Tuesday, July 16, 2024

‘Mattress Mack’ On The Economics Of His Multimillion-Dollar Sports Bets

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From Bedding to Betting: Jim “Mattress Mack” McIngvale hedges big furniture promotions at his Texas stores with multimillion-dollar sports wagers. “It’s a lot sexier than liability insurance,” he says.

Gallery Furniture

For some sports gamblers, betting on the Super Bowl coin toss is about as good as the odds can get. But for Jim McIngvale, the Houston furniture mogul known as “Mattress Mack,” placing multi-million-dollar wagers on the big game and other marquee sporting events offers a different strategy—heads I win, tails I win.

For years, McIngvale, who owns the three-store chain Gallery Furniture, has made his headline-grabbing wagers not for gambling glory, but as sensible hedges against his big sales promotions. During the Super Bowl, March Madness, the World Series, and other events, Mack will place a giant bet on one team—either a Texas club or one closest geographically to his home state—and offer customers a full refund if they win.

During this year’s NCAA Men’s Basketball Tournament, for example, he wagered $5.5 million on Kansas and ran a promotion to refund all customers who spent $3,000 or more on certain types of mattresses and furniture if the Jayhawks won. Right after Kansas beat the University of North Carolina on Monday night, Mack and his 20-person sales team received a stream of text messages from their customers: We won! We won! “When does a furniture salesman get a text at midnight from a customer?” McIngvale asks.

One customer bought seven mattresses for a total of $38,000 and another bought $40,000 worth of furniture to outfit a new home. “I’ve always heard about his promotions on the news, but I never needed furniture until now,” says Robert Cruz, who has a new house full of new, free furniture. “When I heard the score I said, ‘Wow. That’s cool.”

The phone rang. It was his wife. “I said, ‘Did Denver win?’ She said, ‘Seattle won, dummy. We’re out $9 million.’”

McIngvale’s promotions and sports bets have helped him grow his business, which he started with his wife, Linda, in 1981. In 2019, Gallery had $164 million in revenue and by the end of last year sales grew by about 40% to more than $230 million.

The economics of McIngvale’s strategy has mostly paid off. During his March Madness promotion he bet a total of $9.86 million across four bets and won $13.5 million. (Mack’s bets were a $1 million futures bet on the East bracket to win $1.7 million, the only bet he lost, then $2.25 million on Kansas at +190 to win $6.5 million; $3.31 million on Kansas at +190 to win $6.3 million; and $3.3 million on Kansas at –200 to win $1.7 million.) Gallery sold a total of $12.9 million worth of furniture during the promotion, so once he refunds all of his customers, which he will do on April 24 during a big party in his store, he’ll have more than a $500,000 profit.

“Now, it doesn’t always work this cleanly,” says McIngvale. “The reason is that I got ahead of it.”

Read More: ‘Mattress Mack’ Bets $5.5 Million On Kansas To Win NCAA Basketball Championship
Read More: ‘Mattress Mack’ Shakes Off Losing $9.5 Million Super Bowl Bet After Rams Beat Bengals

McIngvale bet on Kansas on Thursday, before the Final Four, and got his money down at +190. If McIngvale waited until Kansas, which was No. 1 seed, had won its Final Four game against Villanova, the odds would have been –190 or worse, and he would have needed to bet $25 million to win $12 million. “There’s no advantage in doing this if you take a negative proposition wager to cover the losses,” McIngvale says.

Whether the bet itself pays off, the publicity-generating promotions move a ton of furniture. Mack says about 30% of the store’s inventory sold out on Monday alone. The March Madness promotion supercharged what should have been a lackluster day on the showroom floor. “Normally, on Mondays we do about $200,000 at this time a year,” says McIngvale. “Yesterday we did $1.4 million.”

Similarly, during Super Bowl LVI, McIngvale bet $9.5 million on the Cincinnati Bengals to beat the Los Angeles Rams. If the Bengals had won, McIngvale would have refunded any customer who bought a $3,000 mattress or recliner before kickoff. He had a huge spike in sales and sold $20 million worth of inventory. He lost that $9.5 million wager, however, meaning he didn’t have to refund any customers—and he was up $10.5 million.

Mack says his promotions also attract a deep-pocketed clientele. During the Super Bowl, customers spent an average of $5,800. For four weeks in June 2021, when Gallery held no promotions, McIngvale did $7 million in sales with the average customer spending around $4,000. During March Madness, Gallery brought in 842 new customers and 1,234 repeat customers. The new customers spent an average $6,764 and repeat clients spent an average of $5,882. The percentage of customers who get approved for in-store financing also jumps about 10% during his sports sales events.

“These promotions bring in a better-quality customer,” he says, “a customer who spends more money, who is more affluent and more creditworthy.”

Win-Win: Mack’s gambling promotions around the Super Bowl, March Madness and the World Series have helped revenue at Gallery Furniture jump 42% in 2021 compared to 2019.

Gallery Furniture

The genius behind the self-described huckster’s promotions is that they are equal parts marketing gimmick and sound business sense. And he’s not the only one taking a risk. Even for customers who wouldn’t know a parlay from a prop, Mack has created regular sales events that feels like gambling—his customers essentially lay down $3,000 or more for the chance to win a free mattress. And win or lose, they go home with something. But McIngvale says that it’s not the allure of gambling that draws in customers: “It’s about the strongest word in the English language which is ‘free,’ ‘free,’ ‘free,’” he says. “The opportunity that they might buy this and they might get it free brings them in.”

Most gamblers lose, of course, and Mattress Mack had to learn the hard way. Twenty years ago, McIngvale ran his first sports-related promotion, offering refunds to customers if the Houston Texans beat the Dallas Cowboys in the Governor’s Cup. He didn’t hedge the promotion with a bet, but the Cowboys won anyway. In 2014, Mack suffered his biggest loss. He offered a promotion that would give customers whatever they bought for free if the Denver Broncos beat the Seattle Seahawks in Super Bowl XLVII. He didn’t hedge that time, either, and he still can recall the pain vividly. “The snap went over Peyton Manning’s head on the first play, and it went downhill from there,” says McIngvale. “That was a huge hurt—no insurance, no bets, no nothing. I took all the liability.”

His stores sold so much furniture during that two-day promotion that the showroom was empty by Saturday. “I’ll never forget it: we had to close the store at 6 o’clock,” he says. “We had no furniture left.” He was too nervous to watch the game, so he walked on the treadmill for hours. The phone rang. It was his wife. “I said, ‘Did Denver win?’ She said, ‘Seattle won, dummy. We’re out $9 million.’”

In 2017, when McIngvale’s hometown Houston Astros were headed to the World Series, he finally decided to hedge a promotion with sports wagers. He went to a few sportsbooks to get as much money down as possible on the Astros, but he couldn’t get great odds—the best was –120. The Astros won, and he refunded his customers, but “scraped by” with a profit.

Mack’s appetite for risk is high, but he won’t take his own action anymore like he did during that Seahawks-Broncos Super Bowl. He now knows well enough to hedge his big sales with a giant bet, and he’ll also wager more if sales are surpassing his potential win total. Back in 2014, when his promotion lost the business $9 million, his wife told him something he’s never forgotten. “She said that I have a gambling problem,” McIngvale recalls. “I said, ‘No, I have a promotion problem.’”

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