Based in Houston, Texas, Mattress Firm Holding (proposed MFRM) scheduled a $100 million IPO with a market capitalization of $599 million at a price range mid-point of $18 for Friday, November 18, 2011.

SUMMARY

MFRM is ranked second among mattress specialty retails in the U.S., based on sales, and second based on geographical footprint, with stores in states.

Sales were up 40% to $331 million from $231 million for the six months ended July 2011 vs July 2010. Profit was up 60% to $24 million from $15 million for the six month period.

VALUATION

The P/E ratio was 12, annualizing the 2011 July six months, and the price to sales ratio was .9.

On a comparative basis, other retailers ratios are highterl. Annualizing the July 2011 six months the price to sales ratios for Haverty Furniture (HVT), Sears (SHLD) and JCPenney (JCP) were respectively –12, -74 and 45. MFRM, however, is not as dependent on holiday season sales in the fourth quarter, so even though the July six months results are not directly comparable, we include them as a ‘sanity check’.

Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	Stock
Annualizing July mos	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	YTD
Mattress Firm (MFRM)	$599	0.9	12	3.5	-3.0	n/a
Haverty Furniture (HVT)	$243	0.4	-74	1.0	1.0	-16%
Sears (SHLD)	$7,810	0.2	-12	1.0	2.2	-3%
J.C. Penney (JCP)	$6,960	0.4	45	1.5	1.5	1%

CONCLUSION

Based on MFRM’s recent growth in sales and profits, maintenance of a relatively high profit margin in the 7% range, and given opportunities for geographic expansion, MFRM’s mid-range price point of $18 seems very reasonable.

BUSINESS

MFRM is a leading specialty retailer of mattresses and related products and accessories in the United States.

As of February 1, 2011, MFRM and its franchisees operated 592 and 88 stores, respectively, primarily under the Mattress Firm name, in 49 markets across 23 states.

In 2010, MFRM ranked first among the top 100 U.S. furniture stores for both growth in store count and percentage increase in sales according to Furniture Today.

MFRM has the largest geographic footprint in the United States among multi-brand mattress specialty retailers and ranks second in total sales among mattress specialty retailers.

NDUSTRY OVERVIEW

There are nearly 500 manufacturers in the bedding industry, with the four largest manufacturers, Sealy (ZZ), Serta, Simmons and Tempur-Pedic (TPX), representing 59% of the dollar value of the mattress market in 2009 and the 15 largest manufacturers accounting for 81% during the same period.

In general, the bedding industry has faced little competition from imported products as a result of the short lead times required by mattress retailers, high shipping costs and relatively low direct labor expenses in mattress manufacturing.

Manufacturers sell traditional innerspring products and specialty products across a wide range of styles, sizes, price points and technologies. While conventional mattresses still accounted for 75% of total bedding sales in the United States in 2010, in recent years, specialty mattresses, which use foam and air technology, have grown at a much faster rate than the industry as a whole.

In 2009, specialty bedding producers Tempur-Pedic and Select Comfort combined to account for a 12.2% market share.

RESPONDING TO THE MARKET

As new research emerged showing the link between proper sleep and good health, Mattress Firm responded to the growing demand for specialty mattresses by expanding its product selection to include memory foam mattress sets such as Tempur-Pedic products, and mattresses that allow an individual to personalize the comfort characteristics of the sleep surface.

COMPETITION

The retail bedding industry in the United States is highly competitive. Participants in the bedding industry compete primarily based on store location, service, price, product selection, brand name recognition and advertising. There can be no assurance that we will be able to continue to compete favorably with our competitors in these areas.

Store competitors include regional and local specialty retailers of bedding (such as Mattress Giant and American Mattress, national and regional chains of retail furniture stores carrying bedding (such as Haverty's (HVT) and Rooms-To-Go), department store chains with bedding departments (such as Macy's, Sears (SHLD) and JC Penney (JCP)), big box retailers such as Walmart (WMT), warehouse clubs such as Costco (COST) and factory direct stores (such as Original Mattress).

In the past, MFRN has faced periods of heightened competition that materially affected results of operations.

PRIVATE EQUITY CONTROLLED

Upon completion of this offering, investment funds associated with J.W. Childs will indirectly own 64.3% of MFRM’s outstanding common stock. J.W. Childs is a Boston-based private equity firm.

USE OF PROCEEDS

MFRM is expected to net $90 million from the IPO. $86 million is allocated to repay debt, the remainder for working capital and general corporate purposes.

Mattress Firm (MFRM)	MFRM, C+, 7					Post PO shares: 33mm
Mattress retailer			2010 fiscal yr ended Feb 1, 2011, etc	July 6 mos	July 6 mos
Houston, TX	2008	2009	2010	2010	2011	IPO Mkt
Revenues ($mm)	$433	$433	$494	$236	$331	Cap (mm)
Gross Margin % of revenue	34%	35%	37%	36%	38%	$599
Net loss ($mm)	-$93.0	$21.0	$33.0	$15.0	$24.0	@$18
Net income (loss) % of revenue	-21%	5%	7%	6%	7%
Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
Annualizing July 6 mos	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
Mattress Firm (MFRM)	$599	0.9	12	3.5	-3.0	17%
Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	Stock
Annualizing Aug 6 mos	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	YTD
Mattress Firm (MFRM)	$599	0.9	12	3.5	-3.0	n/a
Haverty Furniture (HVT)	$243	0.4	-74	1.0	1.0	-16%
Sears (SHLD)	$7,810	0.2	-12	1.0	2.2	-3%
J.C. Penney (JCP)	$6,960	0.4	45	1.5	1.5	1%
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		2	2	2	1	7