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David Perry

Sealy's sales drop, profit increases in Q2

Archdale, N.C. - Bedding major Sealy said its second quarter net sales dropped 2.9% while its gross profit increased by $1.9 million and its gross margin increased 1.8 percentage points to 40.7%.
     The company also said that income from operations increased by $3.7 million to $26 million compared to the second quarter of fiscal 2011, and net income from continuing operations was $2.8 million, compared to net income from continuing operations of $0.8 million in the prior year quarter. Adjusted EBITDA increased by 9.7% or $3.2 million to $36 million compared to the prior year quarter.
     "We delivered solid financial and operational performance in the second quarter of 2012," said Larry Rogers, Sealy's CEO. "Our increased gross margin and adjusted EBITDA performance for the quarter were driven by the successful rollout of our Next Generation Stearns & Foster line, and our strategic commitment to driving profitable sales."
     Total U.S. net sales decreased 5.2% to $240.2 million from the second quarter of fiscal 2011. Excluding third party sales from the component plants, wholesale average unit selling price increased 5.4%, while wholesale unit volume decreased 10.4%. The increase in average unit selling price was driven primarily by increases in all major innerspring lines and improved product mix related to the newly introduced Next Generation Stearns & Foster product line. The decrease in unit volume is attributable to relatively lower sales of Posturepedic beds, which grew 14.2% in the prior year quarter, the company said.
     International net sales increased $4 million, or 5.9%, from the second quarter of fiscal 2011 to $71.8 million. This increase was primarily due to increased sales in Canada coupled with stronger sales performance in Argentina, the company said.
     Net sales for the six months ended May 27 decreased 0.4% to $624.3 million from $626.8 million for the comparable period a year earlier. Gross profit was $249.4 million, or 39.9% of net sales, versus $243.6 million, or 38.9% of net sales, for the comparable period a year earlier. Net income from continuing operations was $4.4 million, versus net income of $0.9 million in the prior year period. Adjusted EBITDA increased 15.2% to $72.4 million, or 11.6% of net sales, from $62.8 million, or 10% of net sales, compared to the same period in the prior year.
     "As we look forward in 2012, we are focused on driving continued performance from the Next Generation Stearns & Foster line, our value priced Sealy Promotional Line, and the premium priced Optimum by Sealy Posturepedic line," Rogers said. "Our Sealy Promotional and Optimum lines began shipping in the second quarter of 2012 and we expect both of them to perform well during the second half of the year. Finally, we remain committed to investing behind our recent product rollouts with our advertising campaign. Specifically, we will be increasing our commitment to the Optimum line in Q3 to take advantage its momentum moving into Q4 and 2013."

Sealy

Earnings per share are fully diluted, and all figures in parentheses are losses or declines.

Quarter ended 5/27

2012

2011

Change

Sales

$312,031,000

$321,296,000

(2.9%)

Operating income

20,522,000

17,627,000

16.4%

Net income (a)

1,678,000

(377,000)

--

Earnings per share

0.02

0.00

 

6 months ended 5/27

2012

2011

Change

Sales

$624,321,000

$626,825,000

(0.4%)

Operating income

42,773,000

32,397,000

32.0%

Net income (a)

2,914,000

(1,279,000)

--

Earnings per share

0.03

(0.01)

--

(a) Includes losses from discontinued operations of $1.1 million in the 2012 quarter, $1.1 million in the 2011 quarter, $1.5 million in the 2012 six months and $2.2 million in the 2011 six months.

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