Mattress Firm Softens Most in 4 Months as Costs Weigh on Profit

Mattress Firm Holding Corp. headed for its steepest drop since January after first-quarter earnings fell short of analyst estimates as the company spends to integrate recent acquisitions.

Mattress Firm on Tuesday reported adjusted earnings of 33 cents a share compared with an average prediction of 39 cents, according to data compiled by Bloomberg. The Houston-based company, whose brands include Sleep Train and Mattress Pro, also fell short of analysts’ revenue forecasts.

The first-quarter result was hurt by 7 cents per share for costs related to integrating 131 mattress stores acquired last year, according to a June 9 filing. The company is spending to rename the acquired stores to its existing brands.

“While the headwinds were anticipated and previously communicated, the negative impact was more significant than we forecasted,” Budd Bugatch, an analyst at Raymond James & Associates in St. Petersburg, Florida, wrote in a client note on Wednesday. “Some of those headwinds will likely carry over into the second quarter, to a lesser degree.”

Bugatch reaffirmed his outperform rating on the stock and has a price target of $73, about 25 percent above its current trading level.

Mattress Firm’s continued efforts to fold acquired stores into its business operations may limit gains in the stock in the short-term, according to Peter Keith, an analyst at Piper Jaffray & Co. in New York.

“The announced consolidation of nine brands down to three suggests a lingering drag for the current quarter,” he wrote in a client note Tuesday. “We still recommend staying on the sidelines.”

Mattress Firm slipped 4.8 percent, or $2.98, to $58.68 at 1 p.m. in New York. The biggest drop since Jan. 30 on a closing basis trimmed the stock’s gain this year to 1.1 percent.

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