Sealy 3Q sales up 6.4%, net income rises 11.9%
By Larry Thomas -- Furniture Today, October 16, 2006
Archdale, N.C. — Powered by the strong performance of its European and Canadian operations, bedding major Sealy reported third-quarter sales of $415.1 million, an increase of 6.4% from last year's third quarter.
Net income rose 11.9% to $29.4 million.
The company said international sales, which make up about 25% of total sales, jumped 24.3%, but domestic sales rose just 2% and domestic unit volume declined 3.7%.
Company officials said the sluggish economy, coupled with a new product rollout that is taking longer than expected, hurt U.S. bedding sales during the quarter.
"Our domestic performance this quarter was not up to Sealy's historically high standards," said Jim Hirshorn, senior executive vice president of finance and operations.
During a conference call with financial analysts, Hirshorn noted that the product rollout, which involved a complete revamping of the flagship Posturepedic and upper-end Stearns & Foster lines, was the largest in the company's history. And he acknowledged that some models, particularly from the Stearns & Foster line, didn't meet sales expectations.
However, he told analysts the company already has identified the underperforming SKUs and has begun shipping several updated Posturepedic models. Several new Stearns & Foster models are being unveiled at this week's High Point Market.
"The focus must now be on honing our execution and insuring that we have the right product in the stores at all times," said David McIlquham, chairman and CEO.
McIlquham said Sealy's competitors have been especially aggressive in recent weeks, trying to take advantage of the product transition. As a result, Sealy has cut prices on some models in order to maintain market share, a move he acknowledged will hurt margins in the short term.
A bright spot domestically was Sealy's specialty bedding business, where sales were up 50% over last year's third quarter. McIlquham said growth opportunities in latex and visco-elastic bedding were especially promising, and said the company recently began test-marketing an airbed.
For the first nine months of Sealy's fiscal year, worldwide sales increased 7.5% to $1.19 billion but net income slipped 1.6% to $52.5 million.
The nine-month figures include $34.2 million in one-time charges related to the company's recent initial public offering of stock and $20.9 million in one-time costs from the product launch.
| Sealy | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 8/27 | 2006 | 2005 | Change |
| (a) Includes pretax royalty income of $3.8 million in the 2006 quarter and $3.6 million in the 2005 quarter. The 2006 quarter also includes a $4.6 million pretax charge for debt extinguishment and refinancing expenses. (b) Based on average shares outstanding of 96.6 million in the 2006 quarter, 75.8 million in the 2005 quarter, 87.2 million in the 2006 nine months and 75.1 million in the 2005 nine months. (c) Includes pretax royalty income of $11.2 million in the 2006 nine months and $9.9 million in the 2005 nine months and pretax charges for debt extinguishment and refinancing expenses of $9.9 million in the 2006 nine months and $6.2 million in the 2005 nine months. The 2006 nine months also includes a $28.5 million pretax charge for expenses associated with the initial public offering of common stock and a $287,000 extraordinary charge, the cumulative effect of an accounting change. | |||
| Sales | $415,124,000 | $390,026,000 | 6.4% |
| Operating income | 57,976,000 | 58,037,000 | (0.1%) |
| Net income (a) | 29,368,000 | 26,255,000 | 11.9% |
| Earnings per share (b) | 0.30 | 0.35 | (14.3%) |
| 9 months ended 8/27 | 2006 | 2005 | Change |
| Sales | $1,187,571,000 | $1,104,939,000 | 7.5% |
| Operating income | 156,534,000 | 155,404,000 | 0.7% |
| Net income (c) | 52,466,000 | 53,310,000 | (1.6%) |
| Earnings per share (b) | 0.60 | 0.71 | (15.5%) |
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Europe, Canada help Sealy boost sales 6.4% in 3Q
Oct 12, 2006
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