Mattress Firm — Investor Day (June 2014)
115 slides from Mattress Firm's investor day presentation, Jun 12, 2014
Slide 1: June 12, 2014
June 12, 2014 1
Slide 2: Forward Looking Statements and Non-GAAP Information
Forward Looking Statements and Non-GAAP Information This presentation contains forward-looking statements within the meaning of federal securities laws, that are subject to risks and uncertainties. All statements other than statements of historical fact included in this presentation are forward-look
Slide 3: Welcome
Welcome Alex Weiss Senior Vice President of Finance 3
Slide 4: Discussion Overview
Discussion Overview . Industry & Key Trends . Best-in-Class Retailer . Relative Market Share Model . Growth Plan . Strategic Opportunities . Financial Review & Guidance . Store Tour 4
Slide 5: #1 Mattress Specialty Retailer
#1 Mattress Specialty Retailer #1 Largest Footprint Best in Class Market Share Doubled store count in 3 years(1) >90% of stores in markets where we have #1 market share(2) 1,467 locations(1) Sales Growth Store Unit Growth Adj. EBITDA Growth(3) $139mm $1,274mm 1,467 2010 LTM 14Q1 2010 LTM 2010 LTM $5
Slide 6: Investment Thesis
Investment Thesis Compelling Industry Dynamics . Long term stability and consistent growth . Fragmented industry with no national chain . Pent-up demand with 80% replacement Best-in-Class Specialty Retailer . Largest footprint . >90% stores in markets where company is #1 . Unique selling proposition
Slide 7: Industry & Key Trends
Industry & Key Trends Steve Stagner President & Chief Executive Officer 7
Slide 8: Consistent Track Record of Industry Growth
Consistent Track Record of Industry Growth . Long-term industry growth CAGR of approximately 5% . Quick bounce back following recessions 2015(2) U.S. Wholesale Bedding Sales Significantly Rebound After Prior Recessions(1) billions) . 2.5% expected growth in 2014 and 5.5% growth in $4 4 $4.6 $4.6 $4.
Slide 9: Shift towards Specialty Mattress Retailers
Shift towards Specialty Mattress Retailers . Consumers demand expertise and prefer convenience . Mass merchants not meaningful industry participants. Internet primarily used for consumer research Mattress Specialty Retailers Taking Market Share(1) Furniture Retailers Department Stores 5% Other 14% D
Slide 10: Significant Pent-Up Demand
Significant Pent-Up Demand . Unit growth has been atypical since the last recession as lower-end consumers continue to struggle and manufacturer advertising is below peak levels . Approximately 80% of mattress sales are replacement (1) . Approximately 65% of beds are more than eight years old Wholes
Slide 11: Consistent Increase in Average Unit Price
Consistent Increase in Average Unit Price . Technological benefits and manufacturer advertising have helped increase the Average Unit Price (“AUP”) at an approximately 4% CAGR since 1994 . Continued price growth potential exists within the industry Wholesale Mattress and Foundation AUP(2) (3) $198.7
Slide 12: Key Drivers of Bedding Sales
Key Drivers of Bedding Sales . Bedding sales are most correlated with Consumer Sentiment and Gross Domestic Product Bedding Sales vs. Consumer Sentiment(1)(2) Bedding Sales vs. GDP Growth(1)(3) 80 100 120 5% 10% 15% 2% 3% 4% 5% 6% 5% 10% 15% 20 40 60 -10% -5% 0% '94 '95 '96 '97 '98 '99 '00 '01 '02 '
Slide 13: Housing Less Correlated with Bedding Sales
Housing Less Correlated with Bedding Sales . The replacement nature of the bedding industry has shielded it from much of the volatility experienced in the housing market Bedding Sales vs. Housing Starts Bedding Sales vs. Housing Prices 1,500 2,000 2,500 5% 10% 15% 250 300 350 400 5% 10% 15% 500 1,00
