Sleep Country Canada 2Q sales up 11.8%
By Michael J. Knell -- Furniture Today, September 17, 2007
Toronto — Sleep Country Canada Income Fund, parent of Canada's largest specialty sleep chain, said second-quarter sales grew 11.8%, but earnings fell for the first time since it became a publicly held company — thanks mainly to tough market conditions affecting its American subsidiary.
Sales of C$83.5 million were up from C$74.7 million in the same period last year. But earnings fell 20%, to C$5.5 million or 39 cents per trust unit.
However, the company said its earnings before interest, taxes, depreciation and amortization, its preferred measure of financial performance, rose 14.7% to $8.5 million.
First-half sales of C$163.4 million were up 17.3% from a year earlier. EBITDA rose13.2% to C$16 million, but net earnings fell 8.9% to C$10.3 million or 73 cents per unit.
However, monthly distributions to unit holders were uninterrupted. The fund paid out C$4.8 million in the second quarter, compared with C$4.6 million last year, and C$9.5 million in the first half, up from C$9.2 million.
The fund said its Canadian operations, including the Sleep Country Canada and Dormez-vous banners, had sales growth of 14.3% and a comparable-store sales gain of 3.8%. Their EBITDA contributions grew 25.1%.
"Dormez-vous reached an important milestone in the second quarter of 2007 by achieving positive EBITDA," said Stephen Gunn, chairman and CEO.
It was the first that had happened since the fund acquired the Quebec chain in January 2006.
"This milestone was reached a few months ahead of plan and represents a significant achievement for the Dormez-vous management team and is a very positive development for the fund," said Gunn.
However, the Arizona-based Sleep America banner's sales fell 0.8% from a year earlier, in U.S. dollars. Coupled with additional expenditures to improve operations, Sleep America's EBITDA contribution fell by $600,000 in the quarter.
"Sleep America continues to experience the impact of a weaker market and there is no current industry consensus as to when this market will return to historic levels," said Christine Magee, president. "In the second quarter, however, we continued to invest in improvements to Sleep America's operations to enable it to be the platform for future expansion in the United States. We believe this is the right strategy to ensure a future growth platform for the fund."
At the end of the quarter, the fund operated 123 stores in eight regional markets under the Sleep Country Canada banner, 22 stores in Quebec under the Dormez-vous banner, and 40 Sleep America stores in Arizona.
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