Simmons sales slide 7.9%
By Larry Thomas -- Furniture Today, May 16, 2005
Atlanta — Citing a lukewarm reception to its 2005 product line, Simmons Bedding Co. reported sharp declines in first-quarter sales and earnings.
The bedding major said total sales were off 7.9% in the quarter ended March 26, while conventional bedding sales dropped 8.5%. Bedding unit shipments fell 15.2%.
Sales totaled $205.6 million, down from $223.3 million in last year's first period. Net income came to $483,000, plummeting 87.7% from $4 million a year earlier.
"It was a disappointment to our management, our stockholders and our bondholders," said Chairman and CEO Charlie Eitel. "The performance of our core conventional bedding business was unacceptable."
During a conference call with securities analysts, Eitel blamed some of the decline on sluggish sales of the company's new HealthSmart beds, which feature a removable, washable mattress top. He also said the company faced unexpectedly stiff competition for sleep sets retailing for $499 to $999.
"Especially below $800, it has been incredibly competitive," he said. "We've seen, more than ever, competitors focus on thickness rather than performance. The more wire you take out and more foam and air you put in, you can make it thicker."
Eitel told analysts the problems began to develop in February and March, and noted that by mid-March Simmons had begun making changes to its products in hopes of reversing the trend.
The changes, which include a new, lower-priced model for the highly publicized HealthSmart line (see story on page 2), should be fully implemented by the end of June.
"The biggest mistake we made (with HealthSmart) was that our expectations were too high," said Eitel. "HealthSmart is going to be integral to the future of the company."
The sales and earnings declines took analysts by surprise, and two of them asked Eitel why he failed to tell them about the problem during a March 23 conference call to discuss 2004 sales and earnings.
"It was just a decision we made," he answered. "As a matter of habit, we have not given any kind of forward looking information."
Eitel said Simmons management is "working around the clock" to get sales and earnings back on track, and noted he personally is overseeing an effort to identify ways to cut costs significantly.
"We got as blind-sided as anyone," he said of the problems. "It happened very fast."
| Simmons | |||
|---|---|---|---|
| All figures in parentheses are losses or declines. | |||
| Quarter ended 3/26 | 2005 | 2004 | Change |
| (a) Includes pretax licensing fee income of $2.1 million in the 2005 quarter and $2.6 million in the 2004 quarter. The 2005 quarter also includes a $3,000 after-tax gain on foreign currency translation and the 2004 quarter also includes a $2,000 after-tax loss on foreign currency translation. |
|||
| Sales | $205,582,000 | $223,320,000 | (7.9%) |
| Operating income | 12,346,000 | 18,194,000 | (32.1%) |
| Net income (a) | 486,000 | 3,963,000 | (87.7%) |
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