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Good morning. My name is Pam, and I will be your conference operator today. At this time, I'd like to welcome everyone to Sleep Country's Q3 2021 Results Conference Call. [Operator Instructions] Yesterday's Sleep Country results -- released their financial results for third quarter of 2021. A copy of the earnings disclosure is available on their website and includes cautionary language about forward-looking statements, risks and uncertainties, which also apply to the discussion during today's conference call.I would now like to turn the conference call over to David Friesema, CEO. Please go ahead.
Thank you, Pam. Thank you, and welcome, everyone. We appreciate you taking the time to join us this morning. I hope you're keeping well. With me today is Stewart Schaefer, our President; and Craig De Pratto, our CFO.I would like to start today's call by taking a moment to thank everyone who has been part of our journey for the past 27 years. As many of you know, I will be retiring at the end of this year, and Stewart or Stu Schaefer will assume the role of CEO on January 1, 2022. Today marks my 26th and final call is your host since we completed our IPO in 2015. Thank you to the investors and analyst community for joining us each quarter to our employees for their unwavering dedication to our business and to our customers for your continued trust in us. When we first launched Sleep Country in 1994, we set out to transform the way Canadians shop for mattresses. Along the way, we have evolved, pushed the boundaries and differentiated ourselves in the Canadian sleep space to become Canada's leading omnichannel and direct-to-consumer specialty sleep retailer. It has been an honor and a pleasure to serve our team, our investors and our customers over the last 27 years, 7 of which I had the privilege to lead the company as CEO. I look forward to watching this company continue to grow and succeed under Stu's exceptional leadership. As you all know, Stu has been instrumental in our company's success over the past 2 decades, and he is the right person to guide Sleep Country into our next chapter of growth. Thank you all. I will now hand the conversation over to Stu to start us off with our key highlights for the third quarter.
Thank you, Dave. It's been an absolute privilege working with you. Your legacy goes far beyond the bottom line. We thank you for your commitment to serving Canadians transforming lives through the power of sleep and your invaluable contributions to Sleep Country's success over the past 26 years. We wish you the very best in your well-deserved retirement.We are pleased to share the results of another strong quarter. In fact, we delivered the strongest results in our company's history. We achieved growth across several key metrics from Q3 2020 to Q3 2021, including increases in revenue by 13%, gross profit margin by 2.8%, adjusted net income by 19.5% and diluted adjusted EPS by 18.9%.Our performance was a result of solid execution of our strategic road map across our entire sleep ecosystem by our best-in-class team. We continue to solidify our position as Canada's leading omnichannel and direct-to-consumer retailer.As the economy continues to reopen in the third quarter, we welcomed our customers back to our retail stores with no store closures throughout the quarter for the first time since Q3 2020. Our same-store sales increased by 10.6%, and our investments in our e-commerce platforms continued to deliver strong results, representing 17.9% of revenues. These results indicate the power of our growing retail store presence and digital expansion that provide us with more opportunities to serve our existing customers and attract new ones as well.Our sleep experts in our retail stores and through our online Dreamline chat service continue to be a trusted resource for our customers, and we continue to be impressed by our Endy's team's ability to drive exceptional results and exceed customers' expectations. I'd like to take a moment to congratulate our Endy team for reaching 500,000 customer transactions and all of our sleep experts who are truly dedicated to making sure our customers have their best night sleep. Great work team.As Canada's leading omnichannel and direct-to-consumer retailer, we are committed to channel and product innovation. We are always looking for new ways to build our sleep ecosystem and make our brands more accessible to customers in ways that meet their evolving needs. To that end, we have forged new partnerships with Walmart Canada and Casper. Earlier in the quarter, we deepened our existing partnership with Walmart Canada in an agreement to launch Sleep Country Express and Dormez-vous Express, a brand-new pilot concept that will see our Sleep Country Canada and Dormez-vous brands prominently situated at select Walmart Canada supercenters. This development will increase our visibility with new customer segment and allow us to deliver the exceptional customer service for which we have become known for at Walmart. We have just begun rolling out the first 10 pilot stores in the last week, and we look forward to exploring how this new concept will deliver our best-in-class sleep products to more Canadians in the years to come.In Q3, we executed a new and exciting partnership with Casper, the award-winning sleep company. We have become the