Tempur Sealy feels effect of Mattress Firm termination in Q3

Lexington Kentucky — Tempur Sealy International saw a 12.9% fall in sales during the third quarter of 2017 to $ 725 m due to hurricanes and the termination of an agreement with Steinhoff's subsidiary, bedding retailer Mattress Firm.

In the third quarter of 2016, Tempur Sealy sold $832 m worth of products. The company said that compared with the 2016 quarter, the third quarter of 2017 had seen  a 17.2% fall in North American sales, which was partially offset by a 7% increase in the International Business segment.

Operating income fell by 28% to $94.6 m compared to $131 m in the third quarter of 2016. The company said that this was due to the impact of Hurricanes on two of it’s largest markets in Texas and Florida.

Hurricanes damaged sales in the quarter by between $ 10 m and $ 15 m. The termination of a supply agreement with the company Mattress Firm at the start of the second quarter saw sales fall by $171m compared to the prior year quarter.

Tempur added that if this is ignored, North American net sales grew by 10% in the third quarter of 2017 compared to Q3 2016. This was, the group said, driven by growth in the Tempur-Pedic brand which increased by 26% in the period.

Internationally, net sales increased 7.7% to $144 m in the quarter compared with $134 m in the third quarter of 2016.

Gross margin in the international business was 51.2% compared to 54% in the third quarter of 2016.

Tempur Sealy international CEO Scott Thompson said: ‘the team generated one of the highest cash flow quarters in our company's history despite several challenges including a significant change in our distribution network, three Hurricanes and commodity inflation.

‘Looking ahead, our pipeline of innovation provides a foundation for new products next year,’ Thompson said, promising ‘an exciting new Tempur-Pedic line in North America.’

Tempur also announced new financial guidance for the remainder of the year.  it expects its adjusted EBITDA to be between $435 and $450 m.