Tempur Sealy blew Labor Day sales, plans to make it up on Black Friday

Lexington-based Tempur Sealy announced Thursday that despite missteps in Labor Day promotions that contributed to a 5.4 percent decrease in sales, the third quarter generated record profits. The results come in the wake of CEO Scott Thompson’s announcement four weeks ago that sales of mid-range and lower-end products were down significantly, leading to revised full-year projections.

Thompson said Thursday that sales have improved after the August decline but remain flat with evidence of “election goofiness ... Clearly the high-end consumer was nervous during the period and we’re hoping that gets better post-election.”

He said other bedding makers and other durable goods manufacturers also experienced similar softness. Tempur Sealy reported sales of $832 million, down from $880 million in the third quarter of 2015. Adjusted for the effect of currency exchanges, total quarterly net sales were down 4.6 percent, with the biggest decrease – 5.8 percent – in North America and 1.8 percent in international sales.

Year-to-date, sales were almost $2.36 billion, down 1.1 percent from the same period last year.

For the quarter, Tempur Sealy reported earnings of $77.8 million, up 93.5 percent over the same quarter of last year, or $1.32 per dilute share, up 106.3 percent over last year. Year-to-date, earnings were $138.7 million, up 63.6 percent compared with the same period last year, or $2.28 per diluted share, up 67.6 percent.

In a statement to the Herald-Leader, Thompson credited the company’s workforce with maintaining the positive earnings growth for the quarter despite retail challenges.

“I’m proud of the focus and dedication from everyone at Tempur Sealy – including the 400 members of our Lexington headquarters team – to deliver impressive EBITDA growth for the last four quarters, including this quarter’s just-announced growth of 28 percent,” Thompson said. “This was the most profitable quarter in the company’s history and another step in keeping Tempur Sealy competitive for long-term success.”

In a conference call with stock analysts Thursday morning, Thompson said Tempur Sealy sales began to fall unexpectedly in early August and then declined more precipitously around the Labor Day holiday, which is generally a time of big sales promotions.

“Clearly the retail environment in in the U.S. was less robust that we had expected,” Thompson said. But the company made some mistakes, he reiterated, including failing to promote the mid- and lower-end products and reducing its Labor Day incentives and making them too complicated.

They have fixed these issues in advance of upcoming key sales promotions for Veterans’ Day and Black Friday, he said.

Another area of weakness, he said: pillows and non-mattress bedding. Sales of those products slipped more than $20 million in the quarter, almost half of the overall nearly $50 million drop. Thompson said that Tempur Sealy will be rolling out a plan to address this in coming months.

There are also some signs that the successful launch this year of a new high-end Stearns & Foster line is cannabilizing some of the sales of Tempur mattresses, he said.

Overall, Thompson said, the full-year sales are expected to still be down 1 to 3 percent. The company reiterated that it expects full-year adjusted EBITDA to range from $500 million to $525 million, a reduction from the $525 million to $550 million expected at the end of the second quarter in July.

This story was originally published October 27, 2016 at 10:24 AM with the headline "Tempur Sealy blew Labor Day sales, plans to make it up on Black Friday."