Tempur Sealy Reports Second Quarter Results

Tempur Sealy International, Inc. (NYSE: TPX) announced financial results for the second quarter ended June 30, 2023 and updated financial guidance for the full year 2023.

• Consolidated Net Sales Increases 4.8% to Approximately $1.3 Billion
• Expands Consolidated Gross Margins and Operating Margins
• Realizes Robust Cash Flow from Operations of Approximately $150 Million
• Declares Third Quarter Dividend of $0.11 per share

Second Quarter 2023 Financial Summary

• Total net sales increased 4.8% to $1,269.7 million as compared to $1,211.0 million in the second quarter of 2022. On a constant currency basis⁽¹⁾, total net sales increased 5.0%, with an increase of 5.3% in the North America business segment and an increase of 3.9% in the International business segment.
• Gross margin was 42.7% as compared to 41.0% in the second quarter of 2022. Adjusted gross margin⁽¹⁾ was 42.9% as compared to 41.7% in the second quarter of 2022.
• Operating income increased 10.4% to $158.8 million as compared to $143.9 million in the second quarter of 2022. Adjusted operating income⁽¹⁾ was $171.8 million as compared to $159.9 million in the second quarter of 2022.
• Net income increased 2.0% to $92.4 million as compared to $90.6 million in the second quarter of 2022. Adjusted net income⁽¹⁾ was $102.0 million as compared to $103.2 million in the second quarter of 2022.
• Earnings per diluted share (“EPS”) increased 2.0% to $0.52 as compared to $0.51 in the second quarter of 2022. Adjusted EPS⁽¹⁾ was $0.58 in the second quarter of 2023 and 2022.

KEY HIGHLIGHTS
(in millions, except percentages and per common share amounts)
			% ReportedChange
Three Months Ended	June 30, 2023	June 30, 2022
Net sales	$1,269.7	$1,211.0	4.8 %
Net income	$92.4	$90.6	2.0 %
Adjusted net income (1)	$102.0	$103.2	(1.2) %
EPS	$0.52	$0.51	2.0 %
Adjusted EPS (1)	$0.58	$0.58	— %

Company Chairman and CEO Scott Thompson commented, “Our continued market outperformance in the second quarter reflects the momentum we are driving through our execution of our long term initiatives. All three of our leading U.S. brands – Tempur, Sealy and Stearns & Foster – performed well in the quarter, significantly ahead of where we believe the U.S. industry trended. We were also pleased with the second quarter performance of our International business. The successful Tempur international launch, combined with Dreams’ crisp retail execution, is driving continued share gains worldwide and positioning us well for the future. This quarter’s results were delivered in markets that were a bit less robust than we expected. Our global industry outperformance partially mitigated the negative impact of these headwinds. While we look forward to a recovering market, this challenged environment has allowed us to demonstrate the strength of our global business model as we realized solid earnings and strong operating cash flows.

“Regarding the pending Mattress Firm acquisition, we are currently responding to the Federal Trade Commission’s second request. Mattress Firm’s recent quarterly results, which it reported yesterday, were consistent with our expectations. We continue to expect to close the transaction in 2024 and look forward to bringing the Mattress Firm team onboard.”

Business Segment Highlights

The Company’s business segments include North America and International. Corporate operating expenses are not included in either of the business segments and are presented separately as a reconciling item to consolidated results.

North America net sales increased 5.4% to $1,016.8 million as compared to $964.7 million in the second quarter of 2022, primarily driven by the success of new product launches for Tempur and Stearns & Foster. On a constant currency basis⁽¹⁾, North America net sales increased 5.3% as compared to the second quarter of 2022. Gross margin was 39.7% as compared to 37.9% in the second quarter of 2022. Adjusted gross margin⁽¹⁾ was 39.9% as compared to 38.7% in the second quarter of 2022. Operating margin was 17.1% as compared to 15.1% in the second quarter of 2022. Adjusted operating margin⁽¹⁾ was 17.4% as compared to 16.5% in the second quarter of 2022.

North America net sales through the wholesale channel increased $48.2 million, or 5.7%, to $896.0 million, as compared to the second quarter of 2022. North America net sales through the direct channel increased $3.9 million, or 3.3%, to $120.8 million, as compared to the second quarter of 2022.

