Tempur-Pedic Posts 3Q Net Loss as Sales Drop, Expenses Climb
LEXINGTON, Ky.-In the first sign the company has seen of red ink in some time, Tempur-Pedic posted a net loss of $2 million in the third quarter, which ended on Sept. 30.
The specialty mattress manufacturer's quarterly performance suffered from a fall of 9.2 percent in net sales to $347.9 million. The sales decline mostly came from Tempur-Pedic's North American market, whose sales plummeted 14 percent, along with a below-expectations sales increase of 3 percent from its international segment. These results reflected what CEO Mark Sarvary, in a conference call yesterday with financial analysts, called a "very different" competitive environment, one that has become more difficult for Tempur-Pedic since the second quarter.
Because of the sales decline, gross margin came in 315 basis points lower, finishing the quarter at 49.2 percent. Operating expenses gained 3.7 percent in dollars and 384 points as a percentage of sales, to 31 percent. Sarvary told the analysts that the latter figures included extra costs incurred for "a broad series of new initiatives" announced at the Las Vegas Market in August, which are intended to bolster Tempur-Pedic's business in the quarters to come.
These include the launch of five new mattresses and one new adjustable foundation, the discontinuation of two U.S. mattress models, wholesale price rollbacks on certain U.S. models, manufacturer-suggested retail price reductions on two U.S. mattress models and the extension of warranties on all U.S. mattress models to 25 years. Sarvary added that the impact of these initiatives would not be noticeable until early next year.
For the full year, Tempur-Pedic said its projecting sales to total $1.4 billion, roughly flat with 2011 sales.
Commenting on the recent agreement for Tempur-Pedic to acquire Sealy, Sarvary told that analysts, "We have initiated a process and are working with (Sealy President and CEO) Larry Rogers and the Sealy team to prepare for a very successful integration once the required regulatory approval is received."