Sleep Country sets new sales and earnings records in 2016
TORONTO – Sleep Country Canada (SCC) reported new record highs in both sales and earnings for the fourth quarter and 2016 year, its first full-year as a re-constituted public company. It also further secured its place as this country’s largest mattress retailer and only sleep specialist with a national footprint.
For the three months ending December 31, 2016, revenue was $135.4 million, up 13.7% from the $119.1 million for the same period in 2015. The company attributed the increase to a 9.6% uptick in same store sales as well as the addition of 11 new stores since the end of 2015.
Revenue from the sale of both mattresses and accessories was up on a year-over-year basis. Mattress sales gained 12.4% to $105.3 million, from $93.7 million for the comparable period. Accessory sales were $30.2 million, up 18.7% from $25.4 million for the fourth quarter of 2015.
SCC executives noted in their commentary that mattress retailing is affected by seasonality, with the fourth quarter typically producing the second highest revenue, after the third quarter. Typically, the final 13 weeks of the year generates 26% of revenue, with 31% in the third quarter.
Net income in the fourth quarter of 2016 was $11.2 million or 30 cents per share, compared to $8.6 million of 16 cents per share – an uptick of 87.5% on a per share basis.
For the year ended that also ended on December 31, 2016, revenue was $523.8 million, up 14.8% from $456.2 million in 2015. Same store sales were up 10.0% over the prior year.
Mattress revenue increased 12.3% to $410.5 million from $365.6 million in 2015 and accessory revenue increased by 25.0% to $113.3 million from $90.6 million.
Net income for 2016 was $49.6 million or $1.32 per share, reversing last year’s loss of $51.7 million or $1.90 per share.
During 2015, the company incurred a number of one-time expenditures related to the costs associated with its initial public offering in the spring of that year.
“Our 2016 results clearly demonstrate that our strategy aimed at growing via a combination of new store openings in select markets, increased accessory revenue and enhanced store design and renovation is working,” SCC president and chief executive officer David Friesema said in a statement. “The effectiveness of our strategy and our ability to execute it were reflected in the improvements made to each of our key financial metrics. Most notably, we surpassed the $500 million revenue mark for the first time in our history and generated a record operating EBITDA (earnings before interest, taxes, depreciation and amortisation) of $85.0 million. Equally encouraging, we sustained our trend of positive same store growth for the 14th consecutive quarter at 9.6%.”
He also pointed out the company achieved a number of its target through the year for store renovations and additions with the opening of 11 new outlets across the country and the renovation of 20 others.
“With these 20 renovations completed, approximately 27% of our total stores feature our new store design, providing a strong foundation for us to sustain our same store sales growth in the periods ahead,” Friesema said.
Looking ahead, Friesema said SCC intends to follow its proven growth strategy through 2017 and beyond.
“As always, we will continue to make investments in advertising and sales training to drive same store sales growth and identify opportunities for expanding our accessory revenue,” he said, adding the company will add as many as 12 new stores to its network over the coming 12 months while updating between 20 and 30 with the new interior scheme.
“Also, from a longer term and strategic perspective, we are readying ourselves for the launch of our e-commerce platform in the coming weeks,” Friesema said. “This new platform will introduce our exclusive ‘bed-in-a-box’ mattress and our full line up of accessories, allowing us to better meet our customers’ needs, as they seek the convenience of shopping online.”
He also cautioned the ramp-up for initiative may be a short-term drag on EBITDA to the tune of $1.0 to $1.5 million but quickly added SCC’s senior management team is “excited about this opportunity and believe that it will become a strategic advantage for us and help reach a broader customer base over time.”
The company also plans to relocate four of its distribution centres across the country this year at a cost of about $1 million. Friesma told shareholders “these relocations will improve efficiency and grow distribution capacity for the long term.”
At the end of 2016, Sleep Country Canada Holdings Inc. operated 235 stores and 17 distribution centres across the country under two banners: Dormez-vous?, the largest retailer of mattresses in Quebec; and, Sleep Country Canada, the largest mattress retailer in the rest of Canada. Its shares are listed on the Toronto Stock Exchange under the symbol ‘ZZZ’.