Tempur Sealy Reports Fourth Quarter and Full Year 2022 Results

Tempur Sealy International, Inc. (NYSE: TPX) announced financial results for the fourth quarter and year ended December 31, 2022. The Company also issued financial guidance for the full year 2023. 

Fourth Quarter 2022 Key Highlights

• Total net sales decreased 12.7% to $1,187.4 million as compared to $1,359.6 million in the fourth quarter of 2021, with a decrease of 12.2% in the North America business segment and a decrease of 14.3% in the International business segment.
• Gross margin was 41.2% as compared to 44.5% in the fourth quarter of 2021. Adjusted gross margin⁽¹⁾ was 41.6% in the fourth quarter of 2022. There were no adjustments to gross margin in the fourth quarter of 2021.
• Operating income decreased 41.3% to $147.1 million as compared to $250.8 million in the fourth quarter of 2021. Adjusted operating income⁽¹⁾ was $156.8 million in the fourth quarter of 2022. There were no adjustments to operating income in the fourth quarter of 2021.
• Net income decreased 42.2% to $101.7 million as compared to $175.8 million in the fourth quarter of 2021. Adjusted net income⁽¹⁾ decreased 45.3% to $96.2 million as compared to $175.9 million in the fourth quarter of 2021.
• Earnings per diluted share (“EPS”) decreased to $0.57 as compared to $0.88 in the fourth quarter of 2021. Adjusted EPS⁽¹⁾ decreased 38.6% to $0.54 as compared to $0.88 in the fourth quarter of 2021.

Company Chairman and CEO Scott Thompson commented, “Our fourth quarter and full year results are the second best sales and adjusted net income results for like periods in the Company’s history. Although the robust market we experienced in 2021 represented a challenging comparison for 2022, we outperformed the global bedding market, expanding our leading position in the global industry. We continued to invest in industry-leading product innovation and advertising spend, expand our manufacturing capacity, drive omni-channel expansion worldwide, and execute on our balanced capital allocation strategy. As we enter 2023, we expect success across our brand, product, and omnichannel initiatives to deliver growth on both the top and bottom line as the industry experiences a stable but subdued demand environment.”

Business Segment Highlights: Fourth Quarter 2022

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 decreased 12.2% to $932.3 million as compared to $1,062.1 million in the fourth quarter of 2021. This decline was primarily driven by macroeconomic pressures impacting U.S. consumer behavior. Gross margin was 37.4% as compared to 41.6% in the fourth quarter of 2021. Adjusted gross margin⁽¹⁾ was 37.9% in the fourth quarter of 2022. There were no adjustments to gross margin in the fourth quarter of 2021. Operating margin was 14.6% as compared to 21.6% in the fourth quarter of 2021. Adjusted operating margin⁽¹⁾ was 15.1% in the fourth quarter of 2022. There were no adjustments to operating margin in the fourth quarter of 2021.

North America net sales through the wholesale channel decreased $123.7 million, or 13.2%, to $812.9 million as compared to the fourth quarter of 2021. North America net sales through the direct channel decreased $6.1 million, or 4.9%, to $119.4 million, as compared to the fourth quarter of 2021.

North America adjusted gross margin⁽¹⁾ declined 370 basis points as compared to gross margin in the fourth quarter of 2021. The decline was primarily driven by operational headwinds and unfavorable mix related to the prior year Tempur-Pedic sales order backlog reduction. These declines were partially offset by pricing actions to offset commodity inflation. North America adjusted operating margin⁽¹⁾ declined 650 basis points as compared to the operating margin in the fourth quarter of 2021. The decline was primarily driven by the decline in gross margin and operating expense deleverage.

International net sales decreased 14.3% to $255.1 million as compared to $297.5 million in the fourth quarter of 2021. This decline was primarily driven by unfavorable foreign exchange. On a constant currency basis⁽¹⁾, International net sales decreased 2.1% as compared to the fourth quarter of 2021. Gross margin was 55.2% as compared to 54.8% in the fourth quarter of 2021. Operating margin was 20.4% as compared to 20.2% in the fourth quarter of 2021. Adjusted operating margin⁽¹⁾ was 20.7% in the fourth quarter of 2022. There were no adjustments to operating margin in the fourth quarter of 2021.

International net sales through the wholesale channel decreased $18.6 million, or 16.6%, to $93.2 million as compared to the fourth quarter of 2021. International net sales through the direct channel decreased $23.8 million, or 12.8%, to $161.9 million, as compared to the fourth quarter of 2021.

International gross margin improved 40 basis points as compared to the fourth quarter of 2021. The improvement was primarily driven by pricing actions to offset commodity inflation, partially offset by unfavorable mix. International adjusted operating margin⁽¹⁾ improved 50 basis points as compared to the operating margin in the fourth quarter of 2021. The improvement was primarily driven by the improvement in gross margin and operating expense leverage, partially offset by Asia joint venture performance.

Corporate operating expense increased to $40.8 million as compared to $38.2 million in the fourth quarter of 2021. Corporate adjusted operating expense⁽¹⁾ was $36.8 in the fourth quarter of 2022. There were no adjustments to operating expense in the fourth quarter of 2021.

Consolidated net income decreased 42.2% to $101.7 million as compared to $175.8 million in the fourth quarter of 2021. Adjusted net income⁽¹⁾ decreased 45.3% to $96.2 million as compared to $175.9 million in the fourth quarter of 2021. EPS decreased 35.2% to $0.57 as compared to $0.88 in the fourth quarter of 2021. Adjusted EPS⁽¹⁾ decreased 38.6% to $0.54 as compared to $0.88 in the fourth quarter of 2021.

The Company recorded an income tax benefit, on a net basis, of $12.3 million related to its Danish tax matter in the fourth quarter of 2022. The Danish tax authority and the IRS agreed on a preliminary framework to conclude the Company’s Danish tax matter for the years 2012 through 2024.

The Company ended the fourth quarter of 2022 with total debt and consolidated indebtedness less netted cash⁽¹⁾ of $2.8 billion. Leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to adjusted EBITDA⁽¹⁾  was 3.10 times for the year ended December 31, 2022.

During the fourth quarter of 2022, the Company repurchased 1.0 million shares of its common stock for a total cost of $30.2 million. Over the last twelve months, the Company has repurchased 19.6 million shares of its common stock for a total cost of $667.4 million. As of December 31, 2022, the Company had approximately $750 million available under its existing share repurchase authorization.

Additionally, today the Company announced that its Board of Directors increased the quarterly cash dividend by 10% to $0.11 per share. This is the third increase to the dividend in the last three years. The dividend is payable on March 9, 2023 to shareholders of record at the close of business on February 23, 2023.

Financial Guidance

For the full year 2023, the Company currently expects adjusted EPS⁽¹⁾ between $2.60 to $2.80. This contemplates the Company’s current sales outlook for mid single digit year-over-year growth.

Company Chairman and CEO Scott Thompson commented, “We are pleased to issue 2023 guidance that targets growth on both the top and bottom line. This contemplates Tempur Sealy’s continued outperformance across the bedding industry worldwide driven by our key product, brand, and omni-channel initiatives. Our strong competitive position continues to provide us growth opportunities.”

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. 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 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.

Contact:

Lauren Avritt – Investor Relations – investor.relations@tempursealy.com – (800) 805-3635

Source: Tempur Sealy International, Inc.