eve Sleep's (LON:EVEE) disruptive model is seeing positive traction and management is pressing the pedal to grow the brand. While carrying execution risk, indications after this short first period are at least equal to expectations at IPO and the valuation on a sales basis appears undemanding.
Disruptive sleep brand: International push
eve Sleep operates a disruptive disintermediation model, sourcing its own products and marketing direct to consumers, so offering higher quality for lower prices. It offers free delivery, a 100-day trial and return. eve focuses on product design, branding and marketing, with outsourced manufacturing and fulfilment. It has scaled up to 15 countries quickly and without significant capex. UK awareness has just passed Ikea as the seventh best-known mattress brand (source: market data).
Maiden interim results: Explosive growth
In its first results since IPO, revenue is up 126%, driven by international sales up 153% and 107% growth in the UK. Underlying gross margin is up 560 basis points to 57.0%. Underlying pre-tax loss has risen from £3.7m to £9.6m (which includes IPO costs of £2.1m) as marketing, including TV, has stepped up; but marketing as a percentage of sales is already falling. In the second half, following a store agreement with Karstadt, the brand will be represented in a total of 146 stores.
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