[Company Exploration] Zinus, Global Expansion with Amazon Domination Know-how

No.1 Mattress Market Share on US Amazon
Acquired by Hyundai Department Store in March... Expanding Domestic Business
Q1 Operating Profit Up 13%, Exceeding Expectations

As the desire for comfortable sleep grows, the bed and mattress market is rapidly expanding. The COVID-19 pandemic accelerated the market growth as people spent more time at home. The growth trend in the related market is expected to continue even after the reopening. According to Statistics Korea, the domestic home furnishing market size is projected to reach 18 trillion KRW in 2023, up from 13 trillion KRW in 2016. With rising national income and Westernization of lifestyles, the bed and mattress market continues to grow focusing on design and functionality-oriented products. At the same time, competition within the market is intensifying. Asia Economy examines the business structure and competitiveness of Ace Bed, the No.1 domestic bed market company, and Zinus, which is prominent in overseas markets.

[Asia Economy Reporter Jang Hyowon] Zinus, a KOSPI-listed company, is a domestic company holding the No.1 mattress market share on Amazon in the United States. Recently, its sales have grown significantly not only in the U.S. but also in major countries worldwide. Since its acquisition by Hyundai Department Store in March, synergy effects between the two companies are also anticipated.

Zinus commercialized small box-packaged mattresses in 2005 and sells beds online through platforms like Amazon. Its main market is the U.S., accounting for about 87% of sales. In the U.S., due to high logistics costs for bulky mattresses, production mainly relied on domestic manufacturing, but Zinus succeeded in market penetration by pioneering online sales channels.

Following mattresses, Zinus also developed small box-packaged bed frames. Based on this, it has recently expanded its business areas to living room furniture, kitchen furniture, and office furniture, and continues regional expansion into Canada, Korea, China, Australia, and Europe. The sales composition by product category is 60.3% mattresses, 36.4% bedroom furniture, and 3.3% other furniture.

In the first quarter of this year, Zinus recorded results exceeding market expectations. On a consolidated basis, Zinus posted sales of 290.8 billion KRW and operating profit of 28.3 billion KRW, up 6% and 13.1% respectively from the same period last year. Operating profit surpassed the market forecast of 25 billion KRW. This was due to reduced customs logistics costs and increased prices of sold products.

Looking at sales by product category, mattress sales remained similar to the first quarter of last year, while bedroom furniture and other furniture sales increased by 16.4% and 45.1%, respectively. By region, sales growth rates in Canada, Korea, and Europe stood out more than in the main U.S. market. Sales in countries other than the U.S. increased by 49.5% compared to the same period last year.

Zinus’s stock price has been sluggish over the past two years. The causes are analyzed as external issues such as the global logistics crisis, labor shortages in the U.S., cost ratio deterioration due to rising raw material prices, and anti-dumping duties in the U.S. Although the global logistics crisis and U.S. labor shortages continue recently, Zinus is responding by raising the proportion of direct imports (DI) from 55% to about 70%.

Additionally, recent discussions about abolishing special tariffs imposed on Chinese imports to curb high inflation in the U.S. are positive. This is because Zinus produces bed frames in China and sells them in the U.S.

Kim Myungjoo, a researcher at Korea Investment & Securities, said, "The decreasing ratio of customs logistics costs to sales is positive," adding, "If the global logistics crisis, U.S. labor shortage, and raw material price increases do not worsen from the current level, stable earnings per share (EPS) growth is expected."

Ra Jinseong, a researcher at Daol Investment & Securities, analyzed, "The U.S. online furniture market size is expected to surpass the offline market size in 2024," and "If mattress online penetration expands further, Zinus, which maintains a high market share on Amazon, is expected to benefit in the mid to long term."

Synergy with Hyundai Department Store is also anticipated. In March, Hyundai Department Store announced it would acquire a 30% stake and management rights from Zinus founder Chairman Lee Yoonjae and others for 774.7 billion KRW, paying about a 114% premium for management rights.

Along with this, Hyundai Department Store plans to secure a total of 35.8% stake by injecting 120 billion KRW through a paid-in capital increase. Once the cash is received at the end of May, Zinus’s debt ratio is expected to improve from 114.4% to 92.2%, and net debt ratio from 40% to 12.8%. The capital increase funds are expected to be used for production facility investments to meet global demand and investments related to U.S. logistics.

Going forward, Zinus is expected to expand its domestic business by utilizing Hyundai Department Store’s domestic distribution network and know-how. There is also talk of Zinus being held as an exclusive brand on The Hyundai.com. This is analyzed to drive increased brand awareness among the MZ generation (Millennials + Generation Z) and boost domestic sales.

A Zinus official stated, "The reason Zinus can grow rapidly in the global market is that it launches products specialized for each country based on market information and research and development (R&D) know-how accumulated through long-term global business activities," adding, "We plan to continuously develop new products optimized for local countries and expand the global market."