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Tempur Sealy Reports Second Quarter Results

General News
Tempur Sealy International - Furniture Manufacturer

Tempur Sealy International, Inc. (the “Company”) announced financial results for the second quarter ended June 30, 2022. The Company also issued updated financial guidance for the full year 2022.

  • Total net sales increased 3.6% to $1,211.0 million as compared to $1,169.1 million in the second quarter of 2021. On a constant currency basis(1), total net sales increased 5.1%, with a decrease of 4.6% in the North America business segment and an increase of 68.2% in the International business segment, primarily driven by the acquisition of Dreams in August 2021.
  • Gross margin was 41.0% as compared to the second quarter 2021 record of 44.3%. Adjusted gross margin(1) was 41.7% in the second quarter of 2022. There were no adjustments to gross margin in the second quarter of 2021.
  • Operating income was $143.9 million as compared to the second quarter 2021 record of $223.3 million. Adjusted operating income(1) was $159.9 million as compared to $227.2 million in the second quarter of 2021.
  • Net income was $90.6 million as compared to the second quarter 2021 record of $140.8 million. Adjusted net income(1) was $103.2 million as compared to $161.5 million in the second quarter of 2021.
  • Earnings before interest, tax, depreciation and amortization (“EBITDA”)(1) was $186.8 million as compared to the second quarter 2021 record of $266.1 million. Adjusted EBITDA(1) was $203.4 million as compared to $270.3 million in the second quarter of 2021.
  • Earnings per diluted share (“EPS”) was $0.51 as compared to the second quarter 2021 record of $0.69. Adjusted EPS(1) was $0.58 as compared to $0.79 in the second quarter of 2021.

Company Chairman and CEO Scott Thompson commented, “During the quarter, the overall North America operating environment deteriorated, driven by various macroeconomic pressures. We believe the overall U.S. mattress business, our largest market, had its toughest volume decline in 15 years, with industry units down 20 percent to 25 percent compared to last year’s record second quarter volumes. We have adjusted our hiring expectations and near-term capacity investments, and we also implemented a price increase in the U.S. in late June to neutralize the dollar impact of commodity inflation. This environment gave us an opportunity to demonstrate the resilience of our business model, as we generated profits, invested in our business, returned capital to shareholders and outperformed the global bedding market. The team remains focused on delivering on our initiatives to drive continued success.”

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 decreased 4.8% to $964.7 million as compared to $1,013.8 million in the second quarter of 2021. On a constant currency basis(1), North America net sales decreased 4.6% as compared to the second quarter of 2021. Gross margin was 37.9% as compared to 42.0% in the second quarter of 2021. Adjusted gross margin(1) was 38.7% in the second quarter of 2022. There were no adjustments to gross margin in the second quarter of 2021. Operating margin was 15.1% as compared to 21.4% in the second quarter of 2021. Adjusted operating margin(1) was 16.5% in the second quarter of 2022. There were no adjustments to operating margin in the second quarter of 2021.

North America net sales through the wholesale channel decreased $43.0 million, or 4.8%, to $847.8 million, as compared to the second quarter of 2021. North America net sales through the direct channel decreased $6.1 million, or 5.0%, to $116.9 million, as compared to the second quarter of 2021.

North America adjusted gross margin(1) declined 330 basis points as compared to gross margin in the second quarter of 2021. The decline was driven by operational investments to service our customers and pricing benefit to sales with no improvement to gross profit. These declines were partially offset by favorable brand mix. North America adjusted operating margin(1) declined 490 basis points as compared to operating margin in the second quarter of 2021. The decline was primarily driven by the decline in gross margin and Stearns & Foster® advertising investments ahead of the expected fourth quarter product launch.

International net sales increased 58.6% to $246.3 million as compared to $155.3 million in the second quarter of 2021. On a constant currency basis(1), International net sales increased 68.2% as compared to the second quarter of 2021. Gross margin was 53.1% as compared to 59.8% in the second quarter of 2021. Operating margin was 14.5% as compared to 27.9% in the second quarter of 2021.

International net sales through the wholesale channel decreased $23.3 million, or 20.3%, to $91.3 million as compared to the second quarter of 2021. International net sales through the direct channel increased $114.3 million, or 280.8%, to $155.0 million as compared to the second quarter of 2021. Prior to the Dreams acquisition in August 2021, net sales to Dreams were included in the wholesale channel. Following the acquisition, net sales for Dreams are included in the direct channel.

International gross margin declined 670 basis points as compared to the second quarter of 2021. The decline was primarily driven by the acquisition of Dreams, unfavorable mix and pricing benefit to sales with no improvement to gross profit. 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 1340 basis points as compared to the second quarter of 2021. The decline was primarily driven by the decline in gross margin, Asia joint venture performance due to COVID-19 related shutdowns and operating expense deleverage.

Corporate operating expense was $38.0 million, consistent with the second quarter of 2021.

Consolidated net income decreased to $90.6 million as compared to $140.8 million in the second quarter of 2021. Adjusted net income(1) decreased to $103.2 million as compared to $161.5 million in the second quarter of 2021. EPS decreased 26.1% to $0.51 as compared to $0.69 in the second quarter of 2021. Adjusted EPS(1) decreased 26.6% to $0.58 as compared to $0.79 in the second quarter of 2021.

The Company ended the second quarter of 2022 with total debt of $2.9 billion and consolidated indebtedness less netted cash(1) of $2.8 billion. Leverage based on the ratio of consolidated indebtedness less netted cash(1) to adjusted EBITDA(1) was 2.67 times for the trailing twelve months ended June 30, 2022.

During the second quarter of 2022, the Company repurchased 4.4 million shares of its common stock for a total cost of $117.2 million. Over the last twelve months, the Company has repurchased 27.1 million shares of its common stock for a total cost of $1.1 billion. As of June 30, 2022, the Company had approximately $834.5 million available under its existing share repurchase authorization.

Additionally, today the Company announced that its Board of Directors declared a quarterly cash dividend of $0.10 per share, payable on August 25, 2022, to shareholders of record at the close of business on August 11, 2022.

Financial Guidance

The Company has updated its earnings guidance for the full year 2022, and currently expects adjusted EPS(1) between $2.60 to $2.80. This contemplates the Company’s current outlook for full year 2022 consolidated sales to be consistent with prior year.

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 second quarter results, click here.

(1) This is a non-GAAP financial measure. Please refer to “Non-GAAP Financial Measures and Constant Currency Information” below.

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.