2Q revenues, earnings jump at Sleep Country Canada
By Michael J. Knell -- Furniture Today, September 18, 2006
Toronto — Sleep Country Canada Income Fund, parent of this country's largest sleep shop chain and two other retail bedding banners, said revenues shot up 42.3% in the second quarter as net earnings leaped nearly 45%.
The fund said sales in the quarter were C$74.6 million, compared with C$52.5 million in the comparable 2005 quarter. Net earnings came to C$6.8 million, or 48 Canadian cents per trust unit, compared with C$4.7 million, or 34 cents per unit, last year.
Sleep Country's preferred performance measure is earnings before interest, taxes, depreciation and amortization, or EBITDA, which fell 6.2% to C$7.4 million in the latest quarter, "reflecting the expected impact of expansion spending at Dormez-vous, offset by positive contributions from the Sleep Country and Sleep America banners," the fund said.
Sales for the 116-unit Sleep Country Canada banner were up 17.4% quarter-over-quarter, with same-store sales up 6.4%. Sales by the Dormez-vous banner in Quebec rose 4.5%, while the Sleep America banner in Arizona recorded a 20.1% sales increase. The fund acquired both regional chains earlier this year.
In the six months, total sales rose 42.1% to C$139.3 million. Net earnings were C$11.3 million, or 80 Canadian cents per unit, a substantial improvement from C$8.3 million, or 59 cents per unit, in last year's first half. EBITDA increased 7.5% to C$14.1 million.
"Sleep Country continued to perform well in the second quarter, with strong contributions from our new banners and continued growth in Sleep Country's base business," said CEO Stephen Gunn. "We believe we are continuing to significantly outperform the industry in terms of revenue and market-share growth."
He pegged total mattress industry growth at between 3% and 5% in the second quarter.
"The development of our new growth platforms in Quebec and Arizona is proceeding according to plan," said Christine Magee, president and advertising spokesman.
Dormez-vous opened four stores in the quarter and plans three more by the end of the year, she said, adding Sleep America opened two stores in the quarter and will add up to four more before year's end.
Gunn said, "We expect the expansion of Dormez-vous will continue to have a negative impact on EBITDA over the next year or so, similar to our experience with expansions in other regions of the country."
He said the fund had passed several times on a chance to buy Sleep Country USA, which owner Simmons subsequently sold to U.S.-based The Sleep Train. He said the U.S. chain "has a different business model."
Gunn also noted the fund wasn't in any rush to add Chinese-made bedding to its offerings.
At the end of the quarter, Sleep Country Canada Income Fund operated a total of 162 stores, compared to 101 last year.
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