Mattress manufacturers see mostly sunny skies ahead

BY JULIE A. PALM

Leaders in the mattress industry say the time is ripe for new opportunities to improve their bottom line as the economy continues its turn-around

With the new year rapidly approaching, BedTimes talked to some leading mattress manufacturers to get their take on the economy, the state of the mattress industry and what trends they see emerging for 2015. We interviewed a cross-section of the industry in terms of market size (from smaller players to majors), product styles (from conventional to specialty and everything in between) and company structure (from large corporations to licensing groups to independents).

Like analysts considering the U.S. economy as a whole, the industry leaders BedTimes interviewed see a rebounding economy and new ways to improve their businesses, but also plenty of challenges ahead.

Here are some of their answers, in their own words:

1.  As we head into 2015, what are the biggest strengths and weaknesses of the U.S. economy?

“The economy’s strengths are that unemployment continues to improve, interest rates on borrowing are low, housing has continued to improve and consumers are back spending. Weaknesses: a volatile stock market that’s ripe for an adjustment and continued instability in the world.”

—Dave Roberts, president and chief operating officer of King Koil in Willowbrook, Illinois

“Strengths include a steadily improving employment rate, lower interest rates and a steady but moderate recovery in housing markets. Weaknesses include continued pressure on lower-income consumers, including credit availability.”

—Michael Traub, president of Serta
International in Hoffman Estates, Illinois

“Strengths: Corporate profits and the stock market both continue to rise; unemployment is declining, although underemployment is still a problem; oil/gas prices are at low levels, adding disposable income and relief to those on a tight budget. Weaknesses: underemployment; lack of trained workers to fill tech positions; Middle East/Russia concerns; Ebola concerns.”

—Denny Boyd, president of
Boyd Specialty Sleep in St. Louis

“The biggest strengths of the U.S. economy are our capital markets and our consumer economy, albeit constrained over the past several years. The biggest weaknesses are our growing governmental burden—largely regulatory—and the dramatic and growing expansion of entitlements.”

—Jimmy Orders, president of Park Place Corp. and King Koil Mid-Atlantic in
Greenville, South Carolina

“The plasticity of the U.S. economy is its greatest asset. The connectedness, structure and spirit of the American culture allow us the ability to maneuver through challenging economic terrain—unlike any other culture. Our weakness is when our energy to participate in the economy wanes in both work ethic and community contributions.”

—Ron Passaglia, president of Restonic
Mattress Corp. in Buffalo, New York,
and chairman of the International
Sleep Products Association

“The 2015 housing market should match numbers comparable to the 1999-2002 average. Full recovery from prebubble numbers should take another two to three years. We are now taking control of our energy demands and rely less on imports. GDP needs to improve to 3% or higher for sustained growth. We will most likely have two more years of gridlock in Washington.”

—Ron Clevenger, president of Symbol
Mattress in Richmond, Virginia

“Labor participation rates and household income continue to be a drag on the overall economy. Current government policy and the Affordable Care Act will continue to put a lot of negative pressure on the hiring of full-time employees. One strength, though, is the housing market: As prices of existing homes rebound and the sale of new homes increases, we should see a similar trend in durable goods sales.”

—Stephen Stickler, vice president of Ashley Sleep at Ashley Furniture in Arcadia, Wisconsin

“The economy is in the best shape that it’s been in for a number of years—led by employment, low interest rates, housing sales and a rebounding of furniture sales.”

—Jim Nation, president of Five Star Mattress, Business Development Serta and
Serta Canada at Serta International
in Hoffman Estates, Illinois

2. As we head into 2015, what is the biggest challenge facing the mattress industry as a whole?

“We compete with the iPhone 6 introduction and other new technologies that consume billions of dollars of spendable income. (In the mattress industry), there is no truly groundbreaking technology change to cause demand. The ‘next big thing’ needs to be developed to disrupt the buying cycle.”

—Boyd, Boyd Specialty Sleep

“The industry’s biggest challenge in 2015 will be igniting sustained growth across all consumer and price segments. We are seeing good recovery with the higher-end consumer but there are challenges with lower-income consumers.”

—Traub, Serta International

“Many people feel that units are still way down in mattresses, but I think we, as an industry, are not capturing the growth in online sales in industry numbers. There has been tremendous growth in online sales over the past five years. The one challenge this creates, though, is the ‘commoditization’ of the category, which puts margin pressures on everyone.”

—Stickler, Ashley Sleep

“The consolidation of the industry at both retail and supplier levels heightens the need for sharp decisions with a very clear vision for each of our initiatives.”

—Passaglia, Restonic
Mattress Corp.

“Overcapacity in the manufacturing sector and continued contraction of smaller retailers and rapid conglomeration in the retail/outlet sector for product distribution. Driver shortages and government regulation. Logistics costs will continue to climb.”

—Clevenger, Symbol Mattress

3. What do you forecast will be the most significant mattress innovation or trend in 2015?

“I think more and more retailers are finding innovative ways to push the power/adjustable category as a way to increase the average ticket. Mattresses are much more than just sleep surfaces these days—they are living spaces where people work, read, etc. Also, bringing technology into the category to improve the quality of sleep will be very big in the coming years. Mattresses that can adjust to their users—be it temperature, sleeping position, etc.—will offer the first significant change to mattresses since the introduction of specialty mattresses.”

—Stickler, Ashley Sleep

“We see innerspring continuing to ‘bounce’ back and more two-sided mattresses being sold.”