Slide 14: Macro Trends: Consolidation, Innovation & Sleep
Macro Trends Consolidation, Innovation & Sleep 14
Slide 15: Trend #1: Industry Consolidation
Trend #1: Industry Consolidation Top 8 Retailers Top 5 Manufacturers . Top retailers and manufacturers continue to consolidate Other Other Other Other 2010 2013 2012 2007 Top 8 24% Top 8 31% Top 5 73% Top 5 63% 15 (1) Source: Furniture Today Bedding Yearbook Data
Slide 16: Trend #2: Product Innovation
Trend #2: Product Innovation Temperature Management Personalization. Phase-change components . Breathable mattress borders . Heating/cooling technology. Customize comfort . Customize temperature . Self-adjusting components (comfort / adjustable) Designer Aesthetics Hybrids . Infusion of color . Opti
Slide 17: Trend #3: Sleep Awareness
Trend #3: Sleep Awareness . Searches for sleep, relative to the total number of searches done on Google over time, have gone up . Prevalent media coverage in outlets such as the Huffington Post, BBC and morning shows Interest Over Time for the Search Term Sleep The numbers on the graph reflect how m
Slide 18: Consumer Research
Consumer Research The art & science of retail 19
Slide 19: Consumer Research
Consumer Research . Ipsos DuraTrend Study . 35 year-long study of U.S. durable goods purchases . Interview an average of 40,000 adults every month about their durable goods purchases in the last month . Ten months of data: May 2013 – February 2014 . 7,316 mattresses 405,485 survey respondents . All
Slide 20: The Mattress Industry Consumer
The Mattress Industry Consumer Average Age 51 Average Retail Price % Home Owner (units) Median HH Income $712 65% ~$50k 1x Buyer $502 Replacement $870 Units Influencer Dollars 21 Source: Ideaology – Ipsos DuraTrend Findings for Mattress Firm, May 2013 – February 2014 Female Male
Slide 21: Mattress Spending Trends
Mattress Spending Trends % of Mattress Spending by Age Group % of Mattress Spending by Average Salary (in thousands) 30% 35% 40% 15% 20% 25% 20% 25% 30% 0% 5% 10% 0% 5% 10% 15% <25 25-34 35-44 45-54 55-64 >64 <$25 $25-50 $50-100 $100-150 >$150 Mattress Firm target audience 22 Source: ISPA
Slide 22: Customer PRIZM Segmentation
Customer PRIZM Segmentation MFRM Core Consumer 35-54 years old > $75K household income. Majority are married and homeowners . Education . Graduate Plus . Employment . Management . Shop At . Saks, Thomasville, JCrew, Nordstrom, Talbots, Zappos, Amazon . Lifestyle Preferences . Country club sports, bo
Slide 23: Attributes Driving Mattress Selection
Attributes Driving Mattress Selection . A majority of the dollar share is driven by comfort and price 60% 70% 40% 50% Share 10% 20% 30% Dollar 0% Comfort Price Brand Features Size 24 Source: Ideaology – Ipsos DuraTrend Findings for Mattress Firm, May 2013 – February 2014
Slide 24: Unit Share vs. Dollar Share
Unit Share vs. Dollar Share 60% . While half of all unit sales are under $500, only 17% of dollar sales fall in this segment . 56% of all dollar sales are $1,000+, with half of those being $2,000+ 50% Mattress Firm target audience 30% 40% 10% 20% 0% Unit Share Dollar Share 25 <$100 - $499 $500 - $99
Slide 25: Mattress Spending Trends
Mattress Spending Trends % of Spending by Retail Price Point % of Mattress Spending by Bed Size 30% 35% 40% 45% 15% 20% 25% 20% 25% 30% 35% 0% 5% 10% 0% 5% 10% 15% <$500 $500-$1,000 $1,000-$2,000 >$2,000 Twin Full Queen King Other 26 Source: ISPA
Slide 26: Attributes Driving Retailer Selection
