Tempur Sealy Reports First Quarter Results

Tempur Sealy International, Inc. (NYSE: TPX) and Mattress Firm Group Inc. (“Mattress Firm”) today announced that Tempur Sealy has signed a definitive agreement to acquire Mattress Firm, the nation’s largest mattress specialty retailer, in a cash and stock transaction valued at approximately $4.0 billion. The Company expects the transaction to close in the second half of 2024, subject to the satisfaction of customary closing conditions, including applicable regulatory approvals. A separate press release related to the announcement of this transaction can be found on the Company’s investor relations website at investor.tempursealy.com.

The Company today also announced financial results for the first quarter ended March 31, 2023 and reaffirmed financial guidance for the full year 2023.

First Quarter 2023 Financial Summary

• Total net sales decreased 2.5% to $1,208.1 million as compared to $1,239.5 million in the first quarter of 2022. On a constant currency basis⁽¹⁾, total net sales decreased 0.5%, with a decrease of 1.2% in the North America business segment and an increase of 1.7% in the International business segment.
• Gross margin was 41.4% as compared to 42.2% in the first quarter of 2022. Adjusted gross margin⁽¹⁾ was 41.8% in the first quarter of 2023. There were no adjustments to gross margin in the first quarter of 2022.
• Operating income decreased 24.0% to $143.3 million as compared to $188.6 million in the first quarter of 2022. Adjusted operating income⁽¹⁾ was $153.4 million in the first quarter of 2023. There were no adjustments to operating income in the first quarter of 2022.
• Net income decreased 34.7% to $85.3 million as compared to $130.7 million in the first quarter of 2022. Adjusted net income⁽¹⁾ was $92.9 million in the first quarter of 2023. There were no adjustments to net income in the first quarter of 2022.
• Earnings per diluted share (“EPS”) decreased 30.4% to $0.48 as compared to $0.69 in the first quarter of 2022. Adjusted EPS⁽¹⁾ was $0.53 in the first quarter of 2023. There were no adjustments to EPS in the first quarter of 2022.

Company Chairman and CEO Scott Thompson commented, “Our first quarter performance reflects the strength of our industry-leading business model, as we continued to outperform the broader industry against a challenging operating backdrop. Though the U.S. industry conditions were slightly less favorable than anticipated as a result of heightened macroeconomic pressures, we performed largely in-line with our first quarter expectations. In the second quarter, our expectation is that our consolidated sales will return to growth year over year, supported by the strong reception to our newly launched products, encouraging order trends quarter to date, and fully lapping the challenging prior year comps in the first quarter.

Thompson continued, “Today we also announced that we have signed a definitive agreement to acquire Mattress Firm, the nation’s largest mattress specialty retailer. This acquisition aligns with our strategy of acquiring companies that extend our competitive advantages, enable us to move closer to consumers, and facilitate continued innovation. This combination will complement Tempur Sealy’s extensive product development and manufacturing capabilities with vertically integrated retail. The two companies have grown over the last 35 years with a mutual focus on providing customers the best sleep products in the world. We are thrilled to formally bring these teams together.”

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 1.3% to $919.6 million as compared to $931.4 million in the first quarter of 2022. This decline was primarily driven by continued macroeconomic pressures impacting U.S. consumer behavior. On a constant currency basis⁽¹⁾, North America net sales decreased 1.2% as compared to the first quarter of 2022. Gross margin was 37.4% as compared to 37.8% in the first quarter of 2022. Adjusted gross margin⁽¹⁾ was 37.9% in the first quarter of 2023. There were no adjustments to gross margin in the first quarter of 2022. Operating margin was 14.8% as compared to 16.7% in the first quarter of 2022. Adjusted operating margin⁽¹⁾ was 15.3% in the first quarter of 2023. There were no adjustments to operating margin in the first quarter of 2022.

North America net sales through the wholesale channel decreased $7.0 million, or 0.9%, to $804.3 million, as compared to the first quarter of 2022. North America net sales through the direct channel decreased $4.8 million, or 4.0%, to $115.3 million, as compared to the first quarter of 2022.

North America adjusted gross margin⁽¹⁾ improved 10 basis points as compared to gross margin in the first quarter of 2022. The improvement was primarily driven by pricing actions, partially offset by operational headwinds and product launch costs. North America adjusted operating margin⁽¹⁾ declined 140 basis points as compared to operating margin in the first quarter of 2022. The decline was primarily driven by operating expense deleverage partially offset by the improvement in gross margin.

International net sales decreased 6.4% to $288.5 million as compared to $308.1 million in the first quarter of 2022. This decline was primarily driven by unfavorable foreign exchange. On a constant currency basis⁽¹⁾, International net sales increased 1.7% as compared to the first quarter of 2022. Gross margin was 54.0% as compared to 55.3% in the first quarter of 2022. Operating margin was 15.3% as compared to 21.7% in the first quarter of 2022.

International net sales through the wholesale channel decreased $4.5 million, or 4.0%, to $108.3 million as compared to the first quarter of 2022. International net sales through the direct channel decreased $15.1 million, or 7.7%, to $180.2 million as compared to the first quarter of 2022.

International gross margin declined 130 basis points as compared to the first quarter of 2022. The decline was primarily driven by product launch costs, offset by pricing actions. International operating margin declined 640 basis points as compared to the first quarter of 2022. The decline was primarily driven by operating expense deleverage associated with product launch costs, the decline in gross margin and Asia joint venture performance.

Corporate operating expense increased to $36.9 million as compared to $33.6 million in the first quarter of 2022. Corporate adjusted operating expense⁽¹⁾ was $31.7 million in the first quarter of 2023. There were no adjustments to operating expense in the first quarter of 2022.

Consolidated net income decreased 34.7% to $85.3 million as compared to $130.7 million in the first quarter of 2022. Adjusted net income⁽¹⁾ was $92.9 million in the first quarter of 2023. There were no adjustments to net income in the first quarter of 2022. EPS decreased 30.4% to $0.48 as compared to $0.69 in the first quarter of 2022. Adjusted EPS⁽¹⁾ was $0.53 in the first quarter of 2023. There were no adjustments to EPS in the first quarter of 2022.

The Company ended the first quarter of 2023 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 3.24 times for the trailing twelve months ended March 31, 2023.

During the first quarter of 2023, the Company repurchased 1.0 million shares of its common stock for a total cost of $35.7 million. Over the last twelve months, the Company has repurchased 7.4 million shares of its common stock for a total cost of $208.3 million. As of March 31, 2023, the Company had approximately $774.5 million available under its existing share repurchase authorization.

Additionally, today the Company announced that its Board of Directors declared a quarterly cash dividend of $0.11 per share, payable on June 6, 2023, to shareholders of record at the close of business on May 23, 2023.

Financial Guidance

For the full year 2023, the Company reaffirmed its expectations for an adjusted EPS⁽¹⁾ range of $2.60 to $2.80. This contemplates the Company’s current sales outlook for mid single digit year-over-year growth.

The Company noted that its expectations are based on information available at the time of this release, and are subject to changing conditions and risks, many of which are outside the Company’s control. The Company is unable to reconcile forward–looking adjusted EPS, a non–GAAP financial measure, to EPS, its most directly comparable forward–looking GAAP financial measure, without unreasonable efforts, because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact EPS in 2023.

For the complete press release, click here.

About Tempur Sealy International, Inc.

Tempur Sealy (NYSE: TPX) 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.