North America adjusted gross margin⁽¹⁾ improved 120 basis points as compared to the second quarter of 2022. The improvement was primarily driven by pricing actions and normalizing commodity costs, partially offset by product launch costs and operational headwinds. North America adjusted operating margin⁽¹⁾ improved 90 basis points as compared to the second quarter of 2022. The improvement was primarily driven by the improvement in gross margin.

International net sales increased 2.7% to $252.9 million as compared to $246.3 million in the second quarter of 2022. On a constant currency basis⁽¹⁾, International net sales increased 3.9% as compared to the second quarter of 2022. Gross margin was 54.9% as compared to 53.1% in the second quarter of 2022. Operating margin was 13.4% as compared to 14.5% in the second quarter of 2022.

International net sales through the wholesale channel increased $1.9 million, or 2.1%, to $93.2 million as compared to the second quarter of 2022. International net sales through the direct channel increased $4.7 million, or 3.0%, to $159.7 million as compared to the second quarter of 2022.

International gross margin improved 180 basis points as compared to the second quarter of 2022. The improvement was primarily driven by favorable mix and pricing actions. International operating margin declined 110 basis points as compared to the second quarter of 2022. The decline was primarily driven by operating expense deleverage to support product launch initiatives, partially offset by the improvement in gross margin.

Corporate operating expense increased to $49.2 million as compared to $38.0 million in the second quarter of 2022, primarily driven by transaction costs of $10.6 million related to the pending acquisition of Mattress Firm. Corporate adjusted operating expense⁽¹⁾ was $38.6 million as compared to $34.7 million in the second quarter of 2022.

Consolidated net income increased 2.0% to $92.4 million as compared to $90.6 million in the second quarter of 2022. Adjusted net income⁽¹⁾ decreased 1.2% to $102.0 million as compared to $103.2 million in the second quarter of 2022. EPS increased 2.0% to $0.52 as compared to $0.51 in the second quarter of 2022. Adjusted EPS⁽¹⁾ was $0.58 in the second quarter of 2023 and 2022.

The Company ended the second quarter of 2023 with total debt of $2.8 billion and consolidated indebtedness less netted cash⁽¹⁾ of $2.7 billion. Leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to adjusted EBITDA⁽¹⁾ was 3.10 times for the trailing twelve months ended June 30, 2023.

Additionally, today the Company announced that its Board of Directors declared a quarterly cash dividend of $0.11 per share, payable on August 31, 2023, to shareholders of record at the close of business on August 17, 2023.

Recent Events

As previously disclosed, the Company identified a cybersecurity event on July 23, 2023, involving certain of the Company’s information technology (“IT”) systems. The Company has begun the process to bring certain of its critical IT systems back online and has resumed operations. The forensic investigation remains ongoing and the Company continues to assess the impact of this event on its business, operations, and financial results.

Financial Guidance

For the full year 2023, the Company updated its expectations for an adjusted EPS⁽¹⁾ range of $2.50 to $2.70. This contemplates the Company’s current outlook that sales will be flat to slightly up versus prior year.

The Company noted that its expectations are based on information available at the time of this release, and are subject to changing conditions and risks, many of which are outside the Company’s control. The Company is unable to reconcile forward–looking adjusted EPS, a non–GAAP financial measure, to EPS, its most directly comparable forward–looking GAAP financial measure, without unreasonable efforts, because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact EPS in 2023.

For the complete press release, click here.

About Tempur Sealy International, Inc.

Tempur Sealy (NYSE: TPX) is committed to improving the sleep of more people, every night, all around the world. As a global leader in the design, manufacture and distribution of bedding products, we know how crucial a good night of sleep is to overall health and wellness. Utilizing over a century of knowledge and industry-leading innovation, we deliver award-winning products that provide breakthrough sleep solutions to consumers in over 100 countries. Our highly recognized brands include Tempur-Pedic®, Sealy® featuring Posturepedic® Technology and Stearns & Foster® and our non-branded offerings include value-focused private label and OEM products. Our distinct brands allow for complimentary merchandising strategies and are sold through third-party retailers, our Company-owned stores and e-commerce channels. This omni-channel strategy ensures our products are offered where ever and how ever customers want to shop. Lastly, we accept our global responsibility to serve all stakeholders, our community and environment. We have and are implementing programs consistent with our responsibilities.

Source: Tempur Sealy International, Inc.