Attributes Driving Retailer Selection . although much higher 40% Price is the biggest driver of retailer selection, less so with priced purchasers . Mattress Firm captures traffic with prices, location and advertising, and then provides selection and knowledgeable sales associates to drive ticket 30
Slide 27: Ticket Average
Ticket Average . Specialty category commands a >20% premium on average ticket . Mattress Firm commands an additional 10% over the specialty category $1,000 $1,200 $800 $400 $600 $0 $200 28 MFRM Specialty Furniture Dept. Internet Source: Ideaology – Ipsos DuraTrend Findings for Mattress Firm, May 201
Slide 28: Replacement
Replacement 26+ . 65% of the mattresses being replaced are over 8 years old . Opportunity to educate consumers on proper replacement cycle 15-25 years years 65% 9-14 years 1-8 years 29 Source: Ideaology – Ipsos DuraTrend Findings for Mattress Firm, May 2013 – February 2014
Slide 29: Best-in-Class Retailer
Best-in-Class Retailer Ken Murphy Chief Operating Officer 30
Slide 30: Leader in a Fragmented Industry
Leader in a Fragmented Industry . Mattress Firm is the #1 Mattress Specialty Retailer by store count, sales, growth and market share . Fragmented: Top 10 participants accounted for less than 33% of total market revenues in 2014(2) Top Mattress Specialty Retailers(1) Rank Company 2013 Stores 2013 Sal
Slide 31: The Emerging Conversation (Manufacturer and MFRM)
The Emerging Conversation (Manufacturer and MFRM) . A measurement of overall interest on Google . Interest appears to follow advertising investment . The gap between Mattress Firm and manufacturers is closing Interest Over Time for Bedding Manufacturers and Mattress Firm Search Terms # 1 Recession #
Slide 32: The Emerging Conversation (Retailers and MFRM)
The Emerging Conversation (Retailers and MFRM). Mattress Firm is poised to become the largest voice in the industry Interest Over Time for Bedding Retailers and Mattress Firm Search Terms Recession Select Comfort Mattress Firm Sleep Train Sleepy’s 33 Source: Google Trends June 2014
Slide 33: Differentiated Customer Experience
Differentiated Customer Experience Buying Process Happiness Guarantee Best Brands. Best Prices. Selection Awareness Consideration Purchase Service Loyalty Demand Creation Extensive Training Red Carpet Delivery 34
Slide 34: Company Drivers of Growth
Company Drivers of Growth TRAFFIC MARGIN Ad $$ Real Estate Building Value vs. Discounting Merchandising Same Store Margin Repeat/Referral Customer Experience REVENUE Growth Product Expertise Pricing Step-Up Add On Compensation 35 TICKET UNITS
Slide 35: Marketing
Marketing Karrie Forbes Executive Vice President of Marketing 36
Slide 36: Mattress Firm
37 MarTREssFIRM
Slide 37: Apathy
Apathy 38 Source: Ideaology – Ipsos DuraTrend Findings for Mattress Firm, May 2013 – February 2014
Slide 38: Go to Market Model
Go to Market Model . Our mission is to target the right audience at the right time with the best message by market based upon research, localized dynamics and data. 39
Slide 39: Advertising Growth
Advertising Growth Total Advertising to Sales % (A:S) Leverage and Advertising Spend $120 14% In Millions A:S 13.1% 11.8% $100 12% 13% 11.4% 9 0% $60 $80 9% 10% 11% 9.0% 6.8% 7.8% 8.5% 8.7% 8.7% $20 $40 7% 8% $- 5% 6% 2005 2006 2007 2008 2009 2010 2011 2012 2013 40
Slide 40: Marketing Mix – Traditional vs. Targeted
Marketing Mix – Traditional vs. Targeted In-Store Other . Targeted advertising makes up approximately 25% of our advertising spend Online In Research Agency Targeted Direct Mail Social PR Mobile Local Sponsorships Radio TV Traditional 41 Print Out of Home
