Tempur Sealy Reports First Quarter Results

Tempur Sealy International, Inc. (the “Company”) announced financial results for the first quarter ended March 31, 2022. The Company also issued updated financial guidance for the full year 2022.

First Quarter 2022 Financial Summary

• Total net sales increased 18.7% to $1,239.5 million as compared to $1,043.8 million in the first quarter of 2021. On a constant currency basis⁽¹⁾, total net sales increased 19.8%, with an increase of 5.5% in the North America business segment and an increase of 98.6% in the International business segment, primarily driven by the acquisition of Dreams in August 2021.

• Gross margin was 42.2% as compared to 44.0% in the first quarter of 2021.

• Operating income increased to $188.6 million as compared to $188.4 million in the first quarter of 2021.

• Net income increased to $130.7 million as compared to $130.5 million in the first quarter of 2021. Adjusted net income⁽¹⁾ was $134.6 million in the first quarter of 2021. There were no adjustments to net income in the first quarter of 2022.

• Earnings before interest, tax, depreciation and amortization (“EBITDA”)⁽¹⁾ increased 1.9% to $234.5 million as compared to $230.1 million in the first quarter of 2021.

• Earnings per diluted share (“EPS”) increased 11.3% to $0.69 as compared to $0.62 in the first quarter of 2021. Adjusted EPS⁽¹⁾ was $0.64 in the first quarter of 2021. There were no adjustments to EPS in the first quarter of 2022.

Company Chairman and CEO Scott Thompson commented, “The team’s strong execution in the first quarter resulted in net sales growth of 19% and EPS growth of 11% compared to the same period last year, despite headwinds from macroeconomic matters such as recent geopolitical events, falling consumer confidence and new COVID-19 variant outbreaks. In challenging times like these, our iconic brands, complementary products, global footprint and industry-leading financial strength position the Company well relative to competition. We believe that these competitive advantages resulted in continued global market share gains in the first quarter. We are continuing to invest in various initiatives this year, including expanding our manufacturing capabilities, growing our direct to consumer channel both online and in-store, and transitioning to an enhanced ERP system. These investments will position the Company well to drive long-term growth.”

Business Segment Highlights

The Company’s business segments include North America and International. Corporate operating expenses are not included in either of the business segments and are presented separately as a reconciling item to consolidated results.

North America net sales increased 5.4% to $931.4 million as compared to $883.3 million in the first quarter of 2021. On a constant currency basis⁽¹⁾, North America net sales increased 5.5% as compared to the first quarter of 2021. Gross margin was 37.8% as compared to 41.2% in the first quarter of 2021. Operating margin was 16.7% as compared to 19.6% in the first quarter of 2021.

North America net sales through the wholesale channel increased $45.8 million, or 6.0%, to $811.3 million, as compared to the first quarter of 2021. North America net sales through the direct channel increased $2.3 million, or 2.0%, to $120.1 million, as compared to the first quarter of 2021.

North America gross margin declined 340 basis points as compared to gross margin in the first quarter of 2021. The decline was driven by pricing benefit to sales with no improvement in gross margin and operational inefficiencies related to supply chain constraints, partially offset by favorable mix. North America operating margin declined 290 basis points as compared to operating margin in the first quarter of 2021. The decline was primarily driven by the decline in gross margin, partially offset by operating expense leverage.

International net sales increased 92.0% to $308.1 million as compared to $160.5 million in the first quarter of 2021. On a constant currency basis⁽¹⁾, International net sales increased 98.6% as compared to the first quarter of 2021. Gross margin was 55.3% as compared to 59.2% in the first quarter of 2021. Operating margin was 21.7% as compared to 28.8% in the first quarter of 2021.

International net sales through the wholesale channel decreased $3.1 million, or 2.7%, to $112.8 million as compared to the first quarter of 2021. International net sales through the direct channel increased $150.7 million, or 337.9%, to $195.3 million as compared to the first quarter of 2021, primarily driven by the acquisition of Dreams in August 2021.

International gross margin declined 390 basis points as compared to the first quarter of 2021. The decline was primarily driven by the acquisition of Dreams and pricing benefit to sales with no improvement in gross margin. Dreams’ margin profile is lower than our historical International margins as they sell a variety of products across a range of price points. International operating margin declined 710 basis points as compared to the first quarter of 2021. The decline was primarily driven by the decline in gross margin and operating expense deleverage.

Corporate operating expense increased to $33.6 million as compared to $31.2 million in the first quarter of 2021, primarily driven by ERP implementation costs.

Consolidated net income increased to $130.7 million as compared to $130.5 million in the first quarter of 2021. Adjusted net income⁽¹⁾ was $134.6 million in the first quarter of 2021. There were no adjustments to net income in the first quarter of 2022. EPS increased 11.3% to $0.69 as compared to $0.62 in the first quarter of 2021. Adjusted EPS⁽¹⁾ was $0.64 in the first quarter of 2021. There were no adjustments to EPS in the first quarter of 2022.

The Company ended the first quarter of 2022 with total debt of $2.7 billion and consolidated indebtedness less netted cash⁽¹⁾ of $2.6 billion. Leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to adjusted EBITDA⁽¹⁾ was 2.25 times for the trailing twelve months ended March 31, 2022.

During the first quarter of 2022, the Company repurchased 13.2 million shares of its common stock for a total cost of $494.8 million. Over the last twelve months, the Company has repurchased 24.3 million shares of its common stock for a total cost of $998.0 million. As of March 31, 2022, the Company had approximately $951.5 million available under its existing share repurchase authorization.

Additionally, today the Company announced that its Board of Directors declared a quarterly cash dividend of 10 cents per share, payable on May 26, 2022, to shareholders of record at the close of business on May 12, 2022.

Financial Guidance

The Company has updated its earnings guidance for the full year 2022, and currently expects EPS between $3.20 to $3.40. This contemplates the Company’s current sales outlook for year-over-year growth of at least 10% driven by pricing actions to neutralize commodity cost inflation and the acquisition of Dreams.

The Company noted that its expectations are based on information available at the time of this release, and are subject to changing conditions, many of which are outside the Company’s control.

For the full first quarter results, click here.

About Tempur Sealy International, Inc. 

Tempur Sealy is committed to improving the sleep of more people, every night, all around the world. As a global leader in the design, manufacture and distribution of bedding products, we know how crucial a good night of sleep is to overall health and wellness. Utilizing over a century of knowledge and industry-leading innovation, we deliver award-winning products that provide breakthrough sleep solutions to consumers in over 100 countries. Our highly recognized brands include Tempur-Pedic®, Sealy® featuring Posturepedic® Technology and Stearns & Foster® and our non-branded offerings include value-focused private label and OEM products. Our distinct brands allow for complimentary merchandising strategies and are sold through third-party retailers, our Company-owned stores and e-commerce channels. This omni-channel strategy ensures our products are offered where ever and how ever customers want to shop. Lastly, we accept our global responsibility to serve all stakeholders, our community and environment. We have and are implementing programs consistent with our responsibilities.

Contact:

Aubrey Moore – Investor Relations – Investor.relations@tempursealy.com – (800) 805-3635

Source: Tempur Sealy International, Inc.