- Company looks for buyer after warning on growth

- US-based PE buyer walks away from possible deal

- Heavy promotions put margins under pressure

Shares in Eve Sleep (EVE:AIM) slumped the best part of 25% to 1.25p after the online beds-to-mattresses minnow warned it will miss revenue targets this year and launched a strategic review that could include an outright sale of the company.

The loss-making mattress seller said it needs new funding to push into the ‘wider sleep wellness space’ and is therefore seeking a new owner or a major new investor.

US-BASED INVESTOR WALKS AWAY

‘In order to deliver our objective of creating the first digital sleep wellness retailer, the board considers that eve would benefit from additional investment,’ said the AIM-listed mattresses seller, which has ‘recently been in discussions with a US-based investor with respect to a strategic investment in the company.’

These talks led to the mystery US based investor making a preliminary expression of interest in making an offer for Eve Sleep, but discussions have since lapsed and ‘the party has withdrawn its interest’.

However, Eve Sleep continues to explore ‘all possible strategic and financing options for the business. In addition to further external investment in the business, these options may include a potential sale of the company.’

SLEEPLESS NIGHTS FOR INVESTORS

Based on the first five months of trading and with the cost of living crisis beginning to bite, Eve Sleep does not now expect to meet its previous revenue expectations for the current year amid declining consumer confidence and rising inflation.

‘These headwinds are slowing Eve’s progress toward its strategic and financial goals’, bemoaned the company, which also warned that the need for extra promotions to shift product is hurting gross margins.

Eve Sleep stressed it continues to outperform a market which is estimated for the first four months of 2022 to be down 29% year-on-year in the UK and down 37% year-on-year in France.

Over the five months to 29 May and against challenging year-on-year comparatives, the company’s direct to consumer sales orders in the UK & Ireland are down 15% and down 3% in France, though sales have picked up in the last three weeks.

AJ Bell investment director Russ Mould commented: ‘Mattress seller Eve Sleep has had anything but a soft landing since listing in London in 2017. The company has given its shareholders plenty of sleepless nights and after its latest item of bad news - missing revenue forecasts - the company is giving up the ghost and putting itself up for sale.’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.

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Issue Date: 06 Jun 2022