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Placed CAPS on at $31.72: PE ratio I thought long and hard about whether to place this one on caps. A recession would probably cause them to crash. but that is one of the reasons I wanted to follow them. How badly would they be hurt and if they are hurt would it be real opportunity. Select Comfort hit $0.19 during the great recession. I think there is more safety with a mattress superstore that sells from all manufacturers except air-beds. They focus on box springs and Foam beds like Tempur-Pedic. Could they be a category killer. They have 1121 stores with a goal of operating 2500 in the U.S. They are benefiting from some trends. One department stores are starting to sell fewer beds, but also furniture stores are losing market share to Mattress specialty stores too. They do have a lot of debt, but they have made some big acquisitions too. They are expanding quickly, maybe too quickly. Another trend is that Baby boomers want a good night sleep and have the money to spend on a premium mattress. Average selling prices of mattresses are on the rise. Mattress technology is on the rise too.It has only been a public company for about 2 years, so there is no track record. I like to see a larger track record. I also want to see how they would do during a recession. In 2008, according to their S1, sales went down, but not that much. But they lost a lot of money. but without a 10K I will probably never know why. Was it an acquisition? I am sure a strong housing market would help this one. If the housing market goes the other direction, they will fall. I haven't seen a lot of positive comments about the company which might be a good reason to avoid it. I did buy a position and now I want to watch it.The U.S mattress retail market had sales of $11.4 billion in 2011. The market is highly fragmented with no retailer with more than 8% of the market. The top ten companies only own about 30% of the market. Select Comfort has about 8% of that market while Mattress Firm has about 6.7%. Mattress firm doesn’t carry airbeds, but focuses on box springs and foam beds like those made by Tempur-Pedic. Remember Select Comfort isn't just a manufacturer they are a bedding retailer with over 400 stores.Prices are moving up. As premium bed technology grows average selling prices of units go up. And upgrades happen more often. Mattress Firm will benefit from that too.There are about 500 different manufacturers in the bedding industry. The largest are Serta, Simmons and Tempur-Pedic/Sealy. Tempur-Pedic acquired Sealy while Select Comfort acquired Comfortaire. Ares Management and Ontario Teachers’ Pension purchased the Simmons bedding Company out of chapter 11 bankruptcy. Ares Management also owned Serta. In each case, I believe the combined companies are stronger. The industry is changing. Average price points are going to be very important for these companies. People don’t buy beds on a yearly basis – they tend to use them for a decade or two, so innovation will be very important if these companies are to grow. A bed that offers a better night sleep through technology could make people switch or upgrade faster.The 15 largest manufacturers control 86% of sales. In 2011, TPX, a big Mattress Firm customer, sold about 14% of total bedding in the U.S. With the addition of Sealy that market share is larger.Will the baby boomers’ desire for a good night sleep continue the premium mattress industry’s growth?April 10, 2012 4Q:2011 earnings’ highlights:** 4Q revenue was $188.558 million up from $127.494 million** Fiscal 2012 revenue was $703.91 million up from $494.115 million** TTM revenue per share was $22.60 per share** 4Q earnings were $0.56 up from a Loss ($0.07)** Fiscal 2011 earnings $1.40 up from $0.02** Cash $47.946 million: debt $228.35 million** Cash flow for the year was $47.32 million or $1.52 per share** Diluted share count was 31.145 million** Same store sales were up 24.8%** Trading range between April 10, 2012 and June 5, 2012 was $31 to $48.18: PE ratio range was 22.14 to 31.41: Cash flow yield range was 3.2% to 4.9%June 5, 2012 1Q:2012 earnings’ highlights:** Revenue was $209.814 million up from $151.924 million** TTM revenue was $761.8 million or $22.46 per share** Earnings were $0.29 up from $0.05** TTM earnings were $1.64** Diluted share count 33.926 million ** Cash flow for the quarter was $4.276 million down from $10.211 million** TTM cash flow was $41.385 million or $1.22 per share** Cash $51.622 million: debt $227.79 million** Same store sales were up 16.1%** Trading range between June 5, 2012 and September 6, 2012 was $22.82 to $33.12: PE ratio range was 13.92 to 20.20: PS ratio range was 1.02: Cash flow yield range was 3.7% to 5.4%** Special Note: The stock price fell $7.30 a day after the report to close at $28.00 on June 6, 2012. September 6, 2012 2Q:2012 earnings’ highlights:** Revenue was $262.018 million up from $179.914 million** TTM revenue was $843.904 million or $24.94 per share** Earnings were $0.30 up from $0.16** TTM earnings were $1.78 per share** Diluted share count was 33.841 million** Same