Tempur Sealy’s comfortable past
Tempur Sealy International (TPX) is a bedding provider. It develops, manufactures, and markets mattresses, foundations, pillows, and other products. Its brand portfolio includes many of the most highly recognized brands in the industry, including Tempur, Tempur-Pedic, Sealy, Sealy Posturepedic, Optimum, and Stearns & Foster.
Tempur Sealy’s business segments
Tempur Sealy’s business segments include Tempur North America, Tempur International, and Sealy. It sells products through the following three distribution channels in each operating business segment:
- Retail includes furniture and bedding retailers, department stores, specialty retailers, and warehouse clubs.
- Direct includes e-commerce platforms, company-owned stores, and call centers.
- Other includes third-party distributors, hospitality, and healthcare customers.
The Retail channel accounted for 92.4% of net sales in 2014. The Direct channel accounted for 4.3% of net sales.
Highlights of TPX’s performance in the last five years
In 2009, before the merger, net sales for Tempur-Pedic in the United States were $525 million. In 2012, Tempur-Pedic agreed to acquire Sealy Corporation for $229 million, or $2.20 per share. By 2014, net sales reached $1 billion, a growth of 16% CAGR (compound annual growth rate).
The market share for Tempur-Pedic rose from 8% in 2009 to around 13% in 2014. International sales grew at 9% CAGR from $306 million in 2009 to $472 million in 2014. The firm’s earnings per share was $1.12 in 2009 and $2.65 in 2014, a 19% CAGR.
A recent statement by TPX said that “since the announcement of the acquisition of Sealy, the company has created an additional approximately $1.8 billion in equity value for its shareholders.”
Global mattress industry trends
The mattress industry has almost doubled from 2003 to 2013. The industry saw sales of $11 billion globally in 2003, but the figure rose to $22.3 billion by 2013. Tempur Sealy expects to benefit from this growth and industry evolution. According to the above chart, TPX is the number-one US brand in all product segments of the industry.
The company’s annual report said US wholesale bedding sales have grown since 1993 at a CAGR of 4.8% to around $6.99 billion in 2013, according to the International Sleep Products Association (or ISPA). TPX said, “This growth has been driven by the increase in the U.S. population, natural replacement cycle of mattresses and an increase in the average unit selling prices (‘AUSPs’).”
It further said, “The US mattress industry has benefited from a steady increase in AUSP over the past three decades, due in particular to the growth in premium priced non-innerspring mattresses but also due to various other factors including increasing mix of larger sized mattresses sold.”
TPX has an exposure of 2.97% to the SPDR S&P Homebuilders ETF (XHB). SCSS has a 0.10% exposure to the iShares Russell 2000 ETF (IWM). IWM tracks the performance of around 2,000 publicly listed companies in the growth sector.
In the next article in this series, we’ll look at Tempur Sealy’s (TPX) financial performance in 4Q14 and financial year 2014.