrowed $100 million in incremental term loans during the first quarter under our senior credit facility to fund recent acquisitions
• Also too repay $21 million of outstanding revolver borrowings.
• On April 25 of this year, the company entered into an agreement to purchase the mattress retail operating assets of Mattress Liquidators, Inc. consisting of approximately 75 stores.
• Acquisitions have resulted in an initial drag on gross margins as we integrate and convert the acquired stores.

Share Repurchases:

• The total purchase price was approximately $65 million, which remains subject to customary post-close purchase price adjustments.
• Mattress Firm delivered 71,619 shares of its common stock to the seller as payment for $3.25 million of the aggregate purchase price