Sealy Corporation (NYSE: ZZ) makes mattresses ranging in price from $300 to as much as $5,000. The company is the largest mattress manufacturer in the United States with a wholesale market share of approximately 19.5%, 1.23 times greater than its next largest competitor. Over 90% of the company's sales come from traditional innerspring mattresses, while competing companies such as Tempur-pedic International (TPX) or Select Comfort (SCSS) focus more on specialty mattresses made of memory foam, air and latex bedding. The specialty mattress sector is growing at a faster rate in the U.S. than traditional bedding, as aging baby boomers are demanding these more expensive specialty beds to ease the pains of getting older.
Sealy is highly susceptible to changes in the U.S. housing market. If subprime lending woes have a prolonged effect on U.S. housing, bedding manufacturers will likely suffer as fewer families upgrade to larger homes (with more bedrooms) and buy second homes, both which drive mattress sales. In addition, the company may itself be over-extended with debt.
Sealy does everything from manufacturing to distributing and selling its mattresses, meaning that the company is vertically integrated (it does not operate its own retail stores). Sealy also operates under a just-in-time model that allows the company to avoid warehouse expenses by processing and shipping finished goods with more efficiency.
Sealy makes generates revenue in two ways. First, the company manufacturers and sells mattresses through its 7,000 retail partner outlets. Second, it gets royalties by licensing its Sealy brands to independent mattress manufacturers
Traditional innerspring mattress brands comprised 91% of sales and include:
Non-innerspring mattresses that are made from materials such as latex, foam, water and air generated the remaining 9% of sales and include:
The company reports its geographic sales in two categories: Americas and Europe
The mattress industry consists a few large national players:
These six leaders account for more than 60% of sales for the industry, which is made up of approximately 500 U.S. manufacturers. According to International Sleep Products Association, industry wholesale shipments of mattresses and foundations were estimated to be $5.7 billion in 2009, a 9.0% decline compared to $6.2 billion in 2008.
Bedding products fall in either traditional and/or specialty sleep products and most companies have developed products in recent years to address the faster growing specialty segment. Sealy (ZZ), is the largest bedding manufacturer in the world by sales and dominates the traditional sleep product market and has made some inroads into the specialty products market.