When Tempur Sealy CEO Scott Thompson took the job running the Lexington-based world’s largest bed maker, he knew nothing about mattresses other than that he slept on one.
To the astonishment of his wife of 32 years, Vanessa, he got off the phone and ripped the sheets off the bed to see what was in their house.
“I knew it wasn’t a Tempur-Pedic, because it wasn’t memory foam,” he said. “And I panicked that I might be sleeping on the enemy. He was safe: it was a Stearns and Foster, one of Tempur Sealy’s top line lines.
“I should have known my wife would pick one of the more expensive products that you can possibly pick,” he said. “My wife said, ‘I can’t believe you didn’t think I’d have good judgment.’”
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Despite that unfamiliarity, Thompson, 57, said in a recent interview that learning the mattress business over the last year has been surprisingly smooth and even fun. Thompson was named CEO, president and CEO on Sept 8, 2015, as the result of a search for a new leader after former CEO Mark Sarvary was ousted, along with board chairman P. Andrews McLane and board member Christopher Masto, by a group of unhappy shareholders.
Thompson’s background was in cars; the Fort Worth native had been the head of Dollar Thrifty in Tulsa, Okla., until its purchase by Hertz in November 2012. But he saw Tempur Sealy as a “fabulous” opportunity.
“We have a large market share domestically, we’ve got a rapidly growing international operation, and it’s a business that I get to work on a product that you can be really proud of,” Thompson said. He also was excited about developing the culture of the merged company; Tempur acquired Sealy in March 2013 for $1.3 billion.
“People have tried to recruit me to things like the fast-food industry, where I’d be selling french fries and sugar water. It didn’t seem like something I’d feel that great about,” he said. “The more I got into bedding, the more I felt good about bedding in general. And then when I looked into the brand strength of Tempur and Sealy, that was a double win.”
Since Thompson’s arrival, Tempur Sealy has debuted three lines: Tempur-Breeze, a cool-sleep memory foam mattress in three levels of firmness and represented by quarterback Drew Brees in ads, a redesigned Stearns and Foster collection aimed at the premium end of the market, and Cocoon, a bed-in-a-box concept aimed at the lower end of the market.
The bed-in-a-box line is a “niche market,” Thompson said, and is not expected to generate significant numbers. But the other two lines, especially the Stearns and Foster premium beds, have already shown they can be big revenue drivers, he said.
The top mattress in the Stearns and Foster group went from $3,000 to $5,000, he said.
“It’s selling very well,” he said. “We call it a battleship. This is a very big, luxurious, heavy bed.”
There are more in the pipeline, he said, although he’s cagey about what exactly. At his condo in Lexington, he gets to tests beds, the newest ones out of the lab, including a recent one with hot and cool temperature control built in for both sides of the bed. That one is not on the market at present. Is it coming? “It might.”
Tempur, Sealy and Cocoon all are expected to have new products coming to market in the next year or two, he said.
“You have to have a strong cadence in product development,” he said. On average, mattress companies come out with completely new lines every two years, he said. The exception is the new Stearns and Foster line, he said. “It was so different from what we’d done before from a quality standpoint that we … expect that to stay on the market three years.”
Cocoon’s influence could be more limited. Thompson said that customers who actually go into a mattress showroom are soon convinced that the can get a much better quality Tempur Sealy product for the same or less money.
The best profits, he said, “are in the luxury goods.” Tempur-Pedic accounts for 50 percent of company revenue; Stearns and Foster another 10 percent. Last month Tempur Sealy reported record sales that boosted second-quarter earnings to $21.3 million, a modest gain over the same quarter of the previous year. The company also upped expectations for full-year earnings. But last October Tempur Sealy laid off employees, including about 50 in Lexington.
“We had the best second quarter in the company’s history,” he said. “Yes, there was some drama a year ago, but from a year ago we’ve gone from drama to this and (earnings per share) have gone up 74 percent in a world economy that is relatively flat.”
We have a large market share domestically, we’ve got a rapidly growing international operation, and it’s a business that I get to work on a product that you can be really proud of.
The stock price also has responded, rising about 10 percent from a year ago, much of the growth coming in the last few months.
Thompson also has refocused the company, spending much of the year on the road visiting Tempur Sealy factories unannounced, meeting some of his 7,000-plus employees. When he found unsatisfactory break room and bathroom conditions on a Texas tour, he made changes.
He also moved company board meetings and the annual shareholders meeting to Lexington, rather than Boston. He said there are no plans to move the headquarters from Kentucky but he doesn’t see Tempur Sealy adding any manufacturing facilities here either.
“We don’t need to be next to a factory. We have 400 people here. They’re settled. There’s no reason to leave,” he said.
Thompson does think the company will look at ways to be more a part of the Bluegrass community; Tempur has kept a relatively low profile compared to other corporate entities. Tempur Sealy recently announced they will donate mattresses for the return of “bed races” at a Downtown Lexington Corp. competition on Friday. Tempur Sealy employees will be there doing an exhibition lap with their own heavily modified race bed.
Thompson’s been doing his part to get to know the community by eating out six nights a week a Lexington restaurants (he has a routine table at Coles 735 Main) and learning about bourbon.
“Before I came to Lexington, I’m not sure I’d even had bourbon,” he said. His go-to drink had always been wine, Napa-heavy Cabernet specifically. But he’s jumped into Kentucky bourbon with the same enthusiasm as the mattress world. “I’ve done most of the tours.” His preferred brand? “Probably Woodford Reserve.”
In terms of what Lexington can expect from Tempur Sealy now that he’s settled in, Thompson said, “When you’re a public company, you’ve really got a lot of constituents. One of the constituents is the community … I feel like we owe the community a certain amount of service, and we’re continuing to look at that. We want to be good corporate citizens of where we live.”