From Home Furnishing Business
Take 5: Steve Stagner
Welcome to the first installment of Home Furnishings Business’ new feature, Take 5.
Each month, we’ll pose five questions to a mover and shaker in home furnishings. We kick things off with Steve Stagner, President and CEO of Houston-based Mattress Firm, who discusses the bedding retailer’s acquisition strategy during its eight-year growth spurt.
Home Furnishings Business: Mattress Firm has made 18 acquisitions since 2006. What’s the driving strategy behind the acquisition mode?
Competitors have entered our markets, and some have done well, but as we develop a fortress position it enables us to drive profitability. Those 18 acquisitions since 2006 enabled us to build that fortress position faster.
(Acquisitions) help us leverage scale for several advantages: increasing advertising at a more efficient rate; increasing our presence in the marketplace; and increasing our ability to educate consumers in those markets about the benefits of better sleep.
HFB: Mattress Firm will be up to 2,030-plus stores with the latest acquisition of Sleep Train. Is there still an appetite for more?
Stagner: We have a long history of doing acquisitions, and right now we have a lot going on with Sleep Train (311 stores), and concurrently Back to Bed (135 stores).
Our primary focus right now is on digesting these acquisitions. We want to ensure a smooth transition and success in the long term. That said, there is an appetite for more. We could do some smaller ones where it makes sense in the near term--our stated goal is to go coast-to-coast and build a national presence.
(Digesting) is our preference right now, but we do have a fantastic organization that's demonstrated a capacity to handle a lot of activity.
HFB: Do you plan to convert any of the new brands to the Mattress Firm name, or will they continue operating under their own banner?
Stagner: Our first focus is to expand the Mattress Firm brand across the country to leverage the benefits of advertising, so yes, we will convert some locations to Mattress Firm.
That said, many locations, particularly with Sleep Train, have done a fantastic job building brand equity in their markets. We'll examine that over time. Sleep Train currently has a multi-brand approach on the West Coast, and we're comfortable with their experience operating a multi-brand company.
We feel the market can sustain multiple brands.
HFB: Something about the companies you’ve acquired obviously caught your eye. What criteria do you consider when looking at an acquisition?
Stagner: We look at a variety of things such as the quality of the real estate, the quality of the culture.
One of the most important things is what their position in the marketplace is. What share do they have? How does that fit our goals in that particular marketplace where they operate?
HFB: Moving ahead, what challenges do you see for the bedding retail segment? What indicators are most important to ensure Mattress Firm remains successful?
Stagner: The largest challenge we have is battling an apathetic consumer. There are a lot of consumers, based on our research, who have mattresses that are more than 8-years-old.
We believe that, both as retailers collectively and the wholesalers, the opportunity to provide in our advertising the benefits of better sleep. We can unlock a lot of consumers who, candidly, are sitting on the sidelines.
We look to strategic indicators such as what is our relative market share?
We also measure our turnover rates. We have lower turnover rates than most of our peers and retailers in general. We focus on our culture and our people. We focus on our customer care and response time.
Those are the leading indicators--the overall effectiveness of our people and culture, and our customer service. If we take care of those, the lagging indicator of profitability will be fine.