Tempur-Pedic stock hammered as company confirms discount sale

David Perry -- Furniture Today, May 8, 2012

LEXINGTON, Ky. — Memory foam mattress leader Tempur-Pedic confirmed that it is offering a discount of approximately 12% to 17% off the suggested retail price of a high-end Tempur-Cloud Supreme mattress set for an upcoming consumer promotion.

News of the unusual discount sent the company's stock price down sharply. Shares dropped $8.42 to close Monday at $48.29, a 15% decline.

Securities analysts raised questions about the move.

"While Tempur-Pedic is suggesting that this does not represent a departure or change in its pricing strategy, this may be a ‘hard sell' to the investment community," said Raymond James analyst Budd Bugatch. He said full retails for the Tempur-Cloud Supreme range from $2,499 to $3,699.

Added John Baugh, an analyst with Stifel, Nicolaus & Co.: "While Tempur has discounted pillows and adjustable bases in conjunction with mattress sales in the past, this marks the first time that Tempur has actually discounted the mattress itself. We readily admit that this move by the company caught us by surprise and left us somewhat puzzled at first thought. Investors also reacted to this seeming shift in strategy with great concern sending shares down nearly 15% (compared to a 0.04% gain in the S&P) on over 10 times the normal daily trading volume."

Tempur-Pedic said the discount would be in effect for one of the company's consumer promotions for the holiday shopping period of May 16 to July 8. The Tempur-Cloud Supreme is one of three beds in the company's Tempur-Cloud Collection.