SHOP TALK ZEENAT MOORAD
The tagline “Sleep your way to the top” is hardly the most felicitous one you would associate with (probably) the most famous female entrepreneur in the US. But Huffington Post cofounder and editor-in-chief Arianna Huffington has been advocating the role of shut-eye as a performance tool — a pivotal metric for productivity and success.
In her how-to tome Sleep Revolution she speaks about the scientific, engineering and design skill being poured into the mattress industry, which has become “its own hub of sleep-related innovation”.
Companies like Casper, for example, which in its first month of operation sold US$1m worth of mattresses, makes latex memory foam that can be compressed into a box. This cuts the cost of shipping and meets the demand for mattresses that are too bulky to get through the door or up the stairs of apartments.
Sweden’s Hästens says it makes beds that will change your life. Its most expensive mattress, The Vividus (erm . . . six figures), takes over 300 hours to make and contains 180 kg of layered cotton, wool, mohair and horsetail hair.
Get in line, Goldilocks, there’s an actual waiting list. According to Huffington, a quality mattress is a key factor in getting a good night’s sleep.
Considering that, on average, people are said to spend one-third of their lives in bed, the mattress industry has, by virtue of procreation and world population growth rates, a captive audience.
This week, the world’s largest multibrand mattress retail distribution network was created. Steinhoff, conglomerate of furniture and tax rate fame, is buying Houston-based Mattress Firm.
The enterprise value of the deal — so that includes Mattress Firm’s debt — is $3.8bn. Not a cheapie then.
In fact, it’s more than double what Woolies sprang for David Jones.
Markus Jooste & Co will pay up $64/share — that’s a 115% premium to Mattress Firm’s close last Friday. Consider, though, that @StockTwits, a social network of investors and traders, says that Mattress Firm was one of the most shorted stocks in the market until the acquisition.
Steinhoff tends to be a big spender when it really wants something; remember the Pepkor deal?
This tie-up might be just the shield it needs against any Brexit pain.
Its latest move — and there have been many this year — will give it a foothold in the US: 3,500 stores and 80 distribution centres, to be exact. It has been trying to diversify as broadly as possible so as not to be left to the ravages of the rand. It plays a little bit in beds through Harvey’s and Bensons for Beds in the UK, but ultimately it’s a scale business which runs on global purchasing power.
Steinhoff benefits from being able to source and produce in bulk so it can negotiate competitive agreements to decrease fixed overhead costs and increase volume and other supplier rebates. It now operates in 30 countries with 40 brands. When I chatted to Jooste in February he had this to say: “One always watches America because they have some of the best retail operations in the world . . . it’s a space [where] Steinhoff can and will play a role in the future. In America, the biggest win.”
He had just returned from a road show of sorts in New York and was quite surprised that the “Americans” had studied Steinhoff and “knew everything”.
He said they asked “strategic” questions and not “what is the turnover per square metre or the like-for-like growth”, which according to him are uninteresting measures to evaluate Steinhoff.
What with all the corporate action it’s done over the years, Steinhoff’s balance sheet remains an enigma to many in the SA investment community, who, like dappled deer, continue to wonder, search and sniff the wind for core organic earnings. Steinhoff tends to be a big spender when it really wants something