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Mattress Firm Swings To Profit, Shares Soar 15%

Mattress Firm Holding Corp. (MFRM) Tuesday reported a swing to profit in the fourth quarter from last year, driven mainly by a tax gain. Sales for the quarter jumped 48 percent on the back of some strong same-store sales and increased store count.

Mattress Firm, a bedding retailer that debuted on the Nasdaq last November, also detailed its financial outlook for the fiscal year ending January 2013, which is expected to beat current market expectations. Following the news, the company's stock surged 15 percent in after-market hours.

Comparable store sales for the quarter increased 24.8 percent. Investors consider comparable store sales an important metric of performance as they indicate how fast revenues grow without new stores.

Mattress Firm opened 41 new stores and also integrated the 55 stores acquired from Mattress Giant Corp. in the fourth quarter.

Net sales for the fourth-quarter grew to $188.6 million from $127.5 million last year. Wall Street analysts on a consensus estimated revenues of $177.21 million for the quarter.

Gross margin advanced to 40.2 percent from 36.9 percent, as a result of increased leverage over occupancy and operating costs.

The Houston-based company's fourth-quarter net profit was $17.4 million or $0.56 per share, compared to a net loss of $1.63 million or $0.07 per share last year.

On average, six analysts polled by Thomson Reuters expected earnings of $0.19 per share for the quarter. Analysts' estimates typically exclude one-time items.

For the quarter, the company recorded a tax benefit of $14.2 million related to release of the valuation allowance on deferred tax assets.

The company also agreed to buy all of the equity interests of Mattress Giant for about $47 million in cash. With the closing of the acquisition, Mattress Firm expects to operate about 180 additional Mattress Giant stores in Texas and Florida. Mattress Firm expects Mattress Giant deal to be accretive to its earnings in the fiscal year ending January 2014 by $0.25 to $0.35 per share.

Looking ahead, Mattress Firm expects earnings for the new full year in a range of $1.40 to $1.48 per share and revenues of $1.03 billion to $1.06 billion. Analysts currently expect earnings of $1.37 per share on revenues of $879.91 million for the fiscal year.

The company said the guidance is based on opening of about 100 new stores and comparable-store sales growth of 10 to 12 percent. The acquisition of Mattress Giant is expected to contribute in a range of $90 million to $95 million for the full year.

MFRM closed its Tuesday's trading on the Nasdaq at $37.43, down 4.69%, on a volume of 0.4 million shares. Nonetheless, the stock rose 14.93% in after-hours trade.

by RTT Staff Writer

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