Lexington, Kentucky-based Tempur Sealy International Inc. reported fiscal third-quarter net sales of $821 million, an increase of 12.5% over the prior-year quarter. Net income grew a surprising 73.3% to $73.3 million. Gross margin expanded to 43.9%, compared with 41.1% in the third quarter of fiscal 2018. Earnings per diluted share increased 70.1% to $1.31.
Results exceeded Wall Street analysts’ (Zacks Investment Research) already optimistic expectations for revenue and earnings in the quarter and Yahoo Finance called it Tempur Sealy’s “blowout” quarter.
“We are pleased to report double-digit growth in sales of both Tempur-Pedic and Sealy products, with robust sales growth across geographies, brands and price points,” said Scott Thompson, Tempur Sealy chair and chief executive officer. “It is clear that our investments in innovative products, reliable manufacturing and direct distribution are allowing us to win in the marketplace. In fact, during the third quarter we recognized the highest gross profit in the company’s history, greater than what was generated previously across a larger presence. Our double-digit growth in operating income and adjusted EBITDA allows us to continue investing in our plants, products and people, while repurchasing our stock and strengthening our balance sheet by reducing our financial leverage.”
“This marks the sixth consecutive quarter of adjusted EPS growth driven almost entirely by improved operating performance versus share buy backs,” Thompson said. “I am also pleased to report that we have hired over 600 new employees this year and invested tens of millions of dollars in property, plant, and equipment to drive future performance.”
A significant portion of the company’s sales uptick was attributed to the direct channel in North America ($79.8 million, an increase of 89.1%), which includes online sales and company-owned brick-and-mortar stores. The latter includes Tempur-Pedic stores and the large, regional sleep shop chain Sleep Outfitters, which Tempur Sealy acquired in April.
The company raised its financial guidance for 2019. For the full year, it currently expects adjusted earnings before interest, taxes, depreciation and amortization to range from $485 million to $500 million, raising the mid-point by $28 million.