HOUSTON-Cost increases countered a significant gain in sales to hold Mattress Firm to a bare 1.1 percent gain in net income in its fiscal third quarter, to $12.5 million.
Selling, marketing, general and administrative expenses jumped 66.5 percent in dollars and 300 basis points as a percentage of sales. Due to a 51.8 percent increase in cost of goods sold, gross margin slipped 30 basis points to 39.7 percent.
Net sales in the quarter, which ended on Oct. 30, were up 51.1 percent to $277.3 million, including a pickup of 6.6 percent in same-store sales. Steve Stagner, Mattress Firm president and CEO, said the core strategy of further penetrating existing and new markets has been benefiting the mattress retailer in terms of increased market share and profitability. Since the beginning of the fiscal year, Mattress Firm has added more than 280 net stores through new store openings and acquisitions, which have generated sales above the company’s initial expectations, Stagner said.
Stagner also cautioned that Mattress Firm’s expectations for the rest of this fiscal year are now below its previous plan, due to pressures on average ticket and reduced traffic growth since the beginning of November. Even with this updated guidance, however, Mattress Firm should achieve 40 percent increases in both sales and operating earnings for the year as a whole, he said.