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Eve Sleep issues sales and profit warning

Online bed and mattress retailer Eve Sleep has lowered its sales and profit expectations for the year, citing “more challenging than previously anticipated” trading conditions.

The uncertain economic outlook and continuing low levels of consumer confidence have had an impact, the business said in a market update today (20 September), while heavy discounting and promotional activity from competitors has also added to its challenges.

The Eve board has concluded that 2019 revenues are now likely to be in the range of £25 million to £27 million, and despite a stronger EBITDA performance, with first half losses 50% lower year-on-year, the revenue shortfall “will have some flow throw to the EBITDA loss”.

Today’s statement emphasised, though, that this year’s annual loss will represent “a substantial reduction” on 2018’s loss.

Eve also said today that a mooted merger with mattress-in-a-box rival, Simba, will not happen and merger talks have ceased. However, the board will continue to seek further acquisitions, as well as aiming to drive organic growth.

Trading in the company's shares – which was suspended when merger talks were revealed in the summer – have resumed today.

The retailer said that it continues to increase its brand awareness, and it talked up the success of recent product launches. The implementation of a new ERP system has led to improved operations, it added.

James Sturrock, CEO of Eve Sleep, remarked: "We have continued to make progress with our rebuild strategy and have taken action to reduce our cost base, including a significant reduction in administrative expenses compared to 2018 along with a refocused and reduced marketing investment strategy removing inefficient activity.”

He added: "The opportunity to create a leading sleep wellness brand remains undiminished and I am confident that Eve's rebuild strategy, centred around a differentiated brand positioning, expanded product range, lower friction customer experience, combined with increasing brand awareness sets out a clear path to building a profitable business, which delivers for shareholders.”

Eve’s interim results will be reported on 26 September.

Analyst group GlobalData said in August that online home pureplays like Eve, Simba and Victoria Plumb have struggled to provide investors with a long-term sustainable business model due to high start-up and marketing costs.

Eve was valued at £140 million when it floated in May 2017, but now sits around £13 million, while Simba is reportedly worth just £20 million after raising £27.6 million in investment during its 2016-17 financial year. GlobalData said they have not been able to keep costs under control.

Matt Walton, senior data analyst at GlobalData, commented: “Beyond the high costs associated with international expansion, which significantly backfired on Eve Sleep, investing in marketing to establish and maintain brand awareness has been a significant burden for the pureplays."