The Urethane Blog

Tempur Sealy Results

Tempur Sealy Reports Third Quarter Results

Nov. 03, 2022 6:37 AM ETTempur Sealy International, Inc. (TPX)

Q3: 2022-11-03 Earnings Summary

EPS of $0.78 beats by $0.03 | Revenue of $1.28B (-5.52% Y/Y) misses by $7.51M

– Consolidated Sales Decreased 5.5%, Direct Channel Sales Increased 8.1%

– Reports EPS of $0.75 and Adjusted EPS(1) of $0.78

– Declares Fourth Quarter Dividend of $0.10 per share

LEXINGTON, Ky., Nov. 3, 2022 /PRNewswire/ — Tempur Sealy International, Inc. (NYSE: TPX) announced financial results for the third quarter ended September 30, 2022. The Company also issued updated financial guidance for the full year 2022.

THIRD QUARTER 2022 FINANCIAL SUMMARY

  • Total net sales decreased 5.5% to $1,283.3 million as compared to $1,358.3 million in the third quarter of 2021. On a constant currency basis(1), total net sales decreased 3.1%, with a decrease of 5.4% in the North America business segment and an increase of 7.4% in the International business segment.
  • Gross margin was 42.2% as compared to 42.5% in the third quarter of 2021. Adjusted gross margin(1) was 42.5% in the third quarter of 2022. There were no adjustments to gross margin in the third quarter of 2021.
  • Operating income decreased 19.5% to $201.0 million as compared to $249.8 million in the third quarter of 2021. Adjusted operating income(1) was $206.7 million as compared to $252.1 million in the third quarter of 2021.
  • Net income decreased 25.2% to $132.7 million as compared to $177.4 million in the third quarter of 2021. Adjusted net income(1) decreased 23.3% to $137.8 million as compared to $179.6 million in the third quarter of 2021.
  • Earnings before interest, tax, depreciation and amortization (“EBITDA”)(1) decreased 16.9% to $245.4 million as compared to $295.2 million in the third quarter of 2021. Adjusted EBITDA(1) decreased 15.4% to $251.9 million as compared to $297.6 million in the third quarter of 2021.
  • Earnings per diluted share (“EPS”) decreased 13.8% to $0.75 as compared to $0.87 in the third quarter of 2021. Adjusted EPS(1) decreased 11.4% to $0.78 as compared to $0.88 in the third quarter of 2021.

Company Chairman and CEO Scott Thompson commented, “Our third quarter results demonstrate the continued strength of our business model and industry-leading products, as they mitigated the unfavorable foreign exchange dynamic and overall challenging operating environment in the quarter. We performed largely in-line with our expectations while working through these headwinds. Over the last couple quarters, we have extended some capital project timelines, and trimmed around the edges, cutting back on expected hiring and expenses. Going forward, we will keep the current operating environment in mind as we drive our competitive advantages to outperform the global bedding market and position ourselves well for the market’s eventual normalization.”

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 decreased 5.6% to $1,057.7 million as compared to $1,120.0 million in the third quarter of 2021. On a constant currency basis(1), North America net sales decreased 5.4% as compared to the third quarter of 2021. Gross margin was 39.8% as compared to 39.9% in the third quarter of 2021. Adjusted gross margin(1) was 40.2% in the third quarter of 2022. There were no adjustments to gross margin in the third quarter of 2021. Operating margin was 19.4% as compared to 21.2% in the third quarter of 2021. Adjusted operating margin(1) was 19.8% in the third quarter of 2022. There were no adjustments to operating margin in the third quarter of 2021.

North America net sales through the wholesale channel decreased $73.1 million, or 7.4%, to $918.1 million, as compared to the third quarter of 2021, primarily driven by macroeconomic pressures impacting U.S. consumer behavior. North America net sales through the direct channel increased $10.8 million, or 8.4%, to $139.6 million, as compared to the third quarter of 2021.

North America adjusted gross margin(1) improved 30 basis points as compared to gross margin in the third quarter of 2021. The improvement was primarily driven by pricing actions to offset commodity inflation and favorable brand mix, partially offset by operational investments to service our customers. North America adjusted operating margin(1) declined 140 basis points as compared to operating margin in the third quarter of 2021. The decline was primarily driven by advertising investments and operating expense deleverage partially offset by the improvement in gross margin.

International net sales decreased 5.3% to $225.6 million as compared to $238.3 million in the third quarter of 2021. On a constant currency basis(1), International net sales increased 7.4% as compared to the third quarter of 2021. Gross margin was 53.4% as compared to 54.6% in the third quarter of 2021. Operating margin was 14.5% as compared to 21.1% in the third quarter of 2021. Adjusted operating margin(1) was 14.7% as compared to 22.1% in the third quarter of 2021.

International net sales through the wholesale channel decreased $22.9 million, or 21.2%, to $85.1 million as compared to the third quarter of 2021. International net sales through the direct channel increased $10.2 million, or 7.8%, to $140.5 million as compared to the third quarter of 2021. In the third quarter of 2022, International net sales decreased $30 million due to unfavorable foreign exchange.

International gross margin declined 120 basis points as compared to the third quarter of 2021. The decline was primarily driven by the acquisition of Dreams driving unfavorable mix, and foreign currency exchange rates. Dreams’ margin profile is lower than our historical International margins as they sell a variety of products across a range of price points. International adjusted operating margin(1) declined 740 basis points as compared to the third quarter of 2021. The decline was primarily driven by operating expense deleverage, the decline in gross margin, and Asia joint venture performance due to COVID-19 related shutdowns.

Corporate operating expense was $36.6 million, consistent with the third quarter of 2021.

Consolidated net income decreased 25.2% to $132.7 million as compared to $177.4 million in the third quarter of 2021. Adjusted net income(1) decreased 23.3% to $137.8 million as compared to $179.6 million in the third quarter of 2021. EPS decreased 13.8% to $0.75 as compared to $0.87 in the third quarter of 2021. Adjusted EPS(1) decreased 11.4% to $0.78 as compared to $0.88 in the third quarter of 2021.

The Company ended the third quarter of 2022 with total debt of $2.8 billion and consolidated indebtedness less netted cash(1) of $2.7 billion. Leverage based on the ratio of consolidated indebtedness less netted cash(1) to adjusted EBITDA(1) was 2.77 times for the trailing twelve months ended September 30, 2022.

During the third quarter of 2022, the Company repurchased 1.0 million shares of its common stock for a total cost of $25.2 million. Over the last twelve months, the Company has repurchased 24.1 million shares of its common stock for a total cost of $887.7 million. As of September 30, 2022, the Company had approximately $809.5 million available under its existing share repurchase authorization.

Additionally, today the Company announced that its Board of Directors declared a quarterly cash dividend of $0.10 per share, payable on December 1, 2022, to shareholders of record at the close of business on November 17, 2022.

Company Chairman and CEO Scott Thompson commented, “Overall, we are pleased with both our quarterly results and the progress we have made on our long-term initiatives, against an evolving macroeconomic backdrop. We enter this complex macro period with retailers generally in good shape, a strong competitive position, and new innovative products to launch. We are watching macro developments closely and adjusting to the market conditions, while staying aggressive and on strategy.”

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