Larry Kestelman bets on economy after buying Snooze, other bedding chains from Greenlit Brands

NBL owner Larry Kestelman is a big believer of the ‘long term viability of the Australian economy’ after snapping up retail chain Snooze and other bedding businesses.

Larry Kestelman, entrepreneur, rich-lister and owner of the National Basketball League, says he is confident in the long-term strength and vibrancy of the Australian economy, which has encouraged him to plunge his family wealth into buying the Snooze bedding retail chain and one of the nation’s largest bedding manufacturers.

The latest deal for the investor – whose $872m empire ranges from property development and call centres to fashion and sports – now deepens his exposure to the retail sector just at a time when higher interest rates and cost of living pressures is threatening to curtail consumer spending.

However, Mr Kestelman told The Australian there has never been a better time to invest in Australia and local businesses, with the founder of internet provider Dodo and owner of the NBL seeing huge opportunities in particular to grow the Snooze bedding brand online and pose a serious challenge to other players in the sector.

“I believe in Australia, and I believe in the long-term viability of the Australian economy,” Mr Kestelman told The Australian after his Queens Lane Capital investment arm, which is part of his LK Group investment office, agreed to buy Snooze, bedding manufacturer Futuresleep and furniture importer and wholesaler G&G for an undisclosed sum from Greenlit Brands.

“Look at what is happening around the world, I would rather be investing in Australia than quite frankly anywhere else.

“I’m a believer in the Australian economy long term, and I think when we are buying brands that are long-term established brands I look beyond 12 months and I think they are good assets, a name like that, Snooze, with our background in consumer marketing I think will place us in good shape.”

Larry Kestleman.

The deal to buy the vertically integrated Snooze and manufacturing assets complements Mr Kestelman’s existing retail portfolio that has been pieced together following his recent deals to buy the remnants of the collapsed PAS Group fashion businesses, as well as the Brand Collective that controls a mix of owned and licensed brands such as Superdry, Clarks, Hush Puppies, Volley, Shoe Warehouse and Mossimo.

Mr Kestelman is emerging as a new and major force in the Australian retail sector, with investments spanning fashion, footwear and now bedding, and it also places him highly exposed to the strengths and fickleness of the Australian consumer.

The Australian 250 Rich List member, property developer and entrepreneur said the Australian economy might well be heading for some “tough times” but it still remained the best country in the world to invest in.

“I think we are in for tough times in the next 12 months or so. But it’s all cyclical. I’ve seen it before, that’s part of the benefit of getting older.

“I’ve seen that before, and it’s better to buy at these times when things are tough rather than when everything is flying, and so I’ve been in business for over 30 years, and I’ve seen it all before.

“So for me, I am a believer in the Australian economy long term, and I’m an investor, and I’m an investor into Australia and for me, it’s not about what happens the next 12 months it’s around where are we going to be in the next 5 to 10 years and I think Australia is very well positioned globally.”

Snooze was founded in 1974 under the trading name Capt’n Snooze and today has more than 80 stores.

Mr Kestelman’s LK Group is a Melbourne-based family of private companies generating over $1bn in annual revenues, with diverse interests across property, technology, sport, business transformation and outsourcing, building products, retail apparel, fast-food restaurants and food manufacturing. Operations span across Australia, the United States and the Philippines.

Snooze gives Mr Kestelman one of the most well known bedding brands in Australia, with the retail chain founded in 1974 under the trading name Capt’n Snooze and which today has more than 80 stores. It is believed that Snooze’s annual sales are around $300m, with it operating under a franchise model.

The Futuresleep manufacturing business is one of the largest bedding, mattress and bedding furniture makers in Australia and supplies products into Snooze as well as other retailers. The completion of the divestment of the bedding businesses is subject to customary conditions precedent, which both parties remain committed to fulfilling. The transaction is expected to complete by the end of May 2023.

Mr Kestelman believes Snooze has underinvested online and could become a major player in that arena as it takes on rising, popular pure-play online bedding companies such as Sleeping Duck.

“We want to buy businesses that I feel we can help to really grow, and when I look at these types of deals – and I get pitched a lot of deals – I want to see how we can actually grow this business.

“Snooze is an amazing brand, I think a very good operating team and a good franchise network, but I will say from an online space, from a technology space and from a consumer marketing space I think there’s a lot that we can add.”

The sale of the Snooze bedding and manufacturing businesses by Greenlit Brands comes as the group looks to slim down its own retail operations and focus on its flagship businesses such as Freedom Furniture and Fantastic Furniture that could see a possible sharemarket float in the near future.

Greenlit Brands, which is part of the troubled Steinhoff International company, said on Monday that over time it had considered a range of strategic options across its portfolio, including potential divestment of some or all of its bedding businesses.

In 2017, Steinhoff International shocked markets around the world with an Enron-like financial scandal involving top executives who had overstated profits for several years by as much as $US7.4bn, using fictitious transactions and outright fraud. Its share price quickly collapsed and the entire company, which has more than 40 retail brands across 30 counties including Australia, almost failed.