exclusive retail and digital partners of Casper for Canada for their celebrated core collection of mattresses. In addition, we will be working with the Casper team on new product design exclusively to meet Canadian sleep needs. We are incredibly proud to build on our Walmart partnership and to add Casper to our growing roster of new partners, including leading brands such as Tempur-Pedic, Purple, Malouf, Simba and recently Best Buy, all who continue to differentiate us in the Canadian retail marketplace with the world's most relevant sleep brands and partners.Subsequent to the quarter end, we are very excited to have welcomed Hush Blankets into our family of sleep brands and innovative product lines. Hush is a beloved Canadian-based direct-to-consumer sleep retailer, specializing in temperature regulating weighted blankets, ice cooling sheets, their famous pillow, and just recently launched their first Hush mattress-in-a-box. Started by 2 dynamic entrepreneurs, Lior and Aaron, the Hush team has built unbelievable brand and attracted a highly engaged and fiercely loyal customer base in just 3 years.We closed the acquisition with a 52% majority for an initial amount of $25 million and will acquire the residual 48% of Hush in annual 16% stakes increments on March 31, 2023. Together with their products and digital team and our market knowledge, infrastructure and logistic capabilities, we will continue to drive our digital evolution and expansion of our accessory assortment. Their aggressive and dynamic direct-to-consumer model within Canada and the U.S. perfectly aligns with our growth road map as we explore opportunities in new markets with differentiated customer segments. Amidst the backdrop of the ongoing global supply chain disruptions, we have not been immune by the multiple challenges that all retailers have faced, but believe we are well positioned to realize our recent infrastructure investments. From the 2 new distribution hubs, which opened in Q3, to our digital and supply chain management improvements, we have been able to shift proactively and adapt in these uncertain times and continue to provide our customers with the best solutions to meet their sleep needs.As we look ahead to Q4 2021 and beyond, we remain focused on driving the next generation of our company's growth. The pillars of our strategic plan to provide world-class customer experience across all our channels, deliver relentless channel and product innovation and help Canadians improve their lives with the power of sleep, will continue to serve us well as we chart our course for the next phase of growth story.With that, I will now turn the conversation over to Craig to discuss our financials.
Thank you, Stewart, and good morning, everyone. I'd like to reiterate that we are very pleased with our strong Q3 results. We continue to see Canadians make their health and well-being a key priority, driving demand for sleep solutions. Our differentiated business model, brands, strategic investment, growing sleep ecosystem has allowed us to meet Canadians sleep needs. As noted earlier in the call, in Q3 2021, the company was not impacted by government-mandated store closures similar to Q3 of 2020. This is the first quarter since the start of the pandemic where we did not experience mandated closures in both the current period and the comparative prior year period.Our Q3 revenues increased by $31.4 million or 13% from $242.4 million in Q3 2020 to $273.8 million in Q3 2021. This increase was mainly driven by a 10.6% increase in same-store sales, 6 new store openings in fiscal 2021 and our wrap stores. In Q3 2021, 17.9% of our revenues were generated from our e-commerce platforms. We continue to see revenue growth in both mattresses and accessories categories. Mattress revenues increased by $23.9 million or 12.5% from $191.7 million in Q3 2020 to $215.6 million in Q3 2021. Accessories revenues increased by $7.5 million or 14.8% from $50.7 million in Q3 2020 to $58.2 million in Q3 2021. As a reminder, in fiscal 2020, upon the onset of COVID-19 pandemic in Canada, the company was mandated to close its entire store network for an extended period of time. During this time in Q2 2020, many Canadians deferred their sleep purchases into the future, creating pent-up demand. This resulted in strong quarterly growth in Q3 2020 of 15.4% and Q4 2020 of 33.4%. We are very pleased to see that while we lapsed over these strong results in the prior year, we continue to see solid results and revenue growth of 13%, resulting in a 2-year stacked revenue growth of 30.4%.Our gross profits increased by $18.5 million from $84.2 million in Q3 2020 to $102.7 million in Q3 2021. The gross profit margin increased by 2.8% from 34.7% in Q3 2020 to 37.5% in Q3 2021. This increase was primarily due to an increase in average unit selling price as well as lower inventory adjustments, COVID-19 PP&E costs and leveraging our occupancy and depreciation costs. These efficiencies were partially offset by higher sales and commissions and distribution operations costs.The increase in compensation costs were attributable to higher sales salaries, bonuses and related payroll taxes. Additionally, we saw a shift in revenue earned from our e-commerce platforms into our retail stores, which increased commission costs. We continue to experience pressures on our freight costs, primarily from the container