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Tempur Sealy Posts Strong Quarter

Tempur Sealy Reports Third Quarter 2019 Results

|PR Newswire|About: TPX

– Margins Expanded, Net Income and EPS Up Over 70%

-Financial Guidance Raised

PR NewswireLEXINGTON, Ky., Oct. 31, 2019 /PRNewswire/ — Tempur Sealy International, Inc. (TPX) announced financial results for the third quarter ended September 30, 2019. The Company also raised its financial guidance for the full year 2019.

THIRD QUARTER 2019 FINANCIAL SUMMARY

  • Total net sales increased 12.5% to $821.0 million as compared to $729.5 million in the third quarter of 2018. On a constant currency basis(1), total net sales increased 13.4%, with an increase of 14.6% in the North America business segment and an increase of 8.0% in the International business segment.
  • Gross margin was 43.9% as compared to 41.1% in the third quarter of 2018.
  • Operating income increased 42.4% to $120.6 million as compared to $84.7 million in the third quarter of 2018. Adjusted operating income(1) was $97.8 million in the third quarter of 2018. There were no adjustments to operating income in the third quarter of 2019.
  • Net income increased 73.3% to $73.3 million as compared to $42.3 million in the third quarter of 2018. Adjusted net income(1) increased 29.2% to $72.5 million as compared to $56.1 million in the third quarter of 2018.
  • Earnings before interest, tax, depreciation and amortization (“EBITDA”)(1) increased 33.7% to $150.7 million as compared to $112.7 million for the third quarter of 2018. Adjusted EBITDA(1) increased 17.4% to $149.9 million as compared to $127.7 million in the third quarter of 2018.
  • Earnings per diluted share (“EPS”) increased 70.1% to $1.31 as compared to $0.77 in the third quarter of 2018. Adjusted EPS(1) increased 27.5% to $1.30 as compared to $1.02 in the third quarter of 2018.

 

KEY HIGHLIGHTS
(in millions, except percentages and per common
share amounts)
Three Months Ended % Reported
Change
% Constant
Currency Change(1)
September 30, 2019 September 30, 2018
Net sales $ 821.0 $ 729.5 12.5 % 13.4 %
Net income 73.3 42.3 73.3 % 75.4 %
EBITDA (1) 150.7 112.7 33.7 % 34.9 %
Adjusted EBITDA (1) 149.9 127.7 17.4 % 18.5 %
EPS 1.31 0.77 70.1 % 72.7 %
Adjusted EPS (1) 1.30 1.02 27.5 % 29.4 %

 

Tempur Sealy International, Inc. Chairman and CEO Scott Thompson commented, “We are pleased to report double-digit growth in sales of both Tempur-Pedic and Sealy products, with robust sales growth across geographies, brands and price points. It is clear that our investments in innovative products, reliable manufacturing and direct distribution are allowing us to win in the marketplace.  In fact, during the third quarter we recognized the highest gross profit in the company’s history, greater than what was generated previously across a larger presence. Our double-digit growth in operating income and adjusted EBITDA allows us to continue investing in our plants, products and people, while repurchasing our stock and strengthening our balance sheet by reducing our financial leverage.”

Business Segment Highlights

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 increased 14.5% to $682.0 million as compared to $595.8 million in the third quarter of 2018. On a constant currency basis(1), North America net sales increased 14.6% as compared to the third quarter of 2018. Gross margin was 42.1% as compared to 38.5% in the third quarter of 2018. Adjusted gross margin(1) was 39.9% in the third quarter of 2018. Operating margin was 17.6% as compared to 13.7% in the third quarter of 2018. Adjusted operating margin(1) was 15.9% in the third quarter of 2018.

North America net sales through the wholesale channel increased $48.6 million, or 8.8%, to $602.2 million as compared to the third quarter of 2018. North America net sales through the direct channel increased $37.6 million, or 89.1%, to $79.8 million, as compared to the third quarter of 2018, driven primarily by growth from company-owned stores, which includes the acquisition of Sleep Outfitters. North America net sales through the direct channel increased 37%, excluding Sleep Outfitters, as compared to the third quarter of 2018.

North America gross margin improved 220 basis points as compared to adjusted gross margin(1) in the third quarter of 2018. The improvement was primarily driven by Tempur merchandising mix, pricing benefits and lower commodity costs. These improvements were partially offset by inefficiencies associated with new distribution. North America operating margin improved 170 basis points as compared to adjusted operating margin(1) in the third quarter of 2018. The improvement in operating margin was driven by the improvement in gross margin, partially offset by increased variable compensation expense.

International net sales increased 4.0% to $139.0 million as compared to $133.7 million in the third quarter of 2018. On a constant currency basis(1), International net sales increased 8.0% as compared to the third quarter of 2018. Gross margin was 53.1% as compared to 53.0% in the third quarter of 2018. Operating margin was 19.6% as compared to 19.3% in the third quarter of 2018. Adjusted operating margin(1) was 19.6% in the third quarter of 2018.

International net sales through the wholesale channel increased $0.6 million, or 0.6%, to $107.9 million as compared to the third quarter of 2018. International net sales through the direct channel increased $4.7 million, or 17.8%, to $31.1 million as compared to the third quarter of 2018.

International gross margin improved 10 basis points as compared to gross margin in the third quarter of 2018. International operating margin was flat as compared to adjusted operating margin(1) in the third quarter of 2018.

https://seekingalpha.com/pr/17681574-tempur-sealy-reports-third-quarter-2019-results