Are automakers’ incentives throttling Tempur-Pedic sales?
Bedding Today Column
David Perry -- Furniture Today, October 10, 2005
Those car promotions are killing us. That was the message visco-elastic bedding leader Tempur-Pedic delivered last month in revising downward its guidance on how it will perform this year.
The company, which had earlier indicated it was looking for 2005 sales of approximately $880 million to $890 million, has revised its outlook to a range of $845 million to $855 million. Those lower figures would represent an increase of 23% to 25% over net sales in 2004, Tempur-Pedic officials noted. And that is certainly very healthy growth, the kind of growth that is the envy of the bedding industry. But it’s a step back for Tempur-Pedic. Perhaps even more worrisome was what the company said about why its sales won’t be quite as strong as earlier expected. The first reason it cited was the aforementioned car promotions. Here’s what Tempur-Pedic said: “Recent available industry data indicates that the U.S. mattress industry got off to a slow start in the third quarter and has been experiencing a more modest growth rate than we previously anticipated. Our retail store customers and industry analysts attribute this trend primarily to the very attractive incentives offered by the U.S. automotive industry this summer. We believe these promotions diverted consumer spending away from other ‘big-ticket’ items such as mattresses.” That line of reasoning is robustly rejected by a number of bedding insiders. They say it’s simply an excuse — “an extravagant excuse,” one called it. Another noted that automakers always have offered strong promotions. A third said that consumers don’t choose between buying cars and mattresses. Tempur-Pedic cited other factors as well, such as a significant dampening of consumer sentiment nationally in the wake of Hurricane Katrina, and the loss of business in areas directly affected by Katrina. The insiders I spoke with say that Tempur-Pedic is feeling the effects of growing competition in the visco marketplace. Interestingly, Tempur-Pedic did address that issue, but minimized its impact on its business: “With respect to competition, we continue to see stores that have competitive visco offerings perform as well, if not better, than stores without knock-off visco products. However, we do note that it is possible that our mattress sales are being impacted by competitive offerings in stores where we are not currently represented.” A few weeks later, Tempur-Pedic announced new management in its key retail channel. Chris Henning has been promoted to president of that division, succeeding David Fogg, who becomes senior vice president of national accounts. We know and respect Chris and David, and wish them both well with their new assignments. Good luck with those pesky car promotions, and with the growing competition in the visco marketplace.
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