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Mattress Firm shares rise on strong 1Q, outlook

NEW YORK (AP) -- Mattress Firm Holding Corp. shares jumped to their highest price in more than a year Wednesday after the company reported a surge in profit in its most recent quarter and its outlook for the year reassured investors.

THE SPARK: Profit in the fiscal first quarter rose 24 percent to $12 million, the company said late Monday. Earnings per share, excluding one-time items, came to 38 cents per share, beating Wall Street predictions by 2 cents. Revenue increased nearly 32 percent to $276 million.

For the year, Mattress Firm expects adjusted profit of $1.90 to $1.98 per share on revenue of $1.24 billion to $1.25 billion. Analysts were anticipating earnings of $1.95 per share on revenue of $1.23 billion.

THE BIG PICTURE: Mattress retailers have struggled for much of the last year amid weak consumer confidence and a general unease about spending on big-ticket items. Meanwhile, battles between companies for market share have reduced profitability.

The company is benefiting from consolidation and managing well in a tough climate, analysts say. In the quarter ended May 1, Mattress Firm's sales new stores. The company bought 181 Mattress Giant stores in May 2012. A few months later, it acquired 34 mattress stores from Mattress Xpress Inc. and another 27 stores from Factory Mattress & Water Bed Outlet of Charlotte at the end of the year.

Revenue in the company's established stores fell 5.2 percent, but Mattress Firm expects this measure to recover, growing by a low single-digit percentage for its fiscal year ending in January.

THE ANALYSIS: The company's acquisitions and a rebound in demand for mattresses should benefit Mattress Firm this year, said Wedbush analyst Joan Storms. Storms raised her price target on the shares, which she rates "Outperform," by $5 to $45.

THE SHARES: Up $2.61, or 7 percent, to $40.17 after peaking at $41.20 earlier in the day, their highest price since May 2012. Mattress Firm shares had risen 53 percent in 2013.