Tempur-Pedic earnings down 45% as North American sales slide

Larry Thomas -- Furniture Today, July 24, 2012

LEXINGTON, Ky. — Bedding major Tempur-Pedic said second-quarter net income tumbled 45% as it faced new competitive pressures in the North American market.

The company said mattress sales in North America were 8.3% below last year's second quarter, but rose 8% outside of North America.

Gross margins and operating margins also were well below last year's second quarter.

"Changes in the competitive environment in North America during the second quarter had an adverse impact on our performance," said Mark Sarvary, CEO. "We are taking actions to across our operations to realign our expense structure appropriately. At the same time, we are focused on a series of new initiatives designed to strengthen our competitive position."

He said the first of the initiatives will be unveiled next week at the Las Vegas Market.

"We are very confident in our company's growth potential and our strong brand, and as a result remain committed to our long-term strategic plan," said Sarvary.

The declines were in line with sales and earnings guidance the company issued in early June - an announcement that sent Tempur-Pedic's stock price down more than 40%.

Total sales for the quarter ended June 30 were $329.5 million, down 3.7% from $342.2 million in the same quarter last year.

North American mattress sales were $160.8 million, down from $175.3 million in the comparable quarter.

Net income for the most recent quarter was $29.1 million or 45 cents per share. In last year's second quarter, it was $53.1 million or 76 cents per share.

Gross margin was 50.7% in the most recent quarter, down from 52.9% in last year's second quarter, while operating margin fell to 14.4% from 24.2% in the comparable quarter.

For the six months ended June 30, sales were up 6.9% to $713.9 million.

First-half net income, however, was down 15.8% to $85.3 million or $1.31 per share.

The company maintained its sales guidance of $1.43 billion for 2012, and said earnings per share would be about $2.80. That's an increase of 10 cents per share from the June estimate and is due to a lower number of outstanding shares this year.

In 2011, Tempur-Pedic had sales of $1.42 billion and earnings of $3.18 per share.