Sealy sales off 6.6%
By Larry Thomas -- Furniture Today, July 13, 2008
ARCHDALE, N.C. — Hammered by soaring raw materials costs and weak retail conditions, bedding major Sealy said its second-quarter sales fell 6.6% and earnings were down 25.9% from the same period last year.
The company said sales in the quarter ended June 1 fell 6.6% from the same period a year ago to $375.4 million. Earnings came to $12 million or 13 cents per share.
Sealy's domestic business was hit particularly hard, with sales declining 14.7% and unit volume tumbling 16.1%. A big chunk of the domestic unit decline was due to the bankruptcy filings of Top 100 retailers Wickes and Levitz, which both closed last fall.
“The business climate is as soft as I have experienced,” said interim CEO Larry Rogers, a 29-year Sealy veteran.
However, Rogers told securities analysts the rollout of the new Sealy Posturepedic line should be completed by the end of July, and said early sales results have been promising.
He said he also is optimistic about a new national advertising campaign that launched at the end of June, and said the company is making significant progress on a number of other initiatives aimed at increasing the average unit selling price, improving gross margins, reducing costs, and growing its specialty bedding and international businesses.
Rogers told analysts he isn't expecting any improvement in the business climate during the second half of the year, and said prices for raw materials such as steel and polyurethane foam are expected to rise another 10% to 12% from what they were at the end of May. That's on top of double-digit cost increases earlier in the year.
“We're seeing unprecedented cost increases,” Rogers said. “We expect inflation to further exert pressure on our margins.”
As a result, he said, the company is implementing a price increase July 21 on virtually all Sealy-branded products, although he did not disclose how much prices would rise.
For the six months ended June 1, worldwide sales fell 5.8% to $767.3 million. Net income fell 30.9% to $28.17 million or 30 cents per fully diluted share.
| Sealy | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 6/1 | 2008 | 2007 | Change |
| (a) Includes net royalty income of $4.3 million in the 2008 quarter, $4.4 million in the 2007 quarter, $9.1 million in the 2008 six months and $9.7 million in the 2007 six months. |
|||
| Sales | $375,375,000 | $401,828,000 | (6.6%) |
| Operating income | 32,014,000 | 36,986,000 | (13.4%) |
| Net income (a) | 11,957,000 | 16,133,000 | (25.9%) |
| Earnings per share | 0.13 | 0.17 | (23.5%) |
| 6 months ended 6/1 | 2008 | 2007 | Change |
| Sales | $767,304,000 | $814,395,000 | (5.8%) |
| Operating income | 68,465,000 | 87,347,000 | (21.6%) |
| Net income (a) | 28,171,000 | 40,767,000 | (30.9%) |
| Earnings per share | 0.30 | 0.42 | (28.6%) |
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