store sales were up 5%** Cash flow for six months was negative ($1.571 million) down from $37.1 million** TTM cash flow was $8.49 million or $0.26 per share** Cash $6.188 million: debt $232.23 million** Trading range between September 6, 2012 and December 4, 2012 was $25.88 to $33.80: PE ratio range was 14.54 to 18.99: PS ratio range was 1.04 to 1.36: Cash flow yield range was <1%December 4, 2012 3Q:2012 earnings’ highlights:** Revenues were $277.259 million up from $183.514 million** TTM revenue was $937.649 million or $27.69 per share** Earnings were $0.37 down from $0.55** TTM earnings were $1.60** Diluted share count 33.868 million** Stores 1,011: same stores sales up 6.6%** Cash flow for nine months was $15.729 million down from $35.53** TTM cash flow was $27.52 million or $0.81 per share** Cash $10.855 million: debt $232.58 million** Trading range between December 4, 2012 and March 26, 2013 was $22.62 to $32.72: PE ratio range was 14.14 to 21.08: PS ratio range was .82 to 1.18: Cash flow yield range was 2.5% to 3.6%**Special note: The stock price fell $6.65 the day after the earnings report to close at $23.67 on December 5, 2012March 26, 2013 4Q:2012 earnings’ highlights:** 4Q revenue was $258.246 million up from $188.558 million** Fiscal 2012 revenue was $1.007 billion up from $703.91 million** TTM revenue per share was $29.80 per share** 4Q earnings were $0.22 down from $0.56** Fiscal 2012 earnings were 1.18 down from $1.40** Diluted share count was 33.798 million** Cash flow for the year was $10.134 million or $0.30 per share** Same stores sales down 1.6%** Capital expenditures for they year was $68.604 million up from $34.356 million** Interest expense for 2012 was $9.247 million ** Trading range between March 26, 2013 and June 4, 2013 was $32.25 to $38.85: PE ratio range was 27.33 to 32.92: PS ratio range was 1.08 to 1.30: Cash flow yield range was <1%June 4, 2013 1Q:2013 earnings’ highlights:** Revenue was $275.957 million up from $209.814 million** TTM revenue was $1.073 billion or $31.60** Earnings were $0.35 up from $0.29** TTM earnings were $1.24** Diluted share count was 33.953 million** Cash flow for the quarter was $1.586 million down from $4.276 million** TTM cash flow was $7.444 million or $0.22 per share** Cash $1.645 million: debt $237.57 million** Same store sales were down 5.2%** Trading range between June 4, 2013 and September 6, 2013 was $37 to $46.85: PE ratio range was 29.84 to 37.78: PS ratio range was 1.17 to 1.48: Cash flow yield range <1%.September 6, 2013 2Q:2013 earnings’ highlights:** Revenue was $302.541 million up 15.47% from $262.018 million** TTM revenue was $1.113 billion or $32.61 per share** Earnings were $0.41 up from $0.30** TTM earnings were $1.35** Diluted share count 34.15 million** Cash flow for six months was $12.778 million up from Negative ($1.571 million)** TTM cash flow was $24.48 million or $0.72 per share** Cash $6.37 million: debt $232.66 million** Trading range between September 6, 2013 and the present September 23, 2013 was 32.50 to 36.24: PE ratio range was 24.07 to 26.84: PS ratio range was 1 to 1.1: Cash flow yield range was 2% to 2.2% **Special Note: the stock price fell $6.10 the day after the report to close at $35.59 on September 6, 2013This company has flaws:This article by Will Ashworth, a contributor for InvestorPlace gives his views on April 17, 2012 12:58 PM.http://investorplace.com/2012/04/a-high-flying-ipo-thats-doomed-to-crash/It’s one thing to have 2,500 stores selling blue jeans; it’s another to be selling $1,000 beds. This is a bankruptcy waiting to happen.The argument sounds logical. Can a company sell $1000 beds in 2500 stores across the U.S.? The price of the stock went up the day the article was written and closed at $46.01 on April 17, 2012. But on April 17, 2012, they did have $47.946 million in cash and $228.35 million of debt for net debt of $180.404 million. Net debt has risen to $226.29 million. The problem with analyzing this is their history is a short one. They went public November 18, 2011. The history is too short to make an accurate assessment about how quickly they accumulate debt. But debt can be a dangerous thing to a growing retailer that is also a cyclical retailer.They are cyclical because their suppliers are cyclical. But they weren’t a public company during the Great Recession, so it is hard to know how they would do during a recession. Sales moved slightly down in 2009 from 2008. In 2008, they had $433.258 million in sales down from $458 million in 2007. But they lost over $161 million in 2008, but they had a $142.8 million impairment charge. And that is the problem. We have no real track record to know how they will do in the next recession, but I assume they wouldn’t do well. But they did su
horrible business that's probably a fraud to boot. been short for a while.
Rapidly expanding firm trading at 28X earnings... but has no barriers to entry.Competition is increasing and will only get worse. Margins and market share will fall. SHORT
You can't really ship mattresses via the internet very well.
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