3Q sales, earnings climb for SCC
TORONTO – Sagging same store sales were the only blight on an otherwise sterling third quarter for Sleep Country Canada Holdings, this country’s single largest bedding retail specialist and parent company to both Sleep Country and Dormez-Vous?
The publicly-held merchant noted the three months ended 30 September represented its 21st consecutive quarter of growth and was bolstered by upticks in both mattress and accessory sales as well as the addition of 16 stores – including four mall-based stores – during the prior 12 months.
Sales for the third quarter was $183.9 million, up 4.4% from the $176.2 million for the three months ending 30 September 2017. Same store sales were up a marginal 0.2%, which some analysts attributed to a number of factors including waning consumer confidence and a general softness throughout the industry over the summer months.
Mattress revenue was $146.2 million, up 2.4% from $142.8 million for the comparable period.
However, accessories revenue saw double digit growth of 12.8%, rising from $33.4 million last year to $37.7 million. The company attributed the climb to a more diverse product assortment, boarder price segmentation, e-commerce growth and greater browser-to-buyer conversation thanks to the SCC web site’s enhanced design.
Senior management also noted the third quarter also saw the launch – in mid-September – of the company’s All for Sleep campaign as well as a shift from traditional radio and print advertising towards more comprehensive digital marketing that aligns with changing consumer media habits.
Net income for the third quarter was $23.7 million or 64 cents per share, compared to $22.8 million or 61 cents per share – up 4.9% on a per share basis.
“While this quarter was successful in profitability measures and we were pleased with growth in many areas of the business, same store sales growth was lower than we expected.” SCC chief executive officer Dave Friesema said in a statement. “Sales growth varied on a regional basis even though Sleep Country executes the same operational and marketing strategies across the country. We were particularly happy with the results of our new stores that opened in 2017 and 2018 and together with online growth, our business contributed to a positive quarter.”
For the nine months that also ended 30 September 2018, revenues increased 6.8% to $462.9 million from $433.3 million for the same period last year. Same store sales for the year-to-date were up 2.9% on top of the 8.6% from last year.
“A major factor in the continued growth of SSS was borne from the enhanced store design, first introduced in certain existing stores in the latter half of 2014,” the company said. “To date, 83 of the company’s stores have been renovated with this enhanced design and have, on average, achieved higher SSS than other stores in their regions since their respective reopening dates.”
Mattress revenue increased 5.4% to $370.4 million compared to $351.2 million for the 2017 year-to-date, while accessories revenue grew 12.7% to $92.5 million compared to $82.1 million at the comparative time last year.
Net income for the nine months was $46.3 million or $1.25 per share, compared to $44.4 million or $1.18 per share for the comparable period – up 5.9% on a per share basis.
Looking ahead, Friesema said he was confident and enthusiastic about the company’s potential over the coming months into 2019.
“As we enter the final months of 2018, we are confident that we are well-positioned to grow our share in both the mattress and accessory categories, generate strong free cash flow and achieve our key initiatives,” said Friesema, noting that SCC will open more than the 17 stores this year than the guidance they issued last month called for. Instead they will open 13 free-standing stores and seven mall-based stores before the end of the year.
“We are maintaining our future guidance of opening eight to 12 stores per year beginning in 2019,” he continued. “Renovating stores to fit our enhanced design also continues to be a priority. In the fourth quarter we plan to renovate a further 10 stores bringing the full year renovation count to 29.”
At the end of September, the company operated some 260 stores including 56 in Quebec under the Dormez-Vous banner and 204 Sleep Country stores across the rest of the country. It also has a network of 14 distribution centres as well as two more in Quebec.