—Roberts, King Koil

“Quick service and direct-to-the-consumer, consumer-care programs from both retailers and suppliers. As wallets continue to tighten and marketing budgets dwindle, a solid social media strategy engaging online communities is a core strategy that will help avoid corporate Darwinism. Those who embrace this evolving media—educating, engaging, relationship building—and blaze trails online will reap ROI far ahead of their competition.”

—Passaglia, Restonic Mattress Corp.

“Innovations that are successful don’t come along every year. In 2014, all of the major brands introduced new technologies and bedding concepts: You would have to say that 2014 was a year of innovation. I believe that 2015 will be more about the manufacturers’ and retailers’ ability to execute. There will be some new products that are trade downs from higher-priced merchandise.”

—Nation, Five Star Mattress

4. What technology do you predict will have the biggest impact on your business or the mattress industry as a whole in 2015?

“The smartphone: In the hands of the consumer, it makes all information about products and retail choices immediately available. So, our job is to make sure we are delivering her relevant and easily accessible information that aids her purchase decision whenever she needs it.”

—Traub, Serta International

“The changes going on in the advertising and marketing world are significant. A company’s ability to reach consumers with its marketing message has never been easier in terms of options—or more difficult in terms of knowing and leveraging what works. The days of leveraging three television channels and a local newspaper as a path to success are gone.”

—Orders, Park Place Corp.

“Individual comfort options along with the use of technology to assist consumer in selection.”

—Roberts, King Koil

“The Internet will continue to dominate the research side of selling. The retail sales associate will need to have a greater command of product knowledge as they encounter a very informed consumer.”

—Clevenger, Symbol Mattress

“It’s still gel and sleep systems with a cooling surface.”

—Nation, Five Star Mattress

“Marrying new technology with the category that enables consumers to improve their quality of sleep will be the biggest breakthrough in a generation. Mattresses that can ‘learn’ and adjust the sleeping environment based on feedback from the customer via sensors and the consumer’s input will greatly improve sleep quality and help the industry to continue to grow average tickets.”

—Stickler, Ashley Sleep

5. These days, what keeps you up at night?

“The nights I lie awake, I spend reviewing Restonic consumer deliverables to enhance their experience with our brand. Knowing we need to be on social media and actually figuring out how to do it right can be as overwhelming as a transcontinental flight. Thankfully, we have a crackerjack team at Restonic who also spend their nights dreaming up new ways to reach and service our consumers.”

—Passaglia, Restonic Mattress Corp.

“With essentially two power companies having such control over retailers, will opportunities increase or diminish for the challenger brands?”

—Roberts, King Koil

“What keeps me up at night? It certainly isn’t the mattress business. Lack of leadership at the highest levels of the political landscape bothers me personally the most. What helps me sleep easier? A strong faith, family and family-owned company do wonders to keep you resting well.”

—Orders, Park Place Corp.

“How we access the numerous opportunities that are available keeps me awake. However, I sleep easy because I know that Symbol has a team of talented and dedicated professionals who are engaged in helping our customers grow their businesses.”

—Clevenger, Symbol Mattress

“I always sleep great! I am a happy and very fortunate guy.”

—Boyd, Boyd Specialty Sleep

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The state of the mattress industry

On a still-to-be-determined weeknight in the dead of winter, President Barack Obama will step up to a podium and present his State of the Union address to a joint session of Congress. It’s too early to speculate what he might say. But, taking a cue from this tradition of American politics and governance, BedTimes asked a sample of leading mattress manufacturers to assess the current condition of the bedding industry.

Their answers, by and large, convey a cautious optimism.

Q “How would you complete this sentence: The current state of the mattress industry is_______.”

“Improving.”
—Michael Traub, president of Serta International in Hoffman Estates, Illinois

“In a relatively good position but firmly in a transition.”
—Dave Roberts, president and chief operating officer of King Koil in Willowbrook, Illinois

“Stable but needs to evolve.”
—Denny Boyd, president of Boyd Specialty Sleep in St. Louis

“Very competitive.”
—Jim Nation, president of Five Star Mattress, Business Development Serta and Serta Canada at Serta International in Hoffman Estates, Illinois

“Very exciting and filled with opportunity, while at the same time in a state of flux.”
—Ron Clevenger, president of Symbol Mattress in Richmond, Virginia

“…ablaze with collaborative new players who understand that dynamic, inclusive leadership will shape the landscape of the future.”
—Ron Passaglia, president of Restonic Mattress Corp. in Buffalo, New York

“Improving.”
—Stephen Stickler, vice president of Ashley Sleep at Ashley Furniture in Arcadia, Wisconsin

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ISPA 2015 forecast shows gains

The International Sleep Products Association’s latest forecast, released in October (paywall), projects a solid year for the U.S. mattress industry in 2015. The number of mattresses and foundations shipped is expected to rise 2%, with the wholesale dollar value of those units increasing 4.5% over 2014 figures. The average unit selling price is expected to rise 2.5%. (See story on page 140.)

“Business, like the economy, is improving,” writes Jerry Epperson in a column in the ISPA forecast. Epperson is a founder and managing director of Mann, Armistead & Epperson Ltd., an investment banking and advisory firm in Richmond, Virginia. He writes frequently on the furniture and mattress industries.

“Consumer confidence is near post-recession highs; consumer debt is down; both the stock market and home prices have risen to prerecession levels, restoring consumer wealth; inflation and interest rates are low; new and existing home sales are rising with big gains expected in 2015 and 2016,” Epperson says. “Our retailers are opening new stores and reinvigorating old stores, and, in my opinion, most consumers have learned to ignore the brinkmanship and exaggeration in our government.”