Tempur Sealy Reports Results for Fourth Quarter and Full Year 2021

Tempur Sealy International, Inc. (“Tempur Sealy” and the “Company”) announced record financial results for the fourth quarter and year ended December 31, 2021. The Company also issued financial guidance for the full year 2022.

Fourth Quarter 2021 Key Highlights

• Total net sales increased 28.6% to $1,359.6 million as compared to $1,057.0 million in the fourth quarter of 2020, with an increase of 18.9% in the North America business segment and an increase of 82.1% in the International business segment. Net sales through the direct channel increased $166.7 million, or 115.4%, to $311.2 million, as compared to the fourth quarter of 2020. The direct channel is on an annualized run rate of over $1 billion.
• Gross margin was 44.5% as compared to 45.9% in the fourth quarter of 2020.
• Operating income increased 29.8% to $250.8 million as compared to $193.2 million in the fourth quarter of 2020.
• Net income increased 21.5% to $175.8 million as compared to $144.7 million in the fourth quarter of 2020. Adjusted net income⁽¹⁾ increased 22.8% to $175.9 million as compared to $143.2 million in the fourth quarter of 2020.
• Earnings per diluted share (“EPS”) increased to $0.88 as compared to $0.67 in the fourth quarter of 2020.

Company Chairman and CEO Scott Thompson commented, “We are pleased to report sales growth of 29% and EPS growth of 31% in the fourth quarter. This is the 10th of our last 11 quarters in which we have delivered double-digit sales and EPS growth. We leveraged our strong market position and global operating scale to drive record sales and EPS results while navigating supply chain disruptions, a significant inflationary environment and Covid-related disruptions. These past two years further solidified Tempur Sealy’s position as a market leading, vertically integrated, omni-channel, global company with solid fundamentals in a growing category. We enter 2022 well-positioned to continue to grow sales and EPS double-digits.”

Business Segment Highlights: Fourth Quarter 2021

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

North America net sales increased 18.9% to $1,062.1 million as compared to $893.6 million in the fourth quarter of 2020. Gross margin was 41.6% as compared to 43.4% in the fourth quarter of 2020. Operating margin was 21.6% as compared to 20.9% in the fourth quarter of 2020.

North America net sales through the wholesale channel increased $144.5 million, or 18.2%, to $936.6 million as compared to the fourth quarter of 2020, primarily driven by broad-based demand across our retail partners. North America net sales through the direct channel increased $24.0 million, or 23.6%, to $125.5 million, as compared to the fourth quarter of 2020, primarily driven by growth in our company-owned stores.

North America gross margin declined 180 basis points as compared to the fourth quarter of 2020. The decline was driven by operational inefficiencies related to COVID-19 and pricing benefit to sales with no improvement in gross margin, partially offset by favorable brand mix. North America operating margin improved 70 basis points as compared to the fourth quarter of 2020. The improvement was primarily driven by operating expense leverage, partially offset by the decline in gross margin.

International

International net sales increased 82.1% to $297.5 million as compared to $163.4 million in the fourth quarter of 2020. On a constant currency basis(1), International net sales increased 85.3% as compared to the fourth quarter of 2020.

International net sales through the wholesale channel decreased $8.6 million, or 7.1%, to $111.8 million as compared to the fourth quarter of 2020. International net sales through the direct channel increased $142.7 million, or 331.9%, to $185.7 million, as compared to the fourth quarter of 2020, primarily driven by the acquisition of Dreams Topco Limited (“Dreams”) on August 2, 2021.

Gross margin was 54.8% as compared to 59.9% in the fourth quarter of 2020. Dreams’ margin profile is lower than our historical international margins as they sell a variety of products across a range of price points. Operating margin was 20.2% as compared to 29.8% in the fourth quarter of 2020.

International gross margin declined 510 basis points as compared to the fourth quarter of 2020. The decline was driven by the acquisition of Dreams, the pricing benefit to sales with no improvement in gross margin and operational inefficiencies related to COVID-19. International operating margin declined 960 basis points as compared to the fourth quarter of 2020. The decline was driven by the decline in gross margin and operating expense deleverage.

Corporate

Corporate operating expense decreased to $38.2 million as compared to $42.5 million in the fourth quarter of 2020. Corporate adjusted operating expense(1) was $36.0 million in the fourth quarter of 2020. There were no adjustments to operating expense in the fourth quarter of 2021.

Consolidated

Consolidated net income increased 21.5% to $175.8 million as compared to $144.7 million in the fourth quarter of 2020. Adjusted net income(1) increased 22.8% to $175.9 million as compared to $143.2 million in the fourth quarter of 2020. EPS increased 31.3% to $0.88 as compared to $0.67 in the fourth quarter of 2020.

The Company ended the fourth quarter of 2021 with total debt of $2.3 billion and consolidated indebtedness less netted cash(1) of $2.1 billion. Leverage based on the ratio of consolidated indebtedness less netted cash(1) to adjusted EBITDA was 1.81 times for the year ended December 31, 2021.

During the fourth quarter of 2021, the Company repurchased 5.4 million shares of its common stock for a total cost of $250.5 million. As of December 31, 2021, the Company had approximately $1.4 billion available under its existing share repurchase authorization. In the last twelve months, the Company allocated approximately $1.5 billion of capital, which included investing over $800 million in share repurchases to buy back approximately 10% of our shares outstanding, paying $63 million in cash dividends, investing approximately $475 million to acquire Dreams and making $123 million of operational investments.

Additionally, today the Company announced that its Board of Directors increased the quarterly cash dividend to 10 cents per share. The dividend is payable on March 22, 2022, to shareholders of record at the close of business on March 8, 2022. This represents an 11% increase over the Company’s previous quarterly dividend of 9 cents per share.

Company Chairman and CEO Scott Thompson commented, “We are pleased to deliver double digit sales and EPS growth in 2021, issue double digit sales and EPS growth targets for 2022, increase our cash dividend 11 percent while simultaneously targeting to repurchase at least 10 percent of our shares outstanding and maintain our historical leverage target. Like always, we will also continue to invest in supporting our global brands with powerful advertising, additional manufacturing capacity and industry-leading product innovation.”

Financial Guidance

For the full year 2022, the Company currently expects EPS between $3.65 to $3.85. This contemplates the Company’s current sales outlook for strong year-over-year growth between 15% to 20%.

The Company noted that its expectations are based on information available at the time of this release, and are subject to changing conditions, many of which are outside the Company’s control.

For the full fourth quarter results, click here.

About Tempur Sealy International, Inc.

Tempur Sealy 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 complementary 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.

Contact:

Aubrey Moore – Investor Relations – investor.relations@tempursealy.com – (800) 805-3635

Source: Tempur Sealy International, Inc.