Business

Sales, profits fall for Tempur-Pedic

Lexington-based mattress maker Tempur-Pedic International reported fourth-quarter and annual earnings Thursday that continued to show declines as the company has faced stiffer competition in recent months.

"In North America, we continued to see signs of stabilization," CEO Mark Sarvary told analysts during an early evening conference call.

Sales for the fourth quarter fell 7 percent to $341.1 million from $366.8 million in the same period in 2011. Net income fell 58 percent to $23.5 million, or 39 cents a share, from $56.3 million, or 84 cents a share, a year ago.

The company said profits were depressed by one-time expenses related to repatriating foreign earnings and transaction costs associated with its plans to purchase rival Sealy. Removing those one-time costs, the company would have earned 60 cents a share in the fourth quarter.

The results conclude a rocky year for the company, as 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.

Since then the stock has generally risen, though it has seen periodic declines including a drop of nearly 20 percent in October after the company reduced its sales and profit expectations for the remainder of the year.

The market had reacted positively, though, in September when the company announced it would acquire rival Sealy in a $1.3 billion deal.

"We're excited about the potential for the combined companies," Sarvary told analysts Thursday.

He noted substantial progress has been made toward completing the purchase of the company, and it's expected to close in the first half of the year.

Sarvary also said Thursday that the company will soon announce initiatives that "we believe will return Tempur-Pedic to growth in North America in 2013."

The 9 percent decline in fourth-quarter North American sales was greater than the 4 percent decline in sales internationally.

For the quarter, mattress sales were down 5 percent, while sales of pillows fell 8 percent.

Sarvary noted the company has essentially completed the rollout of a number of new products launched in 2012 including the Breeze family of mattresses that produce an extra-cool feeling while sleeping.

He said the response has been good to the Breeze and noted "these products are very different from others on the sales floor."

The company is also devoted, he said, to maintaining "significant advertising levels in both North America and internationally" in 2013 and has retained a new advertising agency.

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