In the fourth quarter of 2018, Tempur Sealy International Inc. reported net sales of $676.1 million, a 7.1% increase compared with the prior-year quarter, beating analysts’ estimates (Zacks Investment Research) by close to $20 million. Sales in the North American business segment climbed 9.1% and international sales grew 5.2%, on a constant-currency basis.
North America net sales through direct channels increased 17.4%, to $40.4 million, compared with fourth-quarter 2017, driven primarily by growth from expanded Tempur-Pedic retail stores. In 2018, the Lexington, Kentucky-based company opened 27 stores, bringing the total of company-owned Tempur-Pedic stores to 40. The company said it plans to open 20 more in 2019.
For the full year, net sales were flat at $2.7 billion.
Operating income in the fourth quarter decreased 29.7% to $57.9 million, or 8.6% of net sales. Net income decreased 74.6% to $12.3 million, compared with the prior-year quarter.
Fourth-quarter profits were impacted by $21.2 million of charges associated with the bankruptcy of customer Innovative Mattress Solutions, which owns several sleep shop chains, and other balance sheet adjustments, the company said.
Adjusted net income in the fourth quarter increased 4% to $49.7 million.
Full-year operating income was $256.3 million, or 9.5% of net sales, compared with 10.9% of net sales in 2017. Full-year net income was $100.5 million, compared with $151.4 million in 2017. Adjusted net income was $163 million, compared with $179.2 million in 2017.
“In 2018, we successfully launched our new Tempur-Pedic Adapt line to expand our market share in the competitive $2,000 to $3,000 price band,” said Scott Thompson, Tempur Sealy chair and chief executive officer. “Going into 2019, we look forward to completing the North American Tempur-Pedic rollout with our highly anticipated Tempur Breeze line, as well as launching our entirely new line of Stearns & Foster products. We believe these launches will solidify our market position in premium bedding. We believe our focus on delivering high-quality bedding products, improving the effectiveness of our marketing, expanding our omnichannel strategy, and pursuing ongoing productivity initiatives sets the company up for earnings growth.”
The company also announced it has settled litigation with its former retail customer Mattress Firm. And on Feb. 12, Tempur Sealy made a “stalking-horse bid” to acquire all assets of Innovative Mattress Solutions.