Sealy Acquisition Costs Slash Tempur-Pedic Net in Q1
LEXINGTON, Ky.-Expenses related to the company's merger with Sealy played a significant role in the 77.8 percent slide in net income for Tempur-Pedic in its first quarter.
Net income in the quarter, which ended on March 31, was $12.5 million. The Sealy acquisition resulted in $16 million of transaction and integration costs, which had a hand in beefing up Tempur-Pedic's selling, marketing, general and administrative expenses by 21.4 percent in dollars and 601 basis points as a percentage of sales, to 37.2 percent.
Net sales rose 1.5 percent to $390.1 million, which included some Sealy product sales in the quarter. Excluding those sales, net sales were down 10.7 percent. Gross margin dropped 529 basis points to 48.3 percent, the result of product mix, deleverage and increased promotions and discounts, partly offset by reduced commodity costs and geographic mix.
With Sealy now in the Tempur-Pedic fold, the company said it expects net sales for all of 2013 to total $2.5 billion. Mark Sarvary, Tempur-Pedic's CEO, said, "The integration is progressing smoothly and as planned. We remain confident in realizing cost synergies in excess of $40 million by the third full year, and continue to be very excited about the significant opportunity for revenue synergies."