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Eve Sleep deep dive: can management dream team take this stock to new heights?


Shares in UK mattress maker Eve Sleep AIM:EVE have increased dramatically in the last few weeks; during the pandemic lockdowns many consumers have switched into cocoon mode and upgraded their homewares, including their beds.

Shares had been fairly stable before the pandemic, trading in a narrow range with a year low of 6.5p. Since the middle of last year Eve Sleep has seen a peak of as much as 9.5p and is now off those highs but still going strong at around 7.2p.

The small London company with a turnover of £23.9 million in the second half of 2019, reported a jump of 18 percent for the same period of 2020, citing the switch to e-commerce (Eve Sleep mattresses in a box can be ordered online) and the strength of homeware sales as a result of the pandemic. On Black Friday, it sold one mattress every three minutes.

Eve Sleep jumps on the cannabis oil train

Eve Sleep, which also makes bed frames and sleep accessories, has also been making a strong name for itself through some ubiquitous marketing – notably its dancing sloth TV adverts – and some impressive tie-ups, including its range of bedtime goodies (pyjamas, hot water bottles, scented candles etc) launched with Boots plc in time for a pandemic lockdown Christmas.

A couple of weeks ago, the company jumped on the cannabis oil train, announcing a deal with San Lifestyle cannabis oil products to go with its sleep range. The shares jumped more than 50 percent on the deal. Eve Sleep has also seen an increase in sales off the back of recommendations by consumer association Which? and a slew of home interiors magazines.

And, if that’s not enough to put its name in the mind of consumers and investors, its sleep experts’ survey on how the Brits are getting – or rather not getting – their z’s during the pandemic was slapped all over consumer magazines and newspapers earlier this month. Eve’s big hint is that its innovative mattresses are the preventive cure for what it dubbed “sleep divorce”.

Has the company turned a corner?

All of this is quite ambitious for a company that has yet to report a profit, despite the soaring pandemic sales. One might well wonder how long the boom will continue once the pandemic is under control and people quit working in their beds and return to their offices. And how long Eve will sustain its position in a competitive market that is prime for consolidation.

The company, which had been struggling little more than a year ago with high cash burn, has recently overhauled management, appointing its chief marketing officer Cheryl Calverley as chief executive last May. In February, the team, which also includes chief financial officer Tim Parfitt who is ex-Loaf, appointed Massod Choudhry, ex ASOS and ex Zalando, as a board member.

In its 2020 trading update, Calverley said there had been a “business reset”. The company did note that there was a “high level of uncertainty” with regard to the macro economy and consumer spending habits in the second half of 2021 but that the company entered this year with a much improved proposition, a stronger balance sheet and a more resilient business.

Even Sleep is looking for potential acquisitions

Calverley also reassured investors about rising raw component prices and the effects of Brexit on Eve Sleep’s business, saying that so far there was little impact, and she said the company would look for growth initiatives, notably in France. After a failed merger with rival Simba, the company said it would also look for acquisitive opportunities.

For potential investors, it’s a tricky one. On the one hand, the company appears to be in capable hands with a bold strategy for the future. On the other, its share price has been rather volatile over the last few weeks, due in part, but not entirely, to a lack of liquidity. On balance though, we think that things are going in the right direction for Eve with a corner turned, and that there are plenty of reasons to be bullish on this stock.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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