imports, and we have been able to successfully pass on much of these costs to the customers year-to-date.Regarding SG&A expenses, costs for Q3 2021 increased by $14.3 million or 41.7% from $34.5 million in Q3 2020 to $48.8 million in Q3 2021. As a percentage of revenue, our G&A expenses increased from 14.2% of revenue in Q3 2020 to 17.8% of revenue in Q3 2021. The $14.3 million change in G&A expenses was mainly driven by an increased media and advertising costs, compensation costs and professional fees. $3.2 million of the $14.3 million increases in G&A expenses were related to the acquisition of Hush as well as the majority being due to ERP implementation costs. When you normalize SG&A for these costs, SG&A would have reduced to approximately 16% of sales.Moving on from G&A. Operating EBITDA was $73.7 million for Q3 2021 or 26.9% of revenue compared to $65.3 million in Q3 2020 or 26.9% of revenue, representing an increase of $8.4 million or 12.8%, mainly tied to strong revenue growth in Q3 2021 combined with improved gross profit margins and partially offset by G&A expenses.Adjusted net income increased by $6.5 million from $33.2 million or $0.90 diluted adjusted earnings per share in Q3 2020 to $39.7 million or $1.07 diluted adjusted earnings per share in Q3 2021. On a year-to-date basis on cash flows, we experienced a net decrease in cash of $0.1 million. Net cash flows provided by operating activities came in at $111.1 million. Cash flows used in investing activities of $36.5 million and lastly, cash flows used in financing activities of $75.5 million. As previously mentioned, subsequent to the quarter end, on October 22, 2021, we acquired 52% of the issued and outstanding common shares of Hush Blankets, Inc. for cash consideration of $25 million. We will acquire the remaining 48% of the outstanding common shares in 3 equal installments of 16% over a 3-year period, starting March 31, 2023. The consideration paid for each incremental purchase will be calculated based off specified earning level achievements during this 3-year period. Also subsequent to quarter end, our senior credit agreement for a credit facility of $260 million was amended. The amendment includes negotiated interest rates to pre-COVID levels, thereby reducing our interest expense.On the capital allocation side, on November 11, 2021, the Board declared a dividend of $0.195 per share on the company's common shares, which will be paid in -- later in November. This completes the overview of our financial results. Over to you, Stu, for closing remarks.
Thanks, Craig. Our strong performance this quarter was the result of exceptional execution across all our brands and channels by our fabulous team to provide customers with a world-class portfolio of products wherever and however they choose to shop. Thank you to our Sleep Country, Dormez-vous and Endy teams, along with all our partners who contributed to our success this quarter and for your incredible resilience over the last 20 months. Building on our 27-year history of delivering the best sleep solutions to our customers, we remain focused on driving long-term profitable growth while seeking out the most innovative sleep assortments and partnerships to broaden our reach and product selection. As we recover from the pandemic and customers continue to prioritize sleep as a core pillar of their overall well-being, our powerful sleep ecosystem, differentiated service model and commitment to sleep excellence will continue to strengthen our position as Canada's leading sleep partner.On a final personal note, I want to thank my dear friend, Dave, for the last 17 years of a fabulous partnership. Your leadership, mentorship, guidance and, most important, friendship to me has changed and improved my life and the lives of so many around us. Thank you, Dave. With that, we conclude our remarks and open the floor for questions.
[Operator Instructions] Your first question comes from Martin Landry with Stifel GMP.
Dave, congratulations on your impressive track record and good luck in your future endeavors.
Thank you.
I was reading your MD&A, and there's no discussion on inflationary pressures and no discussion on supply chain issues. And I have to say, that's quite refreshing to see nowadays. But given that, I'd love to hear you talk about a little bit, see how you're navigating the current headwinds you've alluded to being able to pass on some of the freight costs. But if you could just give us a broad overall view of what's going on and how you're coping with it.
Well, so I'll start by saying we're not immune to the supply chain global logistic issues. But we have been incredibly proactive in our approach earlier this year because we saw some tailwinds shifting in the end of last year and the beginning of this year. First off, the introduction of our new super hubs for storage capabilities was a big part of our import program as well as trying to get ahead of these potential increases. And we've been able to load up inventory over the past summer and taking us into our busiest quarter. Traditionally, the third quarter is our busiest quarter of the year. That being said, some of those costs we see are coming through. And in most cases, we are fortunate enough to be able to pass on to some of those costs onto our mid- and high-end collection of goods, and it's a little bit more obviously sensitive on our lower end.
