Tempur Sealy 1st-Quarter Results Beat the Street

Briefly box Tempur Sealy Q1Tempur Sealy International Inc. cited strong growth in an upbeat earnings report for the first quarter of fiscal 2019. The mattress major, headquartered in Lexington, Kentucky, surpassed Wall Street analysts’ expectations (Zacks Investment Research) with earnings of $28.4 million (up 22.9%) on net sales of $690.9 million (up 8.4%).

Earnings per diluted share were $0.52 (+21.4%) in the first quarter of 2019, compared with the prior-year quarter.

Sales in North America rose substantially to $544 million (+12.2%). International sales declined 3.6% to $146.9 million, compared with the first quarter of 2018. Gross margin held steady at nearly 38%.

The company described sales of Tempur-Pedic products as “outstanding” and of Sealy and Stearns & Foster brands as “solid.”

During a May 2 earnings call with investors, Scott Thompson, Tempur Sealy president, chair and chief executive officer, said the company was in ongoing, high-level discussions with former retail partner Mattress Firm. “(We’re) focused on exploring a win-win relationship, not only for the two companies, but also for the North American bedding industry,” Thompson said.

He also announced the launch of a high-end Tempur-Pedic boxed product under the Tempur-Cloud collection. The bed fills a top price point in Tempur Sealy’s boxed offerings and is priced at $1,799 (queen mattress). The boxed Tempur-Cloud joins the budget-priced Sealy To Go collection and mid-priced Cocoon by Sealy beds.

We’ve been working on this (Tempur-Cloud boxed bed) for a couple of years,” Thompson said. “Anybody can make a bed in a box; it’s taken us quite a while to make sure that we can make a Tempur. … It’s been tested in Seattle, and over time, we’ll roll it out to some other high-density locations.”

The new product is available direct to consumer, an area of sales where Tempur Sealy showed particular strength in the first quarter, the company said.

“I do think that direct business probably has more tailwinds behind it than the wholesale business, and I could see us going to 20% (direct to consumer) … but clearly wholesale … is still going to be the largest share of the business,” Thompson said.

The company also raised its financial guidance for 2019. The revised guidance factors in expected losses of $5 million to $8 million tied to Tempur Sealy’s acquisition of retailer Sleep Outfitters on April 1. The company now expects adjusted earnings before interest, taxes, depreciation and amortization to range from $435 million to $475 million.

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