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eve management in a waking nightmare

The mattress maker has ditched its chief executive as sales fall short of expectations
July 2, 2018

News that “lower growth for the year will delay UK profitability from Q4 2018” knocked the stuffing out of eve Sleep (EVE), prompted the departure of chief executive Jas Bagniewski, and sent the market value down by around 55 per cent.

IC TIP: Hold at 28.5p

The mattress company reported first-half sales growth of 61 per cent, equating to £18.6m; decent enough, on the face of it, but expectations were that the top-line would double over the course of 2018.

Management cited a “challenging backdrop for consumer spending”, but surely this would have come as no surprise given trends in consumer finance over the past 15-months or so. Growth initiatives into Continental Europe, with the exception of the French market, haven’t worked out as expected, so management is evaluating which markets are commercially viable, with an update on the findings due out in September.

The UK is operating at a broadly breakeven position before central overheads, and the French operations are there or thereabouts. Between them, these markets account for around three-quarters of sales, but analysts at Peel Hunt make the point that “the scale of marketing required to break into multiple markets and establish the brand” means that the remainder of the sales base “has soaked up 60 per cent of the first-half cash-burn". The broker duly revised its full-year revenue forecast from £59.9m to £41.5m. We’ll get a clearer idea of the impact on margins when eve Sleep publishes its half-year returns.