Tempur-Pedic aims for growth with adjustable mattresses

ssloan@herald-leader.comJanuary 25, 2013 

Tempur-Pedic's Breeze line of mattresses shown in a company showroom at a trade show. Photo courtesy Tempur-Pedic International

PHOTO COURTESY TEMPUR-PEDIC INTERNATIONAL — Photo courtesy Tempur-Pedic International

Shares of Lexington-based mattress maker Tempur-Pedic International rose 6 percent Friday, a day after the company reported earnings that were down but still exceeded analysts' expectations.

The company's sales and profits fell for both the fourth quarter and full year, but executives touted a new product line to be unveiled next week that is expected to boost sales this year.

The Tempur Choice line will offer varying degrees of firmness that can be adjusted with a remote control. The bed will also allow couples who prefer different degrees of firmness to set different feels for their portion of the bed, said Chief Financial Officer Dale Williams.

"One of our key strategic initiatives is to have a Tempur mattress and pillow that appeals to everyone," he said.

Williams noted the idea grew out of the knowledge that many shoppers only briefly test the mattresses that they ultimately purchase.

"You may be on it for five minutes if you're a really thorough shopper, but most people spend 30 seconds to a minute on a bed," he said. "They get it home, and it's a little bit different than what they thought they were getting.

"The thing about Choice is if you like it slightly different then what it is, you can adjust it."

Hopes are high for the new product line, which is expected to go on sale in the second quarter. It's expected to help fuel growth for the company, which is coming off an eventful year during which it struggled with increased competition from other mattress makers, which launched a bevy of memory foam products during the year.

When Tempur-Pedic executives warned in June that the increased competition would lower sales and profit projections, the company's stock lost half its value in one day.

But the company announced later in September that it plans to acquire rival Sealy in a $1.3 billion deal. The acquisition is expected to close in the first half of the year.

In a note to investors, analyst Jon Andersen of William Blair & Co. wrote he thinks "the competitive environment in memory foam continues to be intense" in the United States.

Tempur-Pedic's initiatives including new product introductions, price adjustments and advertising changes "may be beginning to have a positive impact," Andersen noted, "however, these initiatives are still a work in progress."

A bright spot for Tempur-Pedic in recent months has been its Breeze line of mattresses that are designed to offer a cooler sleep.

"The key to Breeze is there's been a lot of talk and discussion in the industry over the last year or so about cooler sleep surfaces," Williams said. "Breeze is meaningfully cooler to sleep on. The technology is validated and is performing very well.

"Even though it's a premium price point, it's selling very well."

But while the Breeze has succeeded, the company's Simplicity line of lower-priced mattresses has yet to create the interest executives once predicted.

"Simplicity did not turn into a grand slam," Williams said. "Simplicity had the potential to be a huge growth driver for the business, but it's not done that.

"But it's done well enough to earn its keep and be a key component of our core collections."

Scott Sloan: (859) 231-1447. Twitter: @HeraldLeaderBiz

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