Mattress Firm Announces First Quarter Financial Results

“Our first quarter results reflect our ability to execute on our profitable growth strategy through a combination of store unit growth and consistent increases in comparable-store sales,” stated Steve Stagner, Mattress Firm’s president and chief executive officer. “We are extremely pleased with the successful execution of our plan to transition the newly acquired Mattress Giant stores in advance of the Memorial Day weekend, which is the beginning of our key summer selling season. The acquisition has significantly strengthened our presence in several key markets. We remain well positioned to capture additional market share and build long-term shareholder value as the largest U.S. specialty bedding retailer.”

First Quarter Financial Summary

• Net sales increased $57.9 million or 38.1% to $209.8 million in the first quarter of fiscal year 2012 from $151.9 million in the first quarter of fiscal year 2011. The increase in net sales was the result of comparable-store sales growth of 16.1%, adding $24.0 million in net sales, and incremental net sales of $36.0 million from the opening of new stores and acquired stores prior to their inclusion in comparable-stores sales results, with such increases offset by a reduction in net sales of $2.1 million related to closed stores.
• The Company opened 30 new stores in the first quarter of fiscal year 2012, while closing four stores, bringing the total Company-operated stores to 755 as of May 1, 2012 (excluding the newly acquired Mattress Giant stores).
• Income from operations for the first quarter was $18.0 million. Excluding $1.2 million of acquisition-related costs, adjusted income from operations was $19.2 million, and adjusted operating margin during the quarter improved 295 basis points from 6.2% in 2011 to 9.1% in 2012. This operating margin growth on an adjusted basis was driven primarily by a 250 basis-point improvement in gross profit margin and a 40 basis-point improvement in general and administrative expenses (excluding acquisition-related costs).
• Net income was $9.7 million in the first quarter of fiscal year 2012 and EPS was $0.29. Excluding acquisition-related costs, net income was $10.5 million for the quarter and adjusted EPS was $0.31.
• Earnings before interest, taxes, depreciation and amortization and other adjustments (“Adjusted EBITDA”) increased 73.4% to $25.4 million in the first quarter of fiscal year 2012, compared to $14.7 million in the same period of fiscal year 2011. Adjusted EBITDA as a percentage of sales improved 250 basis points to 12.1% from 9.6%. See “Non-GAAP Financial Measures” below for a reconciliation of Adjusted EBITDA to net income.

Financial Guidance

The Company is raising EPS expectations for the fiscal year (52 weeks) ending January 29, 2013 (“fiscal year 2012”) to a range from $1.46 to $1.50, an increase from the previously communicated range from $1.40 to $1.48. This outlook continues to assume fiscal 2012 sales in a range from $1.03 billion to $1.06 billion based on opening approximately 100 new stores and comparable-store sales growth of 10.0% to 12.0%. Such net sales guidance for fiscal 2012 continues to include $90 million to $95 million of net sales from the Mattress Giant stores acquired on May 2, 2012. Such EPS guidance for fiscal 2012 continues to include estimated nonrecurring direct transaction and integration costs (“acquisition-related costs”) of the Mattress Giant acquisition that are estimated to have a total per diluted share effect of $0.17 to $0.19, consisting of $0.09 to $0.11 in the second quarter, $0.04 to $0.05 in the third quarter and $0.02 in the fourth quarter.

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