Okay. That's helpful. And maybe just a follow-up. Your gross margin reached a record level. It's up 275 basis points. I was wondering if it'd be possible to quantify the puts and takes to bridge from last year to this year?
Yes, Martin, we kind of break it out a little bit more detail within the MD&A. But the main areas, we've been able to pass on a certain amount to the customers, and what we've seen is a higher ticket in terms of our sales mix. So there's been some efficiencies there over the product cost. So while our product cost year-to-date have largely stayed intact, we've seen some higher sales mix, which is pushing some efficiency to gross profit.In addition to that, our COVID PP&E costs were much heavier in the prior year as we were just rolling out of mandated closure periods in Q2 coming into Q3 of last year. So there was some good efficiency there of about 0.6% levering impact in that area of that other cost bucket. In addition to that, with the sizable increase in sales year-over-year, we also were able to lever on our occupancy costs and depreciation that is recognized down to gross profit. So one is that larger sales mix in average ticket over some good costing year-to-date, we do see the pressures with the container business, which is something that we do see flowing through in future quarters. And then you've got your occupancy, lower COVID costs, and that's what we're seeing the main kind of puts and takes year-over-year.
And Martin, I just also want to add that always keep in mind, too, that over 80% of our mattresses are manufactured in Canada. So the container component is only for our accessory business.
Your next question comes from John Zamparo with CIBC.
Dave, I'll echo my congratulations on a storied career and all the best. We'll miss you on these calls.
Thank you.
My first question is a follow-up to the last one. You mentioned the increase in the average sell price. Is there anything you can say to help us differentiate between inflation on like-for-like items, but also customers who are skewing towards buying higher ticket items? And can you talk about unit sales or customer counts versus Q3 '20 or Q3 '19?
Sure, John. This is Stewart. I will say that the customers' focus around health and wellness and a better sleep has definitely shifted also to a higher better quality product. As you -- as we might have seen more pressures on the lower end, the mid- to high end of our business grew very well this quarter. The introduction of Casper as well as Purple and our #1 selling high-end brand, Tempur-Pedic was definitely strong in this quarter, and that just helps our overall profitability and growth, too.
Okay. That's helpful. And then my second question is on the balance sheet and capital allocation. We've talked about this in the past, and you've seen a year's worth of strong results. The balance sheet is in better shape than it's ever been. So should we interpret the lack of an increase to the dividend or use of the NCIB or announcement of something incremental as product of maybe a more attractive M&A pipeline or maybe more interest in M&A on your part? Or is there something you're waiting to see before announcing something on capital returns?
Yes. Thanks, John. It's Craig here. So when we've held the dividend and -- at this point in time, but we -- investors can expect that we will get back to our regular cadence of increases, which comes in the new year. In addition to that, when we take a step back of where we've been allocating capital this year, we want to just remind that since the last update to this update, we have closed on the acquisition of Hush. So that was $25 million, which typically could have been earmarked for something like an NCIB, would have been in that range on our -- under our current program that's approved, would be in that range of dollars allocated. So we have put that to EPS accretive use with the Hush acquisition. In addition to that, when we take a step back to quarter 1, we also had a $25 million payment to Endy as part of the earn-out. So over the year, we have allocated capital towards strategic acquisitions of about $50 million. And when we take a step back, that's the second largest commitment from a capital perspective in the company's history outside of 2018 when we made the initial payment to Hush. So where we're at, at this point is we feel that we've allocated since the last update in the last call, $25 million towards an investment that's EPS accretive, and we're very happy with and pleased with. And there'll be more to come in the new year around updates, and then the investors can expect the regular cadence of dividend increases to fall back in line with what we've done historically.
Your next question comes from Stephen MacLeod with BMO Capital Markets.
I'll chime in here as well. Congratulations, Dave, on a great run with Sleep Country, and it's been a pleasure working with you. So thank you for everything.
Thank you. I feel the same say.
So I guess I just had a couple of questions. I just wanted to follow up on the gross margin. There was a very strong record growth and record level, I think. And I'm just curious, is this just a new step-up in the gross margin? Or is it more a function of some of the things that you saw being additive to the gross margin that maybe won't repeat in the future?