Slide 41: Targeted Groups and Life Moments
Targeted Groups and Life Moments 42
Slide 42: Shift Towards Targeted Advertising
Shift Towards Targeted Advertising 43
Slide 43: Brand Message Pillars
Brand Message Pillars DIFFERENTI SLEEP HAPPY 44
Slide 44: Differentiated Message Elements
Differentiated Message Elements Differentiate Drive Traffic Memorable Song Grand Opening Strategy Meaningful Tagline Price & Item Promotions Trusted Spokespeople Holiday & Urgency Events Demand Creation Compare Side by Side Charity & Community #1 Tempur-Pedic Retailer 45 Comfort By Color Sleep Happy
Slide 45: Community Connection
Community Connection National Focus Local Giving 46
Slide 46: Engage
Engage Digital Search Landing Page Online Ads Email Digital Billboard Social Reviews Website Mobile Chat Blog Email Newsletter Ask MF Social awareness consideration purchase service loyalty og PR Radio Word of Mouth Direct Mail POP/Store Call Center Call Center Friends & Family FRN Spokespeople /Res
Slide 47: Strategic & Targeted Engagement
Strategic & Targeted Engagement MARCH APRIL MAY JUNE JULY AUGUST SEPT BRAND Spring Forward Replace 8 & Product Mom 2.0 Summit Weddings Mattress Shopping Moving; Kids & Sleep CAUSE Veterans & Better Sleep Initiatives Shelters & Food Banks Local School Involvement EXEC VISIBILITY/ THOUGHT Sleep Happy
Slide 48: Merchandising
Merchandising Craig McAndrews Executive Vice President of Merchandising 49
Slide 49: Merchandising Approach
Merchandising Approach . Differentiated and trademarked . Minimizes customer confusion . Enhances consumer’s trust and brand recognition . Increases conversion and average sales ticket 50
Slide 50: All the Best Brands
All the Best Brands % Slots % Mix C. (1) Contour Cloud Breeze Brand Matrix Mix Matrix TY ACC 10% Core Estate Hybrid SPECIALT 34% 41% Sealy Posturepedic Hybrid Optimum Beautyrest World Class TIONAL Serta iComfort CONVENT 66% 49% H&R H&R Select H&R 51 <$500 >$1999 $1000-1999 $500-999 14 14 19 15 (1) I
Slide 51: Mattress Firm Outperforms in Luxury
Mattress Firm Outperforms in Luxury 40% 30% 35% 20% 25% Industry 10% 15% MFRM 0% 5% <$500 $500 $1000 $1000 $2000 >$2000 52 - - Source: ISPA Mattress Firm target audience
Slide 52: New Product Program
New Product Program Tempur-Pedic Stearns & Foster . Improved contemporary . luxurious hand- appearance and design . Expansion of cooling technology across product line . Innovative removable cover Enhanced look and introduction of hand tufted design . Introduction of cooling fabrics . Placement of H
Slide 53: Buying Experience
Buying Experience Cutting through the clutter 54
Slide 54: A Better Way to Buy A Mattress
A Better Way to Buy A Mattress Comfort by Color Customer-centric Buying Process Happiness Guarantee 3rd Party Financing Red Carpet Delivery Customer-driven Improvement 55
Slide 55: The Human Capital Advantage
The Human Capital Advantage g Creating a high-performance culture 56
Slide 56: Talent Acquisition
Talent Acquisition From MFRM Field 92% Avg. Team Tenure Efficiency & Effectiveness 6 3 Talent Team 6.3yrs 11% Monthly 51% Total 65% Involuntary Profile system Sales Turnover Turnover Sy 10% 40% 30% 20% lent Mix 57 Campus Referral Digital Walk in/Other Ta M
Slide 57: Talent Development
Talent Development First Year. Committed to relevant & scalable training . Career path progression creates highly developmental environment Training 250+ Ongoing Training 75+ 1:1 Hours Hours Store Manager earnings based on individual results + store sales Area Manager first multi-unit management opp
