Simmons posts 3.1% sales gain
By Janice Chamberlain -- Furniture Today, August 29, 2005
Atlanta — Bedding major Simmons, citing gains in its wholesale bedding segment, posted a 3.1% sales increase in its second quarter.
The company said the wholesale gains largely were due to the addition of juvenile products as a result of the August 2004 acquisition of the crib mattress and related soft goods business of Simmons Juvenile Products Co.
Sales in the quarter ended June 25 were $208 million, up from $201.8 million in the comparable 2004 period. Net income in the latest quarter fell 38.3% to $3.7 million.
Second-quarter wholesale bedding sales were up 2.6% to $192.7 million, compared with $187.7 million in the second quarter of 2004. Sales in the retail segment slipped 2.3% to $18.8 million from $19.2 million.
In the first six months, Simmons reported sales of $413.6 million, off 2.7% from the $425.1 million in the comparable 2004 period. Net profits in the latest six months plummeted 58.1% to $4.2 million from $9.9 million a year ago.
In the latest six months, wholesale bedding sales declined 3.2% to $382.3 million from $394.8 million in the year-earlier period, and retail bedding sales dropped 14.5% to $37.9 million. On May 1 of last year, Simmons sold its Mattress Gallery retail operations.
Retail same-store sales increased 14.6% and 18.4%, respectively, in the latest quarter and six months. Simmons owns specialty sleep shops in Oregon and Washington.
Gross margins in the latest quarter and six months slipped to 43.6% and 44.1%, respectively, compared with 45.4% and 45.9% in the year-earlier periods. Simmons attributed the drop in quarterly gross margins to increases in raw material costs and sales of juvenile bedding products, which have lower margins.
The company said increased sales of lower-margin juvenile products and an increase in conventional bedding material and overhead costs hurt gross margins in the latest six months.
Simmons' Chairman and CEO Charlie Eitel said, "Although our second-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) declined slightly compared to a year ago, we are still pleased with our second-quarter financial performance. As a result of pricing and product modifications we have made, we regained some of the sales momentum in our wholesale bedding segment which we lost during our first quarter."
In a conference call with analysts, Eitel reviewed the company's three-phase personnel realignment, which began in June and was completed in early July. Simmons expects the reduction in staff will result in annual compensation, fringe and benefit savings of about $5 million. The realignment eliminated the position of President Bob Hellyer, who left the company, with Eitel assuming his responsibilities.
Eitel also described the company's Sleep Country USA chain as one of the best retail sleep shops in the country.
Following up on remarks made during a first-quarter conference call, Eitel said Simmons had taken a "number of actions to address the weak first quarter," and had made good progress in getting new products on retailers' floors. He said Simmons would continue to focus on margin improvements and on cutting selling, general and administrative costs.
| Simmons | |||
|---|---|---|---|
| All figures in parentheses are losses or declines. | |||
| Quarter ended 6/25 | 2005 | 2004 | Change |
| (a) After post-tax foreign currency translation charges of $9,000 in the 2005 quarter and $8,000 in the 2004 quarter; includes pretax plant closure charges of $40,000 in the 2005 quarter and $764,000 in the 2004 quarter, pretax charges for transaction expenses of $177,000 in the 2005 quarter and $662,000 in the 2004 quarter and pretax licensing fee income of $2.8 million in the 2005 quarter and $2.5 million in the 2004 quarter. (b) After post-tax foreign currency translation charges of $6,000 in the 2005 six months and $10,000 in the 2004 six months; includes pretax plant closure charges of $40,000 in the 2005 six months and $764,000 in the 2004 six months and pretax charges for transaction expenses of $177,000 in the 2005 six months and $662,000 in the 2004 six months and pretax licensing fee income of $4.9 million in the 2005 six months and $5.1 million in the 2004 six months. | |||
| Sales | $208,042,000 | $201,795,000 | 3.1% |
| Operating income | 17,730,000 | 17,945,000 | (1.2%) |
| Net income (a) | 3,670,000 | 5,950,000 | (38.3%) |
| 6 months ended 6/25 | 2005 | 2004 | Change |
| Sales | $413,624,000 | $425,115,000 | (2.7%) |
| Operating income | 30,076,000 | 36,139,000 | (16.8%) |
| Net income (b) | 4,156,000 | 9,913,000 | (58.1%) |