So year-to-date is different than what will be coming down the pipe. So because of the container pressures and the proactive ordering of inventory previous to kind of coming into Q4, we've been able to keep the cost and the container pressure increase largely kind of at bay. As we come into Q4, we are seeing some of those purchases that will start to roll in where they are at the higher freight at the freight cost. So there will be pressure in quarter 4 and into the new year around product costs tied to the increased container costs. You can see that if you look at our revenue -- or sorry, our year-over-year inventory balance growth, it's in excess of $11 million. And what's even -- to show the magnitude of the orders, if you look at our revenue growth even sequentially from Q2 into Q3, it's quite significant. So we've been able to keep up with higher demand from our customers year-over-year. But in addition, we've been able to also hold a very healthy inventory balance, which shows that kind of proactive ordering and the magnitude of what we have been ordering in quarters leading up to the busy Q3, Q4 season. So we feel very good in position from a inventory perspective in terms of being able to serve our customers, but we do want to know that there will be pressure on that gross profit in the subsequent quarters because now we're starting to see those increased container costs that we'll be rolling through.
I would add -- I'm sorry, Stephen, I was going to add one thing that the 13% growth was a mix of a balance of 12.5% growth on our mattresses and an accelerated growth of 14.8% on our accessories, which you know comes at a higher gross margin. So we saw a little bit of that, too.
Okay. That's good color. And when you talk about pressure in Q4 and Q1, which is completely reasonable to expect, are you talking more about the year-over-year pressure or sequential pressure from what you saw in Q3?
It would be sequential, sequential. So you will continue to see a little bit of pressure in that area. Again, we've been able to increase basket size and pass on a portion to the customer. So we've been strategic on that front as well to get ahead of that. And again, just a reminder, when we -- our products do tend to be less price sensitive and the notices of slight increases aren't as heavily felt as it would be, but a day-to-day item that's transacted daily at a lower ticket. So -- but there will be sequential pressure is the way to look at it.
Okay. Great. And then when you think about heading into next year, I think you would have already gone through your pricing exercise for your mattress lineup for 2022. Is there any reason to think that prices, because of the supply chain issues and inflation, would be like materially higher that it could potentially impact consumer purchasing decisions? Is that anything that we should be concerned about heading into next year?
I will say, Stephen, that we're right in the final part of that. There's definitely been -- some of our vendors have put forward certain price increases that were a little higher than usual. But to Craig's point, the entire market shift is -- I don't think will be noticeable to our consumers because the beauty of our business is the diversification of our floor. A bed that goes up in price, it's not like we're -- when we sell 1 bed unit, we could always find another bed for the same price. So $1,000 bed that may go up to $1,050, there will be a step down from that for $1,000. So we strategically look at our pricing and our floor like a chess board to make sure that we meet our customers' needs at every single range in terms of pricing. And I think with that, I can tell you with certainty, we're very comfortable that we've done the same thing for our floors for next year.
And I'd just like to add, that's just one -- another example of our high-touch service in our stores will pay dividends on that front as well.
Your next question comes from Meaghen Annett with TD Securities.
Dave, I will add my congratulations here and wish you all the best. With regards to the Express store concept within Walmart, how significant do you see that partnership becoming in the context of Walmart's 400 locations in Canada? And also, what are your thoughts on maybe taking that concept outside of Walmart? If you could just touch on how you evaluate potential cannibalization there as well, that would be helpful.
So let me just start by saying, Meaghen, it's still very early days. Like we've been open a few stores only for about a week, and it's a 10 pilot stores. Over the next week or first 10 pilot stores are going to be rolling out. And I stress the word pilot because we're going to watch and learn and evaluate. But we are very excited about this. And we're not worried about the cannibalization because there is a component to this that will push, we believe, our customers that are looking for a broader selection in the Sleep Country Express stores to our larger stores. So it's a great introduction to a broader customer segmentation, millions of eyeballs that will see us every single day. And in terms of the opportunity, to your point, 400 stores that they have, I can tell you that it wouldn't be a 400 store expansion, but we do see a path, a runway comfortably. If all goes well and the pilot is what we think it could be, that over the next in 12 months, we could open 30 to 40 stores and probably grow to 100 stores within 2 years -- 2 to 3 years.
And just as a follow-up, a broader question here. The financial performance has been really exceptional throughout the pandemic as we've touched on here. Can you just talk about the top line drivers that you see that really keep that growth profile going in the near term, as you continue to lap those comparable periods? I mean we've seen solid execution against the strategic agenda. But it would be helpful if you could just lay out how you envision those initiatives will contribute to growth in 2022 and beyond?
