eve Sleep plc ("eve" or the "Company")
Trading update, director change, new partnership agreement
eve, the direct to consumer European sleep brand, today issues a trading update for the six months ended 30 June and announces that Jas Bagniewski, Chief Executive Officer, will be leaving the business with immediate effect.
While trading in the period has continued to far outperform the broader market for big ticket consumer items, sales have fallen short of expectations. Group sales for the six months are up by approximately 61% to £18.6m, with the UK&I up 62% and international sales up 60%.
Trading patterns in the first six months of the year have experienced greater volatility than originally expected, which in part reflects the challenging backdrop for consumer spending. They also reflect the fact that key growth initiatives have been launched at the latter end of the half and as such are yet to generate a meaningful financial contribution. In addition, management has made some strategic missteps, underestimating what is required to develop a meaningful footprint across Continental Europe, while losing focus on creating an aspirational sleep brand in its core markets.
In response to the first half trading performance and the challenging retail environment, the Company has decided to refocus its strategy, from scaling across multiple new countries to prioritising greater penetration in its core growth markets. This will enable eve to focus on its key strengths around customer experience, product differentiation and brand. An evaluation of each of our existing European markets is underway to determine those that are core. We will report the conclusions at our interim results in September.
Given the current change in the business and the volatile trading patterns, as well as the recent and upcoming growth initiatives, the Company will provide more meaningful guidance for the full year outturn at its Interim results in September. However, notwithstanding the initiatives in place, the revenue shortfall in the first half is not expected to be recovered in the traditionally stronger second half given that the pull back from non-core markets will also act as a drag on second half revenue growth. The impact of lower growth for the year will delay UK profitability from Q4 2018, although the full impact on earnings will be partially offset by targeted cost savings.
Departure of CEO
It has been agreed by mutual consent that Jas Bagniewski will step down from the Board and the Company. The search for a new CEO will commence immediately, with both internal and external candidates being considered. As an interim measure Abid Ismail will assume the responsibility of acting Chief Executive Officer in addition to his duties as Chief Financial Officer.
Nationwide partnership with Dreams
Today eve announces a major new partnership with Dreams, the UK's leading specialist bed retailer. The partnership, which is a first for Dreams with a mattress in a box brand, will see the eve mattress sold nationwide in 193 Dreams stores and through its website. The rollout across the estate is expected to take just two weeks and commences today. It is expected that the partnership will expand to include sales of ancillary products such as pillows, toppers and linens etc.
The deal increases eve's retail presence across its three largest markets to 331 stores, building on the Company's existing partnerships with Next Home, Fenwick and Debenhams in the UK, Karstadt in Germany and BUT in France.
The retail presence complements eve's focus on direct to consumer, providing a physical touchpoint for those that prefer to purchase through the traditional format, while avoiding the costs of an expensive retail estate. A secondary benefit is that the physical presence also boosts eve's brand awareness, which continues to grow. Latest data from independent research agency Populus Omnibus shows that UK unprompted brand awareness has risen from 6.3% at the end of March 2018 to 7.6% at 30 June 2018, further cementing eve's position as the UK's most well-known direct to consumer mattress brand. In London awareness increased from 7.3% to 11.4%.
Paul Pindar, Chairman of eve Sleep commented:
"We have fallen short of our own and the market's high expectations and as a result have taken the tough decision to make management change. Jas has, as one of the founders, been a driving force for this business and has much to be proud of. He leaves with the Board's best wishes for the future. In tandem with the search for a new CEO we will with immediate effect be refocusing all of our efforts on strengthening the eve brand in our core markets.
While we do not anticipate a near term improvement in the external environment, we have a healthy net cash position, our trading continues to far outstrip that of the market and should be underpinned by Company growth initiatives including the Dreams partnership that we expect to benefit the traditionally stronger second half. We remain convinced that the sleep market will continue to transition online, that the opportunity to build a new brand of size and strength is significant and that eve is well placed to achieve this."
eve Sleep plc
Abid Ismail, Interim CEO and Chief Financial Officer
via Instinctif Partners
Peel Hunt LLP
+44(0)20 7418 8900
+44(0)20 7457 2020
About eve Sleep
eve is an e-commerce focused, direct to consumer European sleep brand, which designs and sells eve branded mattresses and other sleep products, including pillows, bedding and duvets.
The Company principally focuses on the design, branding, marketing and selling of its products, with other aspects of its operations, including manufacturing and fulfillment, being outsourced. This model has enabled the Company to scale quickly internationally without the requirement for significant capital investment.
The Company's strategy is to continue to penetrate existing territories further, expand into new markets, extend its product range and develop its retail partnerships. Whilst the Company has grown quickly since incorporate, its current market share of the fragmented European sleep market (estimated to be worth £26bn) is only an estimated 0.1 per cent which the Directors believe provides a significant opportunity for further expansion.
In May 2017 the Company listed on the AIM market, raising £35m gross proceeds to accelerate its growth strategy. The shares floated at 101p per share, valuing the business, post new money at c. £140m.
The information contained within this announcement constitutes inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.