Tempur Sealy Hits Headwinds in 3rd Quarter

Tempur Sealy 3rd quarter 2018 resultsTempur Sealy International Inc., headquartered in Lexington, Kentucky, reported net sales of $729.5 million, an increase of 2.5%, in its fiscal third quarter of 2018, which ended Sept. 29. The revenue rise missed Wall Street analysts’ (FactSet) expectations of $741.9 million in sales.

On a constant-currency basis, total net sales increased 3.4%, with an increase of 3% in the North America business segment and an increase of 4.9% in the international business segment.

Net income using generally accepted accounted principals slipped 5.2% to $42.3 million, compared with the third quarter of 2017. GAAP operating income decreased 12.9% to $84.7 million, compared with $97.3 million in the third quarter of 2017. Operating income in the third quarter of 2018 included $9.4 million of restructuring charges and $3.7 million in supply chain transition costs.

GAAP gross margin declined slightly to 41.1%, compared with 43.1% in the prior quarter. Gross margin in the third quarter of 2018 included $4.9 million of restructuring charges and $3.7 million in supply chain transition costs.

Earnings before interest, tax, depreciation and amortization decreased 1.5% to $112.7 million, compared with $114.4 million for the third quarter of 2017.

GAAP earnings per diluted share decreased 4.9% to $0.77, compared with $0.81 in the third quarter of 2017.

“Our recent Tempur-Pedic and Sealy Hybrid product introductions have been the best-received in the company’s history and have gained significant share in the marketplace,” said Scott Thompson, Tempur Sealy chair, president and chief executive officer. “Tempur-Pedic mattress units accelerated during the quarter, with growth of 29% in North America. In North America, we are currently rolling out our higher-end Tempur LuxeAdapt product, and in early 2019 our Breeze products will be launched, rounding out our completely new line of Tempur-Pedic mattresses. The team is confident that the combination of these innovative new products, our expanding direct-to-consumer business, and our ongoing productivity initiatives will continue to enhance our worldwide competitive position.”

The company cut its guidance for full-year 2018 and expects adjusted EBITDA to range from $425 million to $435 million. The previous guidance was from $440 million to $460 million. Causes include retailer credit issues; the underperformance of international operations, primarily in Europe; and incremental commodity headwinds primarily related to tariffs, which are not yet offset by planned January 2019 pricing actions, the company said.