Mattress Stocks Are the Slumbering Giants of the Year
Apr 18th 2012 12:14PM
Updated Apr 18th 2012 12:18PM
Judging from the fantastic numbers that mattress vendors have been reporting over the past year, there are lots of people out there experiencing a better night's sleep. Although most of us have read articles time and again purporting that a good mattress is integral to the quality of our sleep and the condition of our backs, I expected this sector to be a real yawn investment-wise. I couldn't have been more wrong.
As I nosed around the bedding and mattress sector, I came across a real success story in Select Comfort (NAS: SCSS) , a company that specializes in adjustable-firmness mattresses. Its Sleep Number product features air chambers that allow consumers to manually tweak their beds for their maximum personal comfort. While this may sound hokey, their numbers are certainly not laughable: The company's stock has achieved a rise of nearly 177% over the past year, with over 60% of that rise occurring in this calendar year. Select Comfort keeps strict control over its product lines, reporting that 90% of sales come from distribution channels controlled by the company -- sales that increased 31% in 2011 from the previous year. There's no doubt that their business plan works very well.
Mattress Firm (NAS: MFRM) has been on a tear since its IPO last November, racking up gains of about 68% so far this year. In a recent interview with CNBC, CEO Stephen Stagner noted that sales have been so stellar that the company plans to open an additional 100 stores per year until its total number of sites climbs from the current 1,000 all the way up to 2,500. Confidence exudes from this guy, and his company recently gobbled up Mattress Giant, which should certainly help with those lofty expansion plans. Mattress Firm's Q4 report was brilliant, showing a year-over-year profit rise of 61% and an increase in sales of nearly 48% from the fourth quarter of 2010. Stagner feels that his stores are more resistant to the problems other retailers have experienced -- namely, "showrooming," where customers price-shop in the store and then order the product over the Internet. People prefer to try out mattresses by touching them and thus tend to buy in person.
Tempur-Pedic (NYS: TPX) has also had a good year, with sales increasing 28% in 2011 from a year previous. The manufacturer of bedding products saw mattress demand increase by 26% worldwide last year, and sales of its foam pillows were up 16%. The company's stock reflects these accomplishments, increasing in value almost 50% over the past year and 64% since the beginning of the year. The company's new Simplicity product line, which debuts this month, is aimed at consumers who would like to buy a Tempur-Pedic mattress for less than $2,000. Analysts forecast sales increases of approximately 30% from this new product -- nothing to sneeze at.
The evidence is in, and these companies are experiencing phenomenal growth as consumers take note of a better economic forecast and start to spend again. Things stand to get better yet as the housing picture improves and homeowners buy new beds to go with their new abodes. Add in the new products, expansion plans, and consumer interest in state-of-the-art bedding systems, and it's easy to see why investors have been touchy-feely about mattress stocks this year.
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At the time this article was published Fool contributor Amanda Alix owns no shares in the companies mentioned above.The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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