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MIDAS SHARE TIPS: Eve Sleep a bet on miserable winter

With insomnia a feature of this pandemic for many of us, a company that makes mattresses ought to be an investment dream. 

But Aim-listed Eve Sleep has been more of a nightmare in recent years, after a failed merger with rival mattress maker Simba and an association with disgraced fund manager Neil Woodford, whose former fund offloaded Eve stock at a penny per share. 

Woodford had initially pegged Eve as a market disruptor; it’s one of a raft of companies that offer you a ‘bed in a box’ squashed flat for delivery, as well as a 100-night satisfaction guarantee. 

Sweet dreams: Eve Sleep is a bet on a miserable winter, when families may want to upgrade their mattresses without trawling round John Lewis first

Sweet dreams: Eve Sleep is a bet on a miserable winter, when families may want to upgrade their mattresses without trawling round John Lewis first

Sweet dreams: Eve Sleep is a bet on a miserable winter, when families may want to upgrade their mattresses without trawling round John Lewis first

But there are only so many disruptors that the bedtime market can bear, and with Simba, Casper, Leesa and Emma also available, there was significant downward pricing pressure.

This week’s interim figures, though, indicate that Eve investors might be able to rest more easily. 

Sales picked up hugely in the second quarter, so although they were down five per cent for the six months as a whole, they were up 25 per cent year on year in the second quarter and the company has trimmed costs and moved away from chasing low margin sales. 

As a result, Eve has been profitable for the past four months when currency fluctuations are stripped out – and on a lower sales number than before. The company also has a strong cash position. Eve has been helped by rivals such as Leesa and Casper pulling out of the European market, so there’s slightly less competition, while we’ve all become more accustomed to buying everything online, which augurs well for a cosy autumn for the brand. 

As well as mattresses, Eve sells beds and pillows, and if the stamp duty holiday results in more people moving house, this should drive revenue too.   

Eve’s share price graph is the stuff of nightmares, slumping from over £1.30 a share in 2017, to 4.85p this week. But there’s the possibility of a real turnaround story here if Eve can leverage the TV marketing campaign it is planning for this autumn to bring in new orders.

Midas Verdict: Eve Sleep is a bet on a miserable winter, when families may want to upgrade their mattresses without trawling round John Lewis first. The company is loss-making, but Eve’s management now has a better handle on costs, which should hopefully lead to profitability. 

As a company with a market capitalisation of under £18million but £9million cash, it’s also worth noting that there’s not much value attributed to its business model. Worth a punt, unless you think the risk will stop you sleeping at night. 

Listed on: AIM Ticker: EVE Contact: evesleep.co.uk or 020 8036 5535 

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