Slide 58: Talent Retention
Talent Retention 31% 1:4 Performance Matters Total Turnover 23% 1:Deeply Connected Voluntary Turnover 2% Leadership 59 Culture Counts Turnover Note: Turnover is an annualized metric
Slide 59: Distribution & Systems
Distribution & Systems The next wave of competitive advantage 60
Slide 60: Distribution Strategy
Distribution Strategy Distribution Centers Same Day Capacity Current State Delivery Window Transactions Delivered 62 p y 72% 40% 3hr Goal: Same Day Delivery Nearly Anywhere in the Continental US by 2016 Standard Delivery Nationwide Capacity 3rd Party DC 61
Slide 61: ERP Rollout
ERP Rollout . Strategic approach to rolling out new ERP platform . Rollout is progressing as planned, with greater than 600 stores currently on the system . Rollout completed by the end of Fiscal 2014 1,400 1,600 250 Stores Converted Cumulative 1,000 1,200 150 200 Warehouses ses Converted 600 800 10
Slide 62: Real Estate
Real Estate The emerging differentiator 63
Slide 63: Competitive Real Estate Platform
Competitive Real Estate Platform Doubled 158 136 102 1,215 1,361 1,467 1,200 1,400 Company-Operated Franchisee-Operated Store Count Since 2010 Convenient and Prominent Locations 729 1,057 1,225 1,365 82 128 674 857 400 600 800 1,000 592 0 200 2010 2011 2012 2013 LTM 14Q1 . Average size: 4,800 sf . 8
Slide 64: Attractive Stores
Attractive Stores a 8 @ MATTRESS Fil IRM.
Slide 65: Fayetteville, AR - Before
Fayetteville, AR - Before 66
Slide 66: Fayetteville, AR - After
Fayetteville, AR - After eee MATTRESSFIRM 67 MATTRESSFIRM
Slide 67: Fort Meyers, FL - Before
Fort Meyers, FL - Before 68
Slide 68: Fort Meyers, FL - After
Fort Meyers, FL - After MarTREssFIRM
Slide 69: Tucson, AZ - Before
Tucson, AZ - Before 7 MarTRESSFIRM
Slide 70: Tucson, AZ - After
Tucson, AZ - After n MarTRessFIRM
Slide 71: Relative Market Share
Relative Market Share Creating advantage through scale 72
Slide 72: Profitability and Relative Market Share
Profitability and Relative Market Share RMS= Company Market Share Top Competitor’s Market Share Financial Impact of RMS RMS Leverage Areas. Generate traffic . Higher customer conversion / retention . Improved site selection . Advertising . Recruiting / training . Warehouse . Increased profits . Deli
Slide 73: Relative Market Share Model
Relative Market Share Model Market Penetration Store Count Stores per Capita 105 stores 65 stores Case Study: Houston 2009 2013 Incremental Advertising Market Profitability ADV Spend per Adj. EBITDA Adj. EBITDA Margin 1:98k 1:62k Driving Profitability ADV per Capita $5.6mm $12.5mm $14.3mm $29.6mm 19
Slide 74: Market Penetration Highly Correlated to Profitability
Market Penetration Highly Correlated to Profitability(1) 19.8% 13.2% 13.7% $1.0mm $1.0mm $1.3mm 4.8% Market Level Adjusted EBITDA(2) Occupancy 12.0% Occupancy 14.5% $0.41 $0.75 $1.33 $1.58 $0.9mm Sales per Store(2) Advertising $ Occupancy 21.0% Occupancy 14.6% Developmental Leadership Fortress - Rec
Slide 75: EBITDA vs. Market Penetration 2013
EBITDA vs. Market Penetration 2013 . Represents (1) 30.0% all markets in the chain . Relationship between store penetration and market level EBITDA 20.0% 10.0% TDA 0.0% - 50 100 150 200 250 300 EBIT (thousands) 20.0% -10.0% 76 -20.0% Store Penetration (1) Circle size represents market level EBITDA D
Slide 76: Growth Plan
Growth Plan High growth opportunity 77
Slide 77: Highly Achievable Growth Plan
