The D2C mattress and sleep solutions company, The Sleep Company, said that its revenue witnessed a fantastic growth at 2.5X for the fiscal year ended March 2024. Revenue from operations skyrocketed to ₹312.33 crore from ₹127.14 crore in FY23 as the demand for its new-age products into sleep continues unabatedly.
PC: PR Newswire
Growth Drivers
This phenomenal growth can be tracked all the way back to the company’s flagship mattress segment, accounting for sales of 65% of the total. Mattress sales grew 89% to ₹203.69 crore in FY24, reflecting the efficiency of the brand in capturing consumer interest. Apart from mattresses, The Sleep Company also retails other commodities like pillows, cushions, bedding, and office chairs. Ancillary items sales, growing 5.6 times, brought in revenue of ₹108.6 crore.
The company also enjoyed the benefit of interest income, aggregating ₹7.7 crore in its total revenue, which, with a total of ₹320 crore during the fiscal year, was the net figure obtained.
Expense Dynamics
The Sleep Company’s revenues skyrocketed, but increasing cost was a constraint and weighed heavily on the financial performance of the company. Cost of materials consumed increased 2.4 times at ₹144.74 crore. Advertising expense jumped 89.7 percent to ₹101.43 crore as the company put money into advertising to raise the face value of the brand and attract customers. Employee benefits nearly tripled to ₹35.94 crore in the year.
The total costs of The Sleep Company have increased 2.2 times, totaling ₹378.68 crore in FY24 versus ₹166.7 crore in FY23. Such a sharp increase in costs combined with huge investments in growth initiatives poses serious questions about the sustainability of profitability for the company.
Financial Performance and Losses
In terms of revenue growth, the company has done phenomenally well. It, however, incurred losses of ₹58.69 crore in FY24 on 58% more losses compared to ₹37.06 crore recorded in FY23. Considering return on capital employed (ROCE) and EBITDA margin stood at -26% and -15.92%, respectively, it could be seen that the company lacks profitability despite sales figures being pretty healthy. On a unit basis, The Sleep Company spent ₹1.21 to earn every rupee of operating revenue in FY24.
Market Context and Future Outlook
The D2C mattress industry has been growing at an incredible pace for the last few years based on growing consumer awareness of health benefits from sleep. However, now market is shifting as legacy companies accelerate through strategic acquisitions and strengthening online as well as offline offerings to maintain competitive advantage.
As consumer education enhances, the rationale for higher price points on mattresses and associated merchandise is constantly under evaluation, which may pose to hit margins across the board. For the Sleep Company, as for most in the industry, it remains vulnerable to these shifting market dynamics while trying to continue to gain traction.
From this perspective, the substantial revenue growth of The Sleep Company in FY24 reflects quite well its successful market strategy and the resonance its products have created. But a growing loss and intensifying cost pressure indicate the challenges and roadblocks that accompany growth in a competitive industry. In fact, moving ahead for the company would mean finding that balance between its growth prospects and cost structure management. Investors and stakeholders will watch closely as to how The Sleep Company navigates through dynamics of change in the market and whether it can capitalize on such strong sales to get to profitability.
