Opinions Bruce Campbell (2)
Sleep Country CanadaZZZ.TOTOP PICKMay 17, 2016
Bruce Campbell (2)Stock price when the opinion was issued
As of Oct 02, 2024. Market Open.
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Don Lato
Don Lato(Past Top Pick Nov. 30, 2017, Down 18%) It just hit 52-week lows, but its earnings from fallen from 18x to 13x. ZZZ had a few weak same-store sales in recent quarters, but not disastrous. The retail story isn't sexy compared to, say, cannabis where investors have poured in. They still dominate mattress sales in Canada. Their new ad campaign is pushing accessories which sees revenue growth. There are fears that the mattress-in- a-box companies will compete, but ZZZ also sells a box beds. It's a mystery to him why Sleep has been hammered. A few good quarters will turn it around. You can buy it now.
Don LatoOne of the better IPO's and had run up a lot, but it has been struggling lately. It's facing competition from new players offering cheap beds. They're good operators, and they dominate the Canadian market share, especially since Sears went out of business. The valuation is not expensive and has decreased. It could possibly get bought. He's monitoring the stock.
Peter ImhofIn general, he finds retail stocks hard to make money on, especially fashion-oriented ones. Sleep Country sells mattresses, not fashion goods, so it is more interesting to him. However, its market cap is too small for his investing approach. He has looked at it several times and has missed several good opportunities in the stock. The stock price has suffered over the past year after very strong growth in the years before that. There has been a proliferation of online providers of mattresses and they are competing effectively against companies like Sleep Country. Sleep Country has gone online as well, and he thinks they provide an excellent customer experience. However, he expects them to lose more share and he expects the stock price to go further down. At some point, the drop will be overdone and it will be a good company to buy. But not yet.
Combination of valuation, same store sales and growth. Ticks on all boxes. Trading at 15 times earnings. Leader in their field. Great entry point. Yield 2.4% (Analysts’ price target is $39.11)
Don Lato
A mattress retailer. What Dollarama (DOL-T) has done over the last 10 years, he feels this company is going to do over the next 10 years. They are going to continue to expand geographically. Currently they serve about 1 store for 180,000 people, and he thinks that is going to be down to the 150,000 level, so they’ll have more stores out there. They are also expanding their business to sell not just mattresses, but a lot of accessories like fancy expensive pillows, giving them a much higher margin.