Kitchen, wardrobe and other household products supplier Joyce Corporation (ASX: JYC) has announced the expansion of its bedding subsidiary, Bedshed, with the acquisition of two prime locations in suburban Sydney. The franchise agreements, finalised with two franchisees, will see Bedshed taking control of stores in Alexandria and Castle Hill. The move is part of Bedshed’s strategic efforts to strengthen its presence in the Sydney market, which the Company perceives as an under-represented yet promising sector.
The total acquisition cost for Bedshed stands at approximately $1.5 million, with stock acquisition costs accounting for around $1 million. The remaining balance is allocated to tangible assets, including store fit-out and equipment.
CEO Dan Madden stressed the importance of acquiring direct ownership of these stores, citing improved access to market insights for better earnings and revenue management in key locations.
Madden commented, ‘‘Through our initial e-commerce store and the establishment of two franchise stores in suburban Sydney, we have established a strong presence from which to grow Bedshed’s brand and operations in Sydney. Having direct ownership of these stores will give us greater control over the NSW strategy and important market intelligence to support future growth opportunities in Australia’s biggest retail market.”
The Bedshed network, currently comprising 42 stores (including six company stores post-acquisition), is set to expand further with the imminent opening of the Toowoomba store in the coming weeks. This follows the successful launch of the Jindalee franchise in Queensland in August 2023.
The franchise-to-owned transition aligns with the 2024 goals Joyce outlined in its FY23 annual report, focusing on expanding Bedshed’s network. Alongside physical store setups, Bedshed introduced an online mattress brand, Drift, in June 2023, targeting Gen Z and Millennial market segments through a seamless e-commerce experience.
As of Q1 FY24, Bedshed Business Written Sales to the end of October 2023 were reported to be 6% below 2023 comparatives. However, things started to look up in November thanks to Black Friday sales. Though the Company did not get into the numbers, it reported that Bedshed generated record revenue from its recent Black Friday sales campaign, as trading conditions strengthened following a slower start to the financial year.
Madden said the Black Friday result confirmed that while consumer spending is easing in response to higher interest rates, people still have an appetite to buy homewares and other goods to improve their homes when there is a strong value proposition.
He added, ‘‘As higher interest rates take effect on discretionary spending, we continue to observe some pressure on revenue and margins. Joyce Group has a robust business model, strong brands, loyal customers and a very strong balance sheet, all of which position us to grow sensibly in a difficult market, and quickly capitalise as market conditions improve.’’
Despite the store expansions and silly season boosts, Joyce foresees its existing issues to continue later into the 2024 financial year.
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