So our plan -- our strategic plan that we've been laying out over the last few years broadening out our product innovation, expanding our channel distribution within our own brick-and-mortar stores as new Walmart Express -- Sleep Country Express partnership, our marketplaces with Best Buy and Walmart, our new partnerships with Casper, Purple, Simba, we're feeling pretty bullish on our business, excluding any potential changes or shifts in the economy. There's no question that there's still some form of pandemic uncertainty, which is why we are probably prudent in terms of our capital allocation, and we would like to see the next 2 quarters. We're comping off a huge Q4 from last year of 34% growth, which was really a build up of Q2 shutting down and rolling into that quarter.Consumer habits are going to be -- we're watching very closely. They seem to be still confident. There's definitely a fair share of their wallet that's been invested in their home, and we believe that the focus and changes of the way customers think of health and well-being as a pillar similar to diet and exercise, we think that will continue. So unit growth, I'm not going to comment on because it's hard for us to predict that. But we have seen during the pandemic over the last 2 years, a shift to a higher AUSP as people invest more in their sleep.
And I would just like to add one small thing to that, which is the market has been favorable to us when our stores were open over the last couple of years, but we've also done a very good job of taking market share. And so as we talk about market share, which we use stats can data for, we've always said that one quarter worth of information doesn't -- you have to look at it over a longer period of time. But our market share in Q3 went up significantly based upon the way we measure it, and just a little bit below 40%. So we really are also performing very well within our industry.
Your next question comes from Patricia Baker with Scotiabank.
And Dave, I would be remiss if I didn't comment on the fact that you will be missed, and I wish you all the best with your future, and it's been a pleasure working with you. I just wanted to follow-up on the Walmart discussion and the discussion of your partnerships, marketplace, et cetera, et cetera. Are there other implications as you roll more of these out and have the Sleep Country brand across so many more doors in Canada, ultimately? What are the implications for your thoughts about growing your own brick-and-mortar Sleep Country [indiscernible] footprint?
Great question. I will tell you that we've been opening up stores during the pandemic and the stores that we continue to open are performing above expectations. So our plans and trajectory in terms of our expansion model, it's still rest the same. There's no change in our philosophy. In fact, we are paying close attention to AAA real estate of some of the opportunities that have popped up. And some of our satellite markets that we've recently opened, Windsor and, more recently, Cornwall have all performed really well, and we still see a nice opportunity there. The expansion of marketplace, the expansion of the relationship with Walmart, we believe will only broaden the awareness of our brand of multiple touch points, which is what we're trying to achieve and make it easier for our consumers to shop anyway, anyhow they want to through Sleep Country. So for the moment, for at least the foreseeable future, Patricia, we are bullish on our growth of our brick-and-mortar. We're bullish on our digital expansion, and we're quite excited about our new relationships in terms of our marketplace.
Okay, that's great to hear, Stewart. Just in the opening remarks, referenced the Casper partnership and noticed that you'd be working on new product designs. So can you just talk a little bit about that with those new product designs that will be exclusive only -- exclusively for the use of Sleep Country or -- for also for both parties?
So as we do with all our vendors, Tempur Sealy, Simmons, Serta, we've always had a position with them to work very closely with our sales teams and our merchandising teams here with the manufacturers because, being in the business for 27 years, we have a very good sense of our customers' sleep needs. Casper has done a fabulous job in terms of recognizing the differentiating components within the Canadian landscape compared to the American landscape. There are some small subtle differences and uniqueness that we have been working with them and discussing that we like the shift. But more importantly, it's making sure that Casper fits well with the blend of other products on our floor so the floor works in a very harmonious way. And I think there's going to be opportunities to expand, not yet about some other sleep accessories as Casper is definitely interested on the accessory side and the success that we've had on our accessories. And we do believe the brand cachet with Casper may accelerate some of those opportunities.
Okay. That's great to hear. I just want to follow up on a comment that Dave just made about the market share being just hovering around 40%. And that's been one of the big success stories at Sleep Country over the course of the last decade or so is just the rapid growth in market share. And when you think about market share, there is no real impediment. Do you think that the market share continue to go much higher than that and that the company ultimately could command an even greater market share? Around 40% is pretty significant, but I assume that you believe that there's a lot more room to grow there.
Yes, I think there is. We don't even focus on 40%. We focus on the 60% we don't have, and that's where we put our attention in. And I know Stewart's opinion is once they get rid of me, they can grow the market share even faster.
Your next question comes from Sabahat Khan with RBC Capital Markets.