Highly Achievable Growth Plan Growth Drivers Existing Markets Franchise Acquisitions Alternate Channels Primary Secondary Test Concepts . 70% existing . 30% new . Existing franchisees . Market . Segmented brands . Proprietary . E-commerce . Special events Legacy program . Limited leaders . Tuck-ins
Slide 78: Continued Store Growth
Continued Store Growth(1) (1) . Border to border and coast to coast 79 (1) Includes franchise locations; as of April 29, 2014
Slide 79: Penetration by State
Penetration by State(1) Fortress 1:<90k Leadership 1:90k – 170k Development 1:>170k 80 (1) Based on fiscal year 2013 results, including 91% of total stores (excluding markets not branded as Mattress Firm and markets open less than one year)
Slide 80: Stores Located in Fastest Growing Cities
Stores Located in Fastest Growing Cities Rank City Population Growth Rate Unemployment Rate Median Salary MFRM Presence Recent Acquisition 1 Austin 2.50% 4.89% $64,000 . . 2 Raleigh 2.15% 5.69% $64,800 . 3 Phoenix 1.67% 6.40% $64,200 . . 4 Dallas 1.91% 5.83% $66,700 . . 5 Salt Lake City 1.33% 4.00%
Slide 81: Proven Acquisition Track Record
(1) Proven Acquisition Track Record 36 stores 5 stores Blue Ocean Franchise 26 stores 14 stores 10 stores Yotes Franchise 13 stores Austin, Dallas, Houston, San Antonio, Las Vegas 2007 Birmingham 2007 Phoenix 2006 Las Vegas 2007 St. Louis 2007 Houston 2007 40 stores Online Retailer 8 stores PEAK Mgm
Slide 82: Traditional Acquisition Playbook
Traditional Acquisition Playbook People Store Market & Products Readiness Leverage . Cultural event . Merchandise . Buying process . POS conversion . Signage . In-store materials . Warehouse . Delivery . Advertising Best Practices/Enhancements/Talent Assessment . Training . Store design . Management
Slide 83: Successful Acquisition Integration
Successful Acquisition Integration . Former Mattress Giant stores demonstrated strong comp results post rebranding Monthly Store Average Post Rebranding $100, 000 $110,000 Current Year Sales per Store Prior Year Sales per Store $100,000 Current Year Sales per Store Prior Year Sales per Store (1) Pos
Slide 84: Mattress Giant Acquisition Case Study
Mattress Giant Acquisition Case Study . RMS model and increase in advertising allowed Mattress Firm stores within close proximity to Mattress Giant stores to face minimal cannibalization as a result of the acquisition. Study of all "Close Proximity" locations in 7 markets . 79 locations were within
Slide 85: Organic Growth Plan Through 2018
Organic Growth Plan Through 2018 . Expansion primarily through new stores in existing and surrounding markets . Focus on new markets that lack dominant specialty mattress retailer . Long-term potential for at least 3,000 stores in the United States 3,000+ 3000 Store Unit Growth Growth Plan (% of Sto
Slide 86: Multiple Retail Brands
Multiple Retail Brands Expanding share with segmentation 87
Slide 87: Segmentation Strategy
Segmentation Strategy Extend Defend Served Other . Market share . Market level profitability . Real estate encroachment . Suppliers’ alternate distribution Market Share (30%) # 3 (9%) (21%) . Store unit runway . Sales lost to 2nd shop Top 5 MFRM Market Share (+24%) # 2 (16%) Organic Opportunity Segm
Slide 88: Consumer Shopping Preference
Consumer Shopping Preference #12 #1 #1 Choice Choice Choice When Shopping for GOOD When Shopping for BETTER When Shopping for BEST 22% 21% 57% 1. 2. Select Comfort 1. 2. Misc 1. Misc 2. Sam’s Club 89 3. Misc. 3. Rooms to Go 3. Beds-Beds-Beds Source: America’s Research Group Note: Percentage represen
Slide 89: Multiple Brand Case Studies
