By David Gill
NEW YORK–Retailers of mattresses and bedding products aren’t resting very easily at the moment.
Retail executives and financial analysts who follow the industry said the weakness at retail experienced during the latter part of 2007 has leaked into 2008. Thanks to an obviously lagging economy and consumer concerns, both store sales and foot traffic are down for January and February.
A report authored by analysts John A. Baugh and Stanley S. Elliott of Stifel, Nicolaus & Co., and released right after the January Las Vegas Market, said that “after talking with suppliers (innersprings, covers), retailers and manufacturers, we are certain that business has deteriorated further in January from the weakened levels reported in December. … Foot traffic is clearly the issue for retailers.”
For Mattress Discounters, that sounds about right.
Asked for his assessment of Mattress Discounters’ business thus far this year, Justin Gannon, the retail chain’s vice president of merchandising and marketing, said the chain’s sales were “about the same as everybody else, which is not good. It’s similar to what’s going on with the home furnishings industry in general. Consumers are making decisions to postpone purchases of big-ticket items like mattresses.
“We noticed the trend last year during the holidays,” Gannon added. “Normally, sales strengthen during the holidays, then tail off once they are over. That trend didn’t continue this time. Sales stayed weak through the holidays and into the New Year.”
John O’Connell, executive vice president of sales at 1800mattress.com, reported that sales and traffic were laggard for the multichannel retailer as well—but that the company had planned for this trend. “The economic conditions we’re facing are not new,” O’Connell said. “To anticipate great sales growth in this environment would be a mistake. We identified the trend and we scheduled for it.”
A similar trend took hold at Verlo Mattress Factory Stores, said Keith Mackey, company vice president, but sales have begun to pick up. “The first quarter thus far has been split in two,” Mackey said. “January was a continuance of the fourth quarter, with very little growth. However, February has turned out to be a stronger month for our organization, finishing up almost 5 percent (over February 2007) and bucking the flat-line trend of late.”
Given the weak sales climate, the only way for mattress stores to grow has been to pinch market share from other stores. Speaking to HFN, analyst Robert Straus of Merriman Curhan Ford & Co. said January and February marked the continuation of a trend that began early last year.
“Over the course of the past six to 12 months, the larger and more established furniture retailers have been taking share from the mom and pops. They have been organically growing their store base as well as acquiring stores from smaller operations,” Straus said.
There have been pockets of strong sales in the midst of the overall weakness.
“We are continuing to see strong interest in specialty, especially our new Verlo-aire program, which saw triple-digit growth in January and February,” Mackey said. The Verlo-aire effort, a private-label grouping of air beds executed in conjunction with Comfortaire, the manufacturer, launched at Verlo in January. “This has contributed to the ever-increasing average ticket that has become a phenomenon of sorts in our organization, being up as much as 30 percent over the last six months from the prior year,” Mackey said.
Shoppers at Mattress Discounters “are looking at meat-and-potatoes price points,” Gannon said. “We’re starting to see more customers looking at value price points, $699 to $1,000. You’ll still see good sales for products that demonstrate good value or unique selling propositions,” Gannon said.
O’Connell cited two areas of strength at 1800mattress.com. “We’ve had success in raising average tickets from the specialty area, coming from communicating features and benefits of getting a good night’s sleep,” he said. “We’ve also done well with mattresses combining innersprings with layers of foam, which have more of a story and which underline the features and benefits you’re communicating to consumers.”
The retailers differ somewhat on the outlook for the rest of 2008.
“I don’t see any indication that things will get better,” Gannon said. “The economy, the mortgage crisis, rising fuel prices and raw-materials costs will dominate this year in retail sales.”
O’Connell, on the other hand, believes that the business could head on an upward curve beginning in the second half. “We’re looking for an uptick this summer from people who are moving to new homes,” he said. “We also think consumer confidence will rise once the election is over with.”