Tempur Sealy 3Q net sales down 12.9%
November 14, 2017,
LEXINGTON, Ky. — Tempur Sealy International said total net sales decreased 12.9% to $724.8 million in its third quarter.
Excluding Mattress Firm sales in the prior year, North America net sales increased 10% in the third quarter of 2017, driven by growth by Tempur-Pedic, which increased 26% in the period, the company said.
“The team generated one of the highest cash flow quarters in our company’s history despite several challenges including a significant change in our distribution network, three hurricanes and commodity inflation,” he said. “Looking ahead, our robust pipeline of innovation provides the foundation for new products next year, especially an exciting new Tempur-Pedic line in North America. These products, combined with our new multi-channel advertising campaigns, will reinforce our leadership position in premium bedding, provide our retailer partners with a competitive advantage to grow their revenue and earnings, and simplify the consumers’ retail experience.”
North America net sales decreased 16.9% to $580.6 million from $698.5 million in the third quarter of 2016. On a constant currency basis, North America net sales decreased 17.2% compared with the third quarter of 2016. Gross margin was 41.1% compared with 41.5% in the third quarter of 2016. Operating margin was 17.2% compared with 18.4% in the third quarter of 2016.
During the third quarter, hurricanes impacted operations in two of the company’s largest markets, Texas and Florida. The company estimates that the hurricanes impacted its sales in the quarter by approximately $10 million to $15 million, and the flow-through of those sales to EBITDA would be in the range of $3 million to $5 million. The company noted that its adjusted EBITDA does not include this impact from lost sales related to hurricanes.
At the beginning of the second quarter, the company terminated its contract with Mattress Firm. In the third quarter of 2016, net sales to Mattress Firm were $171.5 million.
North America net sales through the wholesale channel decreased $137.8 million or 20.1% to $547.3 million and excluding Mattress Firm sales in the prior year, the wholesale channel increased 7% compared with the third quarter of 2016. North America net sales through the direct channel increased $19.9 million or 148.5% to $33.3 million, primarily driven by increased web sales of over 200%, compared with the third quarter of 2016, the company said.
Gross margin under U.S. generally accepted accounting principles was 43.1% compared with 43.5% in the third quarter of 2016, while GAAP operating income decreased 27.8% to $94.6 million compared with $131.1 million in the third quarter of 2016. Adjusted operating income decreased 23.6% to $100.1 million compared with $131.1 million in the third quarter of 2016, the company said.
Earnings before interest, tax, depreciation and amortization decreased 20.1% to $123.8 million compared with $155 million for the third quarter of 2016. Adjusted EBITDA decreased 16.6% to $129.3 million compared with $155 million in the third quarter of 2016, the company said.
Tempur Sealy also increased its financial guidance for 2017. For the full year 2017, the company currently expects adjusted EBITDA to range from $435 million to $450 million.
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