Tempur Sealy Net Down for Q4, Fiscal Year
LEXINGTON, Ky.-With the company still meeting expenses for the acquisition of Sealy, which was completed last March, Tempur Sealy reported a 2.7 percent drop in fourth-quarter net income, to $22.9 million, and a decline of 30.7 percent in net income for the fiscal year, which totaled $74 million.
The inclusion of Sealy into the company formerly known as Tempur-Pedic resulted in a decrease of 977 basis points from the combined company's gross margin, which finished the quarter at 40.24 percent. Also, selling, marketing, general and administrative expenses were hiked 72 percent in dollars--although, as a percentage of sales, operating expenses were cut by 472 basis points to 30.3 percent.
Again reflecting the Sealy inclusion, net sales in the quarter, which ended on Dec. 31, jumped 98.8 percent to $678.1 million. This brought net sales for the fiscal year to $2.5 billion, up 75.7 percent.
Speaking on a conference call yesterday to financial analysts, Mark Sarvary, Tempur Sealy's president and CEO, said the quarter's sales were in line with the company's expectations. "We achieved solid overall growth in the quarter and are pleased, in particular with the improvement in our Sealy and Tempur international businesses," Sarvary said.
Sealy did better than expected in the quarter, fueled by strong demand for Posturepedic, innerspring and hybrid mattresses. Tempur saw positive growth in Europe, Asia and Latin America, partly offset by a 1 percent decline in North American sales.
For 2014, Sarvary told the analysts that Tempur Sealy will pursue four strategic initiatives to grow its business. The first will be product innovation, driven by increased investment in research and development and marked by the launches, at Las Vegas Market, of Tempur Cloud and Contour in the Tempur line, and four new Stearns & Foster collections in the Sealy line.
The second initiative will be an increased investment in marketing, with continuous television advertising for Tempur throughout the year and support through consumer advertising for Stearns & Foster, Optimum and Posturepedic, along with new point-of-purchase materials for Tempur Cloud and Contour. The third will be new market expansion, with the expectation that Tempur Sealy will realize more than $300 million in what Sarvary called "revenue synergies" from international markets.
The fourth initiative will be to build a world-class supply chain that will make it easier for customers to do business with Tempur Sealy. This will include improved customer service and lower costs within the company's transportation and distribution network.