Manufacturing major Tempur Sealy International Inc. posted total net sales of $648 million in the first quarter of 2018, beating analysts’ expectations by $13.67 million.
Year over year, first-quarter sales decreased 10.3%, reflecting impacts from the loss of the Mattress Firm business, previously the mattress major’s largest customer. That relationship was terminated at the beginning of the second quarter of 2017.
On a constant currency basis, Tempur Sealy’s total net sales decreased 12.2%, with a decrease of 17.1% in the North America business segment and an increase of 8.2% in the international business segment, the Lexington, Kentucky-based company said.
Excluding Mattress Firm revenues, Tempur Sealy’s year-over-year total net sales in the first quarter of 2018 increased 3%.
“Over the last 12 months, the team has made considerable progress toward resetting the foundation of our company,” said Scott Thompson, Tempur Sealy chair and chief executive officer. “We have enhanced our relationships with a diversified base of retail partners, we have expanded our owned-store footprint and online presence, we are in the process of meaningfully enhancing our product portfolio, and we continue to be laser-focused on shareholder value.
“With a new suite of bedding products and an intense focus on execution, Tempur Sealy is well- positioned to increase earnings and create long-term shareholder value.”
Tempur Sealy’s gross margin under U.S. generally accepted accounting principles was 41.3% in this year’s first quarter, compared with 39.7% in the same quarter of 2017, which included $11.5 million of net charges associated with the Mattress Firm termination. GAAP operating income decreased to $53.9 million, compared with $59.5 million in the first quarter of last year, which included $25.9 million of net charges associated with the Mattress Firm termination. GAAP net income decreased to $23.1 million in the first quarter of 2018, compared with $33.9 million in last year’s period.
Earnings before interest, tax, depreciation and amortization decreased to $83.2 million, compared with $86.8 million for the first quarter of 2017, which included $34.3 million of charges related to the Mattress Firm termination. EBITDA decreased to $83.2 million, compared with adjusted EBITDA of $121.1 million in the first quarter of 2017, the company said.
Earnings per diluted share missed analysts’ expectations by $0.06, coming in at $0.42 in the first quarter. This compares with an EPS of $0.62 in the first quarter of 2017.
Tempur Sealy’s North America net sales decreased to $485 million from $582.3 million in the first quarter of 2017, driven primarily by the Mattress Firm termination. GAAP gross margin was 37.9%, compared with 36.8% in the first quarter of 2017, and GAAP operating margin was 11.1%, compared with 8.8% in the first quarter of last year.
In this year’s first quarter, North America net sales through the wholesale channel decreased to $454 million. North America net sales through the direct channel increased $6.9 million to $31 million, a 28.6% increase over the first-quarter 2017.
International new sales increased 16.6% to $163 million from $139.8 million in the first quarter of 2017. Gross margin was 51.5%, compared with 51.6% in the first quarter of 2017. Operating margin was 16.5%, compared with 18.5% in the first quarter of 2017.
Tempur Sealy reaffirmed its financial guidance for 2018. For the full year 2018, the company currently expects EBITDA earnings to range from $450 million to $500 million.