Expenses stemming from newly acquired stores and one-time charges plunged Mattress Firm’s first-quarter bottom line deep into red ink, totaling $119.2 million.

The result compares to net income from last year’s first quarter of $5.5 million. Selling, general and administrative expenses ballooned by 56.2 percent in dollars and 160 basis points as a percentage of sales, to 34.2 percent. The quarter also included a one-time asset impairment charge of $138.7 million.

Net sales in the quarter, which ended on May 5, jumped 49.2 percent to $839.4 million, primarily due to the acquired stores; same-store sales were down 1 percent. Gross margin also hurt the bottom line by falling 410 basis points to 31.7 percent.

“We are disappointed in our first-quarter results, as we experienced unrelated challenges in three primary areas,” said Steve Stagner, Mattress Firm’s executive chairman. “These issues have been resolved and are largely behind us.” Stagner did not elaborate about the “unrelated challenges.”

Mattress Firm is now projecting total net sales for the current fiscal year to increase by about 51 percent, with same-store sales growth of between 1 and 2 percent. The company also said it will convert all of the stores operating under different banners to Mattress Firm over the next 12 to 18 months.

“Despite a challenging quarter ... we are now better positioned to execute on our long-term strategy, as we build a national chain under the Mattress Firm brand,” Stagner said.

(Source: hfndigital.com  Author: David Gill)