Tempur Sealy International, Inc. (NYSE:TPX), a leading designer, manufacturer, and distributor of bedding products, has reported its first-quarter 2024 financial results, showcasing its resilience in the face of a challenging macroeconomic environment. The company's net sales for the full year 2023 reached $4.93 billion, with a net income of $368.1 million and operating cash flow of $565 million. For the first quarter of 2024, the company reported net sales of $1.19 billion, a slight decrease of 1.5% year-over-year.
Despite the industry-wide headwinds, Tempur Sealy has continued to demonstrate its ability to outperform the market through innovative product launches, effective marketing strategies, and operational efficiencies. The company's adjusted earnings per share (EPS) for the first quarter of 2024 was $0.50, a decrease of 5.7% compared to the same period in the prior year.
Business Overview
Tempur Sealy is a global leader in the design, manufacture, and distribution of bedding products, including mattresses, foundations, and adjustable bases, as well as other sleep-related accessories. The company operates in two segments: North America and International, with a diverse portfolio of well-recognized brands, including Tempur-Pedic, Sealy, and Stearns & Foster.The North America segment, which accounts for the majority of the company's revenue, manufactures and distributes bedding products through its own subsidiaries and licensees in the U.S., Canada, and Mexico. The International segment, on the other hand, consists of manufacturing and distribution operations in Europe, Asia-Pacific, and Latin America (excluding Mexico), as well as joint ventures in the United Kingdom and Asia-Pacific regions.
Innovative Product Launches and Marketing Strategies
Tempur Sealy's success in the first quarter of 2024 can be attributed to its continued focus on product innovation and effective marketing campaigns. The company has been actively refreshing its U.S. Tempur-Pedic portfolio with the launch of the new Adapt mattress collection, which features the brand's most innovative Tempur material and is designed to provide superior pressure relief and motion cancellation.In the International segment, the company has also rolled out a new line of Tempur products, which offers a broader price range to cater to a wider spectrum of consumers. These new products, combined with the company's targeted marketing efforts, have helped drive positive momentum in the International business, with the segment reporting a 140-basis-point improvement in gross margin during the first quarter.
Tempur Sealy has also continued to invest in compelling marketing campaigns to support its brands and products. In North America, the company has developed new creative assets to drive consumer interest in the category and its recently launched Tempur-Pedic products, including a focus on the Tempur-Pedic Ergo ProSmart Base and its exclusive SoundScape mode feature. Internationally, the company has increased its marketing investments to support the positive momentum of its newly launched Tempur product range, with a campaign featuring the brand's newest ambassador, David Beckham, in key Asia-Pacific markets.
Operational Efficiencies and Financial Performance
Tempur Sealy's financial performance in the first quarter of 2024 was also bolstered by its focus on operational efficiencies. The company's North America segment reported a 160-basis-point improvement in adjusted gross margin, driven by favorable commodity costs and operational improvements, partially offset by costs associated with new product launches and distribution expansions.Similarly, the International segment reported a 140-basis-point improvement in adjusted gross margin, also driven by favorable commodity costs and operational efficiencies. These operational improvements, combined with the company's continued investment in growth initiatives, resulted in a 20-basis-point improvement in the International segment's adjusted operating margin.
On a consolidated basis, Tempur Sealy reported an adjusted EBITDA of $198.2 million for the first quarter of 2024, consistent with the same period in the prior year. The company's balance sheet remains strong, with a ratio of consolidated indebtedness less netted cash to adjusted EBITDA of 2.85 times as of March 31, 2024, well within the company's target range of 2 to 3 times.
Outlook and Guidance
For the full year 2024, Tempur Sealy expects adjusted EPS to be in the range of $2.60 to $2.90, representing a robust 15% growth rate at the midpoint of the range, despite the challenging macroeconomic environment. The company's guidance is based on expectations of low- to mid-single-digit sales growth compared to 2023, with the company's sales outperforming the industry due to recently won distribution in the U.S. and the continued success of new product launches.Tempur Sealy also expects to generate approximately $1 billion in adjusted EBITDA at the midpoint of the guidance range, with capital expenditures of approximately $150 million, down significantly from the prior year as the company's major capital projects are complete. The company plans to maintain a quarterly dividend of $0.13 per share, an 18% increase over the prior year.
Pending Acquisition of Mattress Firm
In addition to its strong operational and financial performance, Tempur Sealy is also making progress on its pending acquisition of Mattress Firm, a leading specialty bedding retailer. The company continues to work with the Federal Trade Commission to advance the transaction's approval process and anticipates the FTC to complete its review in the second quarter of 2024. Tempur Sealy expects the transaction to close in the mid- to late-2024, subject to the satisfaction of customary closing conditions, including regulatory approvals.