Good luck with the next step journey, Dave. Just, I guess, following up on some of the conversation on Casper here. I guess the release announced in September talked about the exclusivity. Can you maybe share some color on what is that exclusivity mean? Does it -- some of the other retail partners, they have may no longer exist? Like how are you sort of going to fit in into the broader Casper distribution in Canada?
Our agreement is an exclusive distribution of their core mattresses. So I can't comment on the relationships that they had before. But this is a full exclusive in terms of the Casper brand throughout Canada, including an agreement and partnership in terms of their website as well as our Casper stores to a smaller extent, but you should consider Sleep Country as the exclusive partner for the country.
Okay. And then is that excludes their own Casper website or, as you said, there's like a small part you'll play in that as well?
There's a small part of that. So the Casper website will continue. The 6 stores that they have will continue and will play a small part in that.
Okay. And then I guess, just on the Hush transaction. Given just their product offering, should we assume that business will be consolidated and then rolled into your accessories revenue line?
No, not for now. First of all, the deal just happened. So we're very excited about their trajectory of growth. They're still very early days, only 3 years old. We do see some future opportunities with the Hush brand to expand our accessory assortment. But for now, their focus will be on some of their new products that they've already recently rolled out. They've been seeing some good traction on that. And what we will focus on immediately is helping them with our buying capabilities, our supply chain, our infrastructure, the finance component, the back end more so and let them do the magical things that they do, which is the front end and the marketing.
I'm so sorry, I just meant more from a reporting perspective, like eventually when the transaction does close and you sort of reported. I guess, will that be split across mattress and accessories depending on where the sales are? Just trying to figure out where we should kind of reflect the contribution?
Yes, yes, Saba.I was going to just pipe in there because I think I thought that's where you're also getting as well. So yes, you're correct. For the mattress component, it would be in the mattress sales and then the accessories being the accessories. So that's the way to think about it.
Okay. Great. And then just a commentary earlier around the market share discussion. I guess, is that -- when you talk about your current estimate of market share, is that sort of brick-and-mortar? Or is it sort of taking all your bed-in-a-box offering and just taking what percentage sort of, call it, total Sleep Country revenues of the all mattress and sleep release stuff in Canada. I just want to get some context around whether that's just sort of a for a brick-and-mortar and Sleep Country online or sort of all kind of offerings?
So when we talk about market share, it's mattresses. We believe the opportunity in accessories is much bigger, and we are much smaller. Our estimates -- our guesstimates are between 8% to 10% share that we currently have. So that is a focus for us. And we do think that the potential for growth in that category is still very early days.
Yes. Sorry. And the only thing I'll add to the other part of your question is it does include all of our channels. So it's our online business plus our bricks-and-mortar, it's not just bricks-and-mortar.
Yes. Correct.
Okay. Great. And then just sort of one last one. I think we talked about it a couple of quarters ago, but should we still kind of assume just given the amount of online and different brands that you're involved with, does that kind of the same-store sales number is still kind of closer to total revenue? Or is it -- given that stores are now open, is they more refined to maybe stores only? Just trying to compare this number sort of going forward, just given all the additional brands and partnerships and marketplace agreements that you have, is that closer to sort of a total revenue number or still more reflective of kind of the store base that frequently operates plus some e-com?
Yes. So the way to think about it is that, yes, they will continue to be fairly close. But with some of the additional channels and how those will roll in between same-store or total sales, there's probably going to be a 1.5-ish to 2% variance between the two. And we'll report some more clarity around that as we see things continue to -- these partnerships continue to become more mature. But yes, it's going to be very close, like within 1% to 2% is a fair range between same-store and your total. And just to clarify that, the e-commerce channels of our business do -- and are included in the same-store sales metric in addition to the brick-and-mortar. So both are included.
I will say, if I could add also, Saba, that we've become, over the last couple of years, very much channel agnostic in terms of our business. We are still in the learning phase of e-commerce and our whole omnichannel evolution and watching the journey of the customer, which may start on their phone, walk into our stores and then conclude the transaction back on their phone. The lines of same-store sales or how we consider overall growth are becoming a little bit blurrier because our focus is to serve our customers any way and anywhere they want to shop, and that is a driver that, I think, is also making us incredibly successful.
Great. And just one clarification, I guess, just on how we should think about revenue going forward. Between the marketplace agreements and I guess some of the shop-in-shops in Walmart, is it that you're collecting the revenue on all those sales and Walmart at some sort of royalty? Is there a difference between the two? Or is there a case where you're getting the royalty? How should we think about whether it's the Best Buy or Walmart online and the Walmart in stores?
