In the first quarter of fiscal 2020, which ended March 31, mattress major Tempur Sealy International Inc. reported net income of $59.7 million, a 110% increase compared with the first quarter of fiscal 2019. Earnings per share were $1.11, compared with $0.51 in the prior-year quarter. Net sales rose 19% to $822.4 million. On a constant currency basis, net sales increased 19.8% — 24.5% in North America and 2% internationally.
The Lexington, Kentucky-based company’s earnings and revenue surpassed Wall Street estimates (Zacks Investment Research), which projected $0.75 EPS and $808 million in sales.
Earnings per share
Gross margin was 43.4%, compared with 40.8% in the first quarter of 2019. Operating income grew 74% to $105.3 million, compared with $60.5 million in the previous first quarter.
In March, Tempur Sealy withdrew its previously issued full-year financial guidance for 2020, saying it would not provide updated full-year financial guidance until the operating environment becomes clear.
Chair and Chief Executive Officer Scott Thompson said: “This is the fourth consecutive quarter of double-digit adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) growth. We are especially pleased with these results in light of COVID-19 having a material impact on our Asian business throughout the quarter, and a material impact on our North American and European markets during the second half of March. While there are significant challenges that lie ahead, our strong operating momentum heading into this crisis gives us confidence that we will emerge even stronger on the other side.”
North America net sales, which saw a robust increase, totaled $677.2 million. In the wholesale channel, sales grew 21.5% to $609.6 million. In the direct channel, primarily driven by growth from company-owned stores, including Sleep Outfitters, sales grew 60.2% to $67.6 million.
International net sales, which totaled $145.2 million, decreased 1.1% to $112.8 million in the wholesale channel. In the direct channel, net sales decreased 1.2% to $32.4 million.
The company has experienced a major reduction in sales since mid-March and has taken steps to mitigate financial impacts of the pandemic. These actions included reducing expenses by approximately $300 million on an annualized basis. Additionally, the company ceased share repurchases, began supporting medical relief efforts and increased support for charitable organizations.
Tempur Sealy said it is working with various government and health care organizations during the COVID-19 pandemic to provide products and services during the crisis. (See stories on page 29 and on page 14 of May BedTimes.)
The company has no significant debt maturities until 2023 and had $197 million of cash on hand as of March 31. Approximately $100 million is available under its revolving credit facility.
“These are truly unprecedented times as we move from a record first quarter to a very challenging second quarter,” Thompson said. “The negative impact from COVID-19 is expected to result in an operating loss and negative EBITDA in the second quarter. Despite this challenging environment, we believe that our consumer-
preferred products and brands, our compelling marketing and our powerful omnichannel distribution platform make Tempur Sealy well-positioned to withstand these headwinds.”