Integrating strategic acquisitions made over the past 12 months or so didn’t seem to deter the cash register as Sleep Country Canada Holdings Inc. (SCC) reported sales were up in the third quarter of 2023, over the same period last year. However, both same store sales and earnings were more reflective of current challenges facing consumers.
The publicly held sleep specialist recently revealed sales for the three months ending Sept. 30, were $255.7 million, up 1.9 per cent from $251 million in Q3 2022.
Management attributed the uptick mainly to revenue earned from new stores, wrap stores opened in 2022, and the acquisition of direct-to-consumer brands Silk & Snow and Casper Canada earlier this year, which were partially offset by a 5.5 per cent decrease in same store sales.
SCC e-commerce revenue increased to 20.4 per cent of sales in Q3 2023, from 18.5 per cent of sales in the third quarter of 2022. In dollar terms, this equates to an estimated $52.1 million, up from $46.4 million, an advance of 12.3 per cent.
Mattress sales advanced 1.3 per cent to $194.5 million, while accessory sales gained 3.7 per cent to $61.2 million.
Net income was $24.7 million or 70 cents per diluted share, compared to $28.9 million or 79 cents per diluted share — an 11.4 per cent decrease on a per share basis.
During the quarter, SCC noted the company opened a new Sleep Country store in Edmonton and acquired an additional 16 per cent of the common shares in Hush Blankets, increasing its ownership stake to 68 per cent. Meanwhile, Silk & Snow was recognized for the third consecutive year in The Globe and Mail’s Report on Business as one of the top 50 fastest-growing businesses.
“We are pleased with our strong performance this quarter amid this evolving environment, as high interest rates and inflation continue to have an impact on consumer confidence,” SCC president and CEO Stewart Schaefer said in a statement. “We are seeing pockets of softness in consumer demand, particularly on larger ticket items, resulting in a deferral of discretionary purchases.”
As the company navigates through this macro-environment and geo-political uncertainty, Schaefer said he remains cautiously optimistic on the medium-term outlook. As for SCC’s long-term positioning, he is very positive.
“We are also very pleased with the progress that we are making with our newest acquired banner, Casper Canada,” said Schaefer. “Over the last five months, our team has invested a significant amount of time and talent in this latest acquisition and we are excited to see the fruits of our labour in 2024 and beyond.”
From Q1-Q3, SCC recorded sales of $679.4 million, down 0.9 per cent from $685.6 million for the same period last year. The decline was attributed to a 7.5 per cent drop in same store sales.
Management noted e-commerce generated 21.3 per cent of revenue for the period, up 19.1 per cent year-over-year. In dollar terms, e-commerce sales were an estimated $144.7 million from January to September, an increase of 10.5 per cent from $130.9 million in Q1-Q3 2022.
SCC noted mattress sales for the first nine months of the year fell 2.5 per cent to $514.3 million, while accessory sales climbed 4.4 per cent to $165.1 million.
Net income was $48.7 million or $1.39 per diluted share, compared to $69.9 million or $1.89 per diluted share — a 26.5 per cent drop on a per share basis.
SCC senior management told shareholders it intends to open at least nine more stores in the last three months of 2023, including the first brick-and-mortar stores under the Endy and Silk & Snow banners, and six new locations under the Sleep Country/Dormez-vous banners. It will also launch a new high-end sleep retail banner called The Rest.
In the third quarter, the company opened a new warehouse in Ontario, and decided not to renew the warehouse lease it acquired as part of the Hush acquisition in the closing months of 2021. In the fourth quarter, it expects to complete the construction of its new Montreal warehouse, and consolidate and relocate the operations of two of its existing warehouses in Quebec.
At the end of September 2023, SCC operated 296 stores across the country, not including the 19 ‘express locations’ within Walmart in Ontario and Quebec.