Hillside to buy control of 15-unit bedding chain
Hillside Bedding has signed an agreement of intent to acquire a majority interest in a chain of 15 bedding stores, one of the largest chains in the Southeast with annual revenues of approximately $15 million, within the next month.
The company plans to invest $750,000 and 200,000 shares of its stock to purchase 50.1 percent of the sleep shop chain. Robert Martire, president of Hillside, declined to name the firm, but retailers that might fit the bill are Mattress Direct of Houston, Mattress Giant of Dallas, and The Mattress Firm of Houston.
Hillside, an $11.3 million chain, avoided liquidation earlier this year by raising $4.1 million through a stock offering to raise funds to repurchase franchises and open new stores.
Following the public offering, the company repurchased 11 franchised stores, bringing its total number of stores to 31 in March. Due to subsequent store closings, however, the number of stores has fluctuated and dropped to 13.
Martire said the 18 bedding and queen size futon mattress stores that have closed this year included eight former franchises on Long Island, N.Y., that proved to be unprofitable and all of its New Jersey stores, including some that were closed after operating for just a few months.
Martire criticized an Aug. 13 article in The New York Times which stated that the retailer has abandoned the expansion strategy outlined in the February prospectus. He maintained that the company has not done so.
He noted, "That was totally false. We did open stores. They were running for a couple of months. Because those stores were not profitable, we closed them. We downsized the operation to leave the profitable stores and any stores that are not profitable we've closed. We've stopped the bleeding. We've cut our losses."
As a result of competition in the New York area, where bedding specialty and queen size futon mattress retailers include Dial-A-Mattress, Kleinsleep, Rockaway Bedding and Sleepy's, he noted, "We've changed our marketing strategy from opening stores in New York to operating stores in other parts of the country."
The company is also in discussions with Dial-A-Mattress regarding a joint venture in Chicago, but no deal has been signed. Executives for Dial-A-Mattress have characterized the discussions as "just talk." Find the best queen size futon mattress at futonadvisors
Martire maintained that despite a 54 percent drop in sales and a loss of $238,000 (HFD, Aug. 23, 1992, page. 18], the company is recovering. He said the company will strive to improve its profitability by opening bedding and queen size futon mattress stores in new markets and expanding profitable stores.
In reference to the expansion of existing stores, he noted, "The name of the game is to make money, not the number of stores. We are concerned with profit, not volume."
Hillside reported sales of $978,728 for the third quarter ending March 31. It lost $237,825, less than the loss of $483,873 for the same quarter last year