The first thing that you said was exactly it. So it's our POS machines. It's our revenue, but there's a royalty component to it. It's exactly how you should look at it.
Your next question comes from Vishal Shreedhar with National Bank.
I'd like to wish you the best in your future endeavors. Okay. So regarding the market share, obviously, very strong performance since IPO. And if you continue at this rate that you've been at your market opportunity, the future will be much less than it was when you IPO-ed. So I presume the Board and management are thinking about growth beyond Canada, correct me if I'm wrong. So if that's the case, do you see opportunity with your e-comm platform to test the waters in the U.S. or maybe via acquisition? Or is that not even on the cards at the moment?
Vishal, I will tell you that we still believe that we have a long runway in Canada on multiple fronts. So let me start by saying that. That being said, I would be remiss to say that the fact that our recent acquisition of Hush and a portion -- and not a large portion, but a portion of their business is in the U.S., aligns very much in terms of some of the conversations that we, management and the Board, have been having. The opportunity to be able to expand beyond our borders through a digital entry is definitely intriguing to us with a low capital expenditure. And we will be exploring and watching very closely with our newest partners, Hush, in 2022.
And with respect to -- on the partnerships, peculiar that your competitors continue to team up with you. At least in my experience, it doesn't happen that often. And wondering why -- from your standpoint, why do these companies come to Sleep Country and partner with Sleep Country? Why don't they do it alone? And should we look forward to more of types of partnerships in the future?
So great question. And I think, first of all, the power of the brand is very important on both sides, by the way. So we're very selective, and I'm sure our partners are very selective in terms of who they're partnering up with. Walmart, Best Buy, Sleep Country, we all think we're top in class with the same focus on our consumer and delivering exceptional customer service. That being said, I think we both recognize what our core value propositions are. There are certain things that we bring to the table that we may be and believe that we're more effective on, and there are certain things that they bring to the table. So -- and I guess, in essence, that's what true partnerships are, is recognizing that both win. And we've all concluded that, together, we're stronger than apart.
Okay. Are there any -- particularly with the Walmart relationship, are there any penalties if you don't hit certain sales thresholds?
No. No penalty.
Right. And it'll be Sleep Country trained staff selling in the Walmart partnership?
100%. It is a Sleep Country experience the moment you cross that lease line into one of our express stores, trained exactly the same way from our leaders that run our Sleep Country regular stores. In fact, a lot of our teams were very excited about these new express stores and quickly jumped into and volunteer to work at some of these at these stores. Plus, there's a component within the stores. If you visit any one of the Walmart express stores, there's a partnership on the flip side, where our teams have the ability to give out a Walmart co-branded Sleep Country VIP card that gives Walmart customers a special discount within our stores, of which they're -- which encourages customers if they can't find what they need at the Walmart Express store to go into our larger stores.
[Operator Instructions] You do have a follow-up from Stephen MacLeod with BMO Capital Markets.
Actually, all my questions have been answered.
You have another follow-up from John Zamparo with CIBC.
I don't know that we've asked about this before, but you and the industry are increasingly using services like PayBright and other, buy now pay later services directly on your website. It seems like this is an advantage that gives you over some independents. But I wonder if there's anything you can say on the impact of that feature and whether there's any measurable impact on customer demand or conversely on collection rates?
Yes. So we do partner with like the PayBright of the world and Flexiti of the world to provide our customers different options around financing. And the benefit to it is that it can drive a larger basket because it allows customers to pay over a period of time that suits their budget and their lifestyle. So we think that they're a good benefit to -- for us to provide our customers that option. And we've seen good pickup with it, both online and within stores. So it's something that we do offer because we want to ensure that our customers are able to finance things in a flexible way that fits their needs as well.
And John, financing isn't new. It's been something we've been doing for years. PayBright is obviously new word to us. But on a big-ticket items, it is definitely sometimes an important tool to have.
There are no further questions at this time. Please proceed.
Well, thank you very much, everyone. This wraps up our conversation, and we look forward to keeping you updated throughout the remainder of the year. Thank you for joining us today. Sleep well. And once again, Dave, I just want to thank you for everything. It's been a fabulous career, 27 years and an unbelievable partnership, and we're going to miss you terribly, buddy.
Thank you. And I'm going to miss everybody, too. Have a great day, everybody.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.