Multiple Brand Case Studies A variety of retailers have deployed a multi-brand strategy to protect their core brand, and pursue unique segments of the market place. Multiple brands allow you to: Target a unique customer with a differentiated value proposition . Minimize cannibalization of your core
Slide 90: Brand Positioning
Brand Positioning High Opportunity Typical Service e/Experience Competitive Entry Point Service $$$$$ $ Low Price 91 Point
Slide 91: Introducing...MattressPro
Introducing...MattressPro 92 MarTressFIRM
Slide 92: Differentiated Positioning
Differentiated Positioning Positioning Quality/Service Value/Velocity Demo/Target 25-64, $75k+ HHI 18-54, $35k-$75k HHI Product Selection Best Brands We bought it all In-Store Experience Comfort by Color ProPicks Service Happiness Guarantee ProPlus 93
Slide 93: Brand Pyramids
Brand Pyramids Billion Dollar Buying Power America’s #1 Mattress Store Brand Uniqueness When manufacturer’s competeYou save! Comfort by Color Happiness Guarantee Replace Every 8 Customer Incentive Customer We’ll help you find the right bed and you’ll wake up feeling great! Save Money. Sleep Happy. P
Slide 94: Potential Market Test
Potential Market Test TEST experience . Quality & Service . . Expertise & Technology . Service Experience . Expert Match TEST Service/Ex . Value & Velocity . Compete Happiness Guarantee . Comfort by Color Price Point Manufacturers . Special Purchase Shared Services Back Office: HR, Accounting IT Ope
Slide 95: Exclusive Brands
Exclusive Brands Differentiate and innovate 96
Slide 96: Growth Through Exclusive Brands
Growth Through Exclusive Brands Mattresses Pillows . Sold under Hampton & Rhodes and YuMe brands . Innerspring, wrapped coil and specialty models . Priced at from <$500 - >$1,999 . Sold under Lux Living brand name . Collection of six pillows (specialty foam and scented) . Priced $79 - $129 Furniture
Slide 97: Growth Through Exclusive Brands: Current Results
Growth Through Exclusive Brands Current Results . Exclusive Brand Retail Sale Mattresses Add Ons 2013 Sales $203M . Includes mattresses, pillows and newly introduced furniture program millions $17 $150 $200 $250 . ~17% of retail sales in $98 $186 $0 $50 $100 Future Opportunity 2011 2013 . Expansion
Slide 98: Omni-channel
Omni-channel Expanding our reach 99
Slide 99: Omni-Channel Development
Omni-Channel Development MattressFirm.com Olejo.com Multi-Brand Retail 3rd Party Online Marketplaces Mattress Firm Super/Clearance Centers Commercial Sales MFRM Mattress Firm Traditional Stores Events & Expositions 100
Slide 100: Financial Overview
Financial Overview Jim Black Chief Financial Officer 102
Slide 101: Strong Revenue Growth
Strong Revenue Growth . Strong historical revenue growth through new store openings, same store sales growth and acquisitions Annual Sales Performance $$1,007mm $1,217mm $1,274mm $494mm 704mm 2010 2011 2012 2013 LTM 14Q1 103
Slide 102: Return to Comparable-Store Sales Growth
Return to Comparable-Store Sales Growth . Three consecutive quarters of positive same store sales growth 20% 15% 16.1% 5% 10% 5.0% 6.6% -1.6% -5.2% -0.3% 2.9% 6.5% 4.3% 0% -10% -5% Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 104
Slide 103: Robust EBITDA Growth
Robust EBITDA Growth . Strong historical EBITDA growth through sales increases, cost efficiencies and a pursuit of Relative Market Share . Historical focus on increasing EBITDA margin % . Recent deleverage due to acquisitions, selling initiatives related to the taking comp back initiative and a slow
Slide 104: Ability to Deleverage Over Time
