Dreams has increased profits and sales for the fourth consecutive year, bucking the trend in a “challenging” big-ticket market, Retail Week can reveal.
The beds specialist, which went through an administration five years ago, reported that pre-tax profits advanced 7.2% to £29.2m in the 12 months to December 24, 2017.
Like-for-like sales rose 3.3% against strong comparatives, while total sales stepped up 7.2% to £300m.
Dreams also recorded a slight increase in pre-exceptional EBITDA margin, which came in at 14.3% compared with 14.2% in 2016.
The results mark the fourth year of growth for Dreams since chief executive Mike Logue was drafted in to transform the ailing business in 2013, when it was losing £5m a year.
Speaking exclusively to Retail Week, Logue said he was “delighted” with the continued progress, particularly against the “more challenging” consumer backdrop.
He put the profit growth down to being efficient and controlling costs, as well as “better quality products” reducing the number of returns.
Logue said that regularly meeting with Dreams’ 1,850 employees face to face – “keeping everyone informed and celebrating individual successes” – formed another important part of the business model.
“In a tougher market, this is the last place that I’d stop spending money,” he said, revealing that Dreams has launched an internal app to further support this prerogative.
Logue attributed the sales performance in part to improvements in its bedframes division, as well as a successful partnership with Tempur on an exclusive range of products.
Online transformation and beds disruption
Logue said Dreams has trebled the size of its online business. Web sales now represent around one in every five transactions.
“Nearly every journey starts online,” he added. “It’s a vital part of who we are and what we offer.”
The business is targeting further progress here with plans to launch a new, “quicker, more intuitive” platform in June.
Logue also acknowledged the “interesting” wave of transformation that has recently hit the sector, with upstarts like Eve and Casper selling bed-in-a-box products online.
He said the amount of marketing money being spent in the beds space has proven “really helpful”.
“These companies are working out how to make money in the space and we’re really pleased they are there, drawing attention to mattresses,” he said.
He revealed there is space for the new brands, despite “nine out of 10 people” still wanting a range of mattresses to choose from, and pointed to 250% sales growth in Dreams’ own mattress-in-a-box product, Hyde & Sleep.
Outlook
Logue said that, despite the week of snow across the UK, Dreams has had “a good start to the year”, with like-for-likes 3.5% up on budget.
Logue has ambitions to continue expanding the 190-store portfolio “because we still feel there are parts of the country we’re not servicing properly”.
Commenting on the broader retail scene, Logue said: “I think it’s going to be a very challenging year for some. Anyone sitting on low single-digit profitability is in trouble, because costs are increasing.
“We’ve not seen the last of it with Toys R Us and Maplin. The move to digital is now playing out, and there’s no more cost people can take out of their business.
“Average to good is not acceptable any more. You’ve just got to be really, really good, and that goes for all of us,” he thundered.
The retailer’s private-equity owner Sun European Partners was previously considering a sale of the business, but Logue said the offers it received “frankly did not value it at the right level”.
“The sale, from my opinion, is now out of the question for the next couple of years,” he concluded.
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