Manufacturing major Tempur Sealy International Inc. reported net sales of $659.3 million in the second quarter, an 18% decrease compared with the second fiscal quarter of 2016.
On a constant-currency basis, the Lexington, Kentucky-based company’s total net sales decreased 17.2%.
Gross margin was 40.7%, compared with 41.9% in the prior-year quarter.
Net income under U.S. generally accepted accounting principles increased 15% to $24.5 million as compared with the second quarter of 2016. However, GAAP net income decreased 56% when compared with adjusted net income of $55.7 million in the second quarter of 2016. Tempur Sealy had no adjustments to GAAP net income in the second quarter of 2017. But, in the second quarter of 2016, it experienced a $47.2 million loss on extinguishment of debt in connection with 2016 financing activities.
Operating income decreased 43.5% to $56.6 million, compared with $100.2 million in the second quarter of 2016.
Earnings before interest, tax, depreciation and amortization decreased 30.6% to $85.8 million, compared to $123.7 million for the second quarter of 2016. EBITDA decreased 31.2%, compared with adjusted EBITDA of $124.7 million in the prior-year period. Tempur Sealy had no adjustments to EBITDA in the second quarter of 2017.
GAAP earnings per diluted share increased 28.6% to $0.45.GAAP EPS decreased 51.1% to $0.45 as compared to adjusted EPS of $0.92 in the second quarter of 2016.
Tempur Sealy ended the second quarter of 2017 with total debt and consolidated funded debt less qualified cash of $1.9 billion.
“We are pleased with our sales and EBITDA performance, despite the loss of our largest customer, and, we are encouraged that our business trends accelerated throughout the quarter,” said Scott Thompson, Tempur Sealy chair and chief executive officer. “While worldwide industry trends continue to be a bit sluggish, we have outperformed our expectations and are raising the midpoint of our 2017 financial guidance.”
In the company’s North America business segment, net sales decreased 21.4% to $525.4 million compared with the second quarter of 2016.
At the beginning of the second quarter, which saw the end of Tempur Sealy’s relationship with its largest retail customer Houston-based Mattress Firm, sales to the sleep shop chain totaled $1.2 million. This compares with second-quarter 2016 sales to Mattress Firm totaling $191.4 million.
When Mattress Firm sales are excluded, second-quarter 2017 net sales increased 10% compared with the prior-year quarter, with growth across all brands, according to the company.
In a conference call with investors, Thompson said direct-to-customer sales in North America were up 137% in the quarter, with a 190% increase in web sales. “Tempur Sealy should earn its fair share of this niche market,” he added.
International net sales decreased 1.7% to $133.9 million compared with the second quarter of 2016.
The company raised the bottom end of its guidance for 2017 from $400 million to $425 million and expects adjusted EBITDA to range from $425 million to $450 million.