Wall Street Watch Friday: Mattress Firm's Shares Sag

Mattress Firm
Mattress Firm

Wall Street can be pretty stingy.

Mattress Firm (MFRM) seems to have posted strong quarterly results on Thursday night, but the stock still tumbled on the report.

Net sales soared 46% to $262 million, fueled by a 5% increase in same-store sales, though mostly by acquisitions and new store openings. Earnings nearly doubled to $0.30 a share, and profitability on an adjusted basis actually clocked in at $0.42 a share.

Mattress Firm also raised its top- and bottom-line guidance.

This is usually a recipe for bulls breaking out into high-fives, but the stock was trading sharply lower on Thursday night.

What went wrong?

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Well, it's really all about the cash register. Mattress buyers may not agree on the ideal firmness of their bedding, but investors really want their top line to be firm. Analysts were expecting $263.3 million in net sales for the second quarter. The retailer's raised outlook for the year calling for $1.02 billion to $1.04 billion may be better than the $1.02 billion in net sales that analysts were targeting, but Wall Street has probably failed to account for the Mattress XPress acquisition that was announced earlier this week and will close this quarter.

Is Mattress Firm trying to buy its way out of a slowdown in organic growth? No. This is a highly fragmented business, and acquiring smaller players is a smart move. However, sometimes the market expects too much out of its recently public companies.

Mattress Firm investors will just have to sleep on it this time.

Other Things Worth Watching

• You're getting a Dell (DELL) dividend, dude. The PC giant announced a quarterly dividend of $0.08 a share after Thursday's market close. It's Dell's first ever payout. Gee, it took the collapse of its flagship computer business for the company to finally begin appealing to income investors.

• The market may be excited about Apple's (AAPL) iPhone 5 unveiling next week, but there's one group of investors who suddenly don't care. Shares of Audience (ADNC) will be falling sharply on Friday after the company warned the market that its voice-processor technology -- long-rumored to be part of Apple's next smartphone -- may not be used in the iPhone 5. And that, investors, is how you lose your Audience.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.

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