Ability to Deleverage Over Time . Historical deleverage through: . Free cash flow generation . Increases in EBITDA Debt / Adjusted EBITDA(1) . Proceeds from the 2011 Initial Public Offering 8.0x 7.0x 7.0x 8.0x 9.0x 2.6x 3.0x 4.0x 5.0x 6.0x 2.6x 2.1x 1.6x 2.2x 0.0x 1.0x 2.0x 2009 2010 2011 2012 2013
Slide 105: Strong Free Cash Flow Generation
Strong Free Cash Flow Generation. Generated $million and $34 million of free cash flow in 2013 and Q1, 2014, respectively . Maintained positive free cash flow during the recession Free Cash Flow(1)(2) . Flexible business model that can adjust advertising and other cost levers to maintain profitabili
Slide 106: History of Reinvestment in the Business
History of Reinvestment in the Business . Strong historical revenue growth through new store openings, same store sales growth and acquisitions . Approximately 30% of LTM capital expenditures were maintenance related Capital Expenditures $69 $56 $61 $60 $70 $80 ($ in millions) Maintenance $27 $34 $1
Slide 107: Capitalization Table
Capitalization Table . Low debt leverage with strong interest coverage . EBITDA does not include benefit of recent acquisitions Capitalization ($ in millions) Actual Cash $ 11.7 Revolver (L+350) - $ Term Loan (L+350) 297.6 Other Debt 2.5 Total Debt 300.1 Adjusted LTM EBITDA 138.5 $ Credit Statistics
Slide 108: Highly Accretive New Store Economic Model
Highly Accretive New Store Economic Model Stores Generate Cash on Cash Payback <1 Year New Store Investment ($ in thousands) Average Investment Buildout and Equipping Cost $220 New Store Results(1) ($ in thousands) Year 1 Year 2 Sales $1,000 $1,050 % Growth 0% - 10% Floor Sample Inventory 26 246 Les
Slide 109: Cash Conversion Cycle
Cash Conversion Cycle CASH CONVERSION CYCLE Day 26: Cash Day 40: Day 24: Customer Received by MF Day 0: Mattress MF Pays Vendor Purchases in Store 14 days of Vendor Float Arrives in DC Day -2: MF Orders Mattress The Company’s cash conversion cycle provides a negative working capital business model w
Slide 110: Guidance
Guidance Achievable long-term goals 112
Slide 111: Process to Achieve Long Term Goals
Process to Achieve Long Term Goals . Increase penetration . Leadership Developmental Fortress . Realize benefits of increased RMS . Improve gross margins . Partner with our vendors to drive cost efficiencies and utilize enhanced proprietary product (1) . Maintain operational focus while growing stor
Slide 112: Store Growth
Store Growth . Historical CAGR: 18% . Projected CAGR: 8 to 10% before acquisitions 2,500 Store Growth(1) 2,125 2,000 1,225 1,000 1,500 235 464 0 500 2003 2008 2013 2018F 114 (1) Reflects only company-operated stores and does not contemplate opportunistic acquisitions
Slide 113: Sales Growth
Sales Growth . Historical CAGR: 19% . Projected CAGR: 10 to 15% before acquisitions $2,450mm Sales Growth(1) $433mm $1,217mm $216mm 2003 2008 2013 2018F 115 (1) Reflects only company-operated stores and does not contemplate opportunistic acquisitions
Slide 114: Adjusted EBITDA
Adjusted EBITDA . Historical CAGR: 30% . Projected CAGR: High Double Digits before acquisitions $315mm 20% 350 EBITDA(1) 12% 13% $10mm $40mm $140mm 5% 9% 2003 2008 2013 2018F Adj. EBITDA Adj. EBITDA % 116 (1) Reflects only company-operated stores and does not contemplate opportunistic acquisitions
Slide 115: Anticipated Results
Anticipated Results New stores: 145 - 165 275 290 2014 Guidance Net new stores: - Sales: $1.500B - $1.560B Comparable store sales growth: Low single digits 2018 Financial Goals Before Acquisitions Adjusted diluted EPS:(1) $1.88 - $2.00 Annual store (unit) growth, net:(2) 8.0% - 10.0% Annual comparab