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Tempur-Pedic continues confounding projections

Larry Thomas, Business editor -- Furniture Today, February 15, 2010

When I was Furniture/Today's bedding editor back in the 1990s, Tempur-Pedic had about as much name recognition as a fourth-string quarterback.

To the best of my knowledge, the first time the company's name appeared in this publication was a column I wrote in the Dec. 8, 1997, issue in which I described Tempur-Pedic as a “little-known manufacturer in the midst of an ultra-premium growth mode.”

Sales topped $30 million that year — up from just $2.5 million in 1993 — but I was skeptical of the company's projection of $100 million in sales by 2000.

“If it's even close to that target,” I sniffed, “Tempur-Pedic would be one of the nation's 10 biggest bedding producers going into the 21st century.”

With the giant flame-out of the waterbed business in early '90s still fresh on my mind, it was unthinkable in 1997 that any mattress producer who shunned traditional innerspring bedding could gain a foothold in the marketplace.

As it turned out, the company's projection was way off the mark — on the low side. Sales hit $162 million in 2000, topped $200 million the following year, and the rout was on.

The company went public in 2003 when sales hit $479.1 million, and by 2007, the top line crossed the $1 billion mark. And profits rose from $52.1 million in 2003 to $141.5 million in 2007.

By then, it was clear to skeptics like me that Tempur-Pedic had more than gained a foothold in the marketplace.

Some of the boo-birds returned in 2008 when sales fell to $927.8 million and the number of skeptics grew even larger when sales were well below $200 million for both the first and second quarters of 2009.

But the company once again proved the doubters wrong by recording a strong second half. The fourth quarter was especially robust, with sales hitting $244.8 million — more than 29% above the fourth quarter of 2008. The company credited a modest improvement in the economy and its own advertising and marketing efforts for the impressive results.

This year, Tempur-Pedic is counting on its new Cloud collection, which features mattresses that are softer than previous models, to drive growth. It's backing the new collection with an advertising campaign that, for the first time, touts a specific Tempur-Pedic product.

Keith Hughes, a securities analyst with SunTrust Robinson Humphrey, is projecting this year's sales at $968.4 million, up 16.5% from 2009. And he believes the company will again top $1 billion in 2011.

Hughes has a “buy” rating on Tempur-Pedic's stock and thinks it could hit $34 per share this year. In recent days, it has been trading around $27.

That's not bad for a stock that was less than $4 per share last March.

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