by Company sees big opportunities in international markets and through OEM business
LEXINGTON, Ky. — A glance at Tempur Sealy International’s latest investor presentation offers a look at where the company has been in the past year and where it’s headed in the future.
And the message is clear: In spite of any industry downturn, TSI has big plans moving forward.
On the financial side, it reported a slight increase in revenues for the second quarter with $1.2 billion in sales, up 3.6% from the $1.17 billion reported the same period last year. Meanwhile net income fell 35.7% to $90.6 million from $140.8 million the same period in 2021.
Commenting on the results, Chairman and CEO Scott Thompson noted that during the quarter, the overall North American operating environment has deteriorated, driven by “macroeconomic pressures.”
“We believe the overall U.S. mattress business, our largest market, had its toughest volume decline in 15 years, with industry units down 20 percent to 25 percent compared to last year’s record second quarter volumes,” Thompson said. “We have adjusted our hiring expectations and near-term capacity investments, and we also implemented a price increase in the U.S. in late June to neutralize the dollar impact of commodity inflation. This environment gave us an opportunity to demonstrate the resilience of our business model, as we generated profits, invested in our business, returned capital to shareholders and outperformed the global bedding market. The team remains focused on delivering on our initiatives to drive continued success.”
Yet an even bigger statement regarding the company’s prospects appeared in its investor presentation. There, the company shared insights into the overall bedding market not just nationally, but internationally, where it sees some of its largest growth in the years ahead given its fragmented nature and size and estimated at 40% larger than the U.S. market overall.
It’s a growth strategy based on a simple yet effective marketing platform the entire bedding industry has embraced for many years, one that makes a connection for consumers on the positive impact that a good night’s sleep has on health and wellness.
With that in mind, TSI sees much opportunity ahead, as noted in the presentation.
Here are several key highlights.
+ In 2023, the company plans to launch a new Tempur line of products in the Europe and Asia-Pacific markets, offering similar innovations that have been well received in the North America market. It also plans to broaden its price range internationally, which it believes will help it reach a broader customer base.
“We expect these new products and the broadened price points to expand our total international addressable market and help us strengthen our presence in regions where our brands are currently underpenetrated,” the company said.
+ The company also sees growth opportunity in the Direct-to-Consumer Market, where it saw 66% growth during the second quarter, driven partly by its 2021 acquisition of UK-based bedding retailer Dreams. While third-party retailers remain its largest distribution channel, it sees major growth opportunity in its 650 stores worldwide as well as in e-commerce.
TSI added in the past five years alone, direct channel sales as a percentage of total sales have risen from 9% to 22% in the second quarter. It expects the growth trajectory to continue,
+ OEM remains another major growth area, and one that continues to be impacted by anti-dumping petitions against countries in Asia and Eastern Europe. The company said in its presentation that the OEM business “leverages manufacturing expertise, diversifies the consolidated sales stream and extends manufacturing profits beyond our own brands.” The targeted sales for this area is $600 million by 2025.
+ The company said it plans to invest an incremental $200 million by 2023 to increase U.S. pouring capacity for Tempur material and specialty and conventional foams, or by about 50%. For example, the company is expanding three existing foam facilities by 2023 and is opening of a new Tempur-Pedic and OEM foam pouring facility in Indiana also by next year. It also is expanding its warehouse footprint.
+ In addition, Tempur Sealy is expanding its environmental and social initiatives including achieving carbon neutrality for its global operations by 2040. It already achieved an 8.4% reduction in greenhouse gas emissions per unit produced at its wholly owned manufacturing and logistics operations in 2021. It also improved the percentage of waste diverted from its North America wholly owned manufacturing facilities to 94% in 2021 from 91% in 2020, getting it closer to achieving zero landfill waste by the end of this year. It also completed the installation of solar panel technology at its largest plant in Albuquerque, New Mexico plant last year.
These and other lofty goals and initiatives show that the company has no plans to slow down anytime soon. The report, thus is a benchmark to compare its progress in the months and years ahead and we and others in the industry look forward to seeing how this all plays out.
