Tempur Sealy Shares Plunge Following Lower 2016 Sales Guidance

Shares of Tempur Sealy International plummeted by 22% to $57.60 following the dismal sales guidance issued by the company, informing investors to expect a 1% to 3% decrease in net sales for 2016 compared to last year. Tempur Sealy also put its revised EBITDA at between $500 million and $525 million, down from the EBITDA guidance of $525 million to $550 million that it issued earlier this year in July.

“While our net sales are below expectations, our operational initiatives are going well and are continuing to drive considerable margin expansion,” Chief Executive Officer Scott Thompson said in a press release. “We currently expect net sales for the full year to be down 1 to 3 percent as compared to 2015.” Thompson, who was brought on board by activist investor H Partners Management LLC, has been aiming to cut costs and boost profit margins at the company in keeping with his mandate.

While Tempur Sealy has not been forthcoming with reasons for the decreased guidance, one likely culprit is the booming online market for mattress sales by e-retailers such as Casper and Tuft & Needle. These companies represent only $300 million, or 2% of the industry, but have captured 13% of non-innerspring mattress sales, and continue to increase market share rapidly.

Another factor put forth by The Wall Street Journal is that the rebranding efforts of Steinhoff International Holdings have had a detrimental effect on mattress sales. Steinhoff recently acquired Houston-based The Mattress Firm, the largest US specialty mattress retailer, and currently accounts for 25% of Tempur Sealy’s sales.

Tempur Sealy will release its third quarter results on October 27. According to USA Today, analysts surveyed by S&P’s Global Capital Intelligence forecast $834.5 million in revenue for the third quarter, down from $880 million in revenue that the company made during the same quarter in 2015. Analysts are also projecting $3.1 billion in revenue for the full year, down from $3.15 billion in revenue for 2015.

References:

http://www.marketwatch.com/story/tempur-sealy-shares-fall-as-2016-outlook-cut-2016-09-27?siteid=bnbh

http://www.usatoday.com/story/money/2016/09/28/tempur-sealy-stock/91213106/

http://www.cnbc.com/2016/09/28/tempur-sealy-shares-plunge-23-after-dismal-sales-guidance.html

http://www.wsj.com/articles/less-cash-in-the-mattress-at-tempur-sealy-1475084361

http://www.wsj.com/articles/steinhoff-to-buy-mattress-firm-for-2-4-billion-1470599217

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