QUOTE AND NEWS
Automotive World  Sep 19  Comment 
There are many ways of improving engine and vehicle fuel efficiency, but to make a step change, you have to get at the wasted heat, says Norgren’s Mark Sealy. By David Isaiah The post Waste heat recovery takes main stage at Norgren appeared...
SeekingAlpha  Aug 7  Comment 
ByAsean Century: Tempur Sealy International (NYSE:TPX) reported Q2 earnings of $0.39, which missed estimates by $0.02, but were $0.03 higher than last year. Revenues grew 8.2% y/y to $715 million and were $11.7 million higher than expected. Tempur...
SeekingAlpha  Jul 24  Comment 
Tempur Sealy International (NYSE:TPX) Q2 2014 Earnings Call July 24, 2014 5:00 pm ET Executives Mark Rupe - Vice President of Investor Relations Mark A. Sarvary - Chief Executive Officer, President and Director Dale E. Williams -...
Wall Street Journal  Jul 24  Comment 
Tempur Sealy International Inc.'s second-quarter loss widened largely on costs associated to the disposal of three innerspring component facilities in the U.S. and its Sealy Corp. acquisition.
Benzinga  Jul 21  Comment 
Tempur Sealy International, Inc. (NYSE: TPX), the world's largest bedding provider, today announced it has promoted Barry Hytinen to Executive Vice President, Corporate Development and Finance. He reports directly to Dale Williams, Executive Vice...
The Hindu Business Line  Jul 18  Comment 
In a masterful book, Allan Sealy crafts high art out of seemingly banal brick and mortar
Benzinga  Jun 16  Comment 
In a report published Monday, Bank of America analyst Denise Chai reiterated a Buy rating on Tempur Sealy International (NYSE: TPX), and raised the price target from $60.00 to $65.00. In the report, Bank of America noted, “Recent comments from...
The Hindu Business Line  May 9  Comment 
Two Mukherjees, a maverick poet, the return of I Alan Sealy — much to look forward to
TheStreet.com  May 2  Comment 
Update (9:39 a.m.): Updated with Friday market open information. NEW YORK (TheStreet) -- Wedbush upgraded Tempur Sealy  to "outperform" from "neutral" and set a $70 price target. The firm noted the company is seeing a better response to its...
SeekingAlpha  May 2  Comment 
Tempur Sealy International (TPX) Q1 2014 Earnings Call May 01, 2014 5:00 pm ET Executives Mark Rupe - Vice President of Investor Relations Mark A. Sarvary - Chief Executive Officer, President and Director Dale E. Williams - Chief...




 

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.[1] 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.

Company Overview

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:

  • Sealy
  • Sealy Posturpedic
  • Stearns & Foster
  • Basset

Non-innerspring mattresses that are made from materials such as latex, foam, water and air generated the remaining 9% of sales and include:

  • True Form
  • Spring Free
  • Stearns & Foster
  • Reflexions
  • Carrington Chase
  • MirrorForm

Geographical Distribution of Sales[2]

The company reports its geographic sales in two categories: Americas and Europe

  • Americas (91.3% of net sales): Sales in the US comprised of 73.4% of the sales, Canada 11.7%, and other countries 6.2%.
  • Europe (8.7% of net sales)

Business Growth

FY 2009 (ended November 29, 2009)[3]

  • Net sales fell 14% to $1.29 billion. US sales fell 10.3% due to a 9.8% decrease in wholesale unit volume coupled with a 0.2% decrease in wholesale average unit selling price. The sluggish economy decreased the demand for mattresses leading to lower sales volume worldwide. International sales fell 22.4%.
  • Net income improved to $13.5 million compared to a $3.9 million dollar loss in 2008. The company benefited from a 13.7% decline in SG&A expenses.

Trends and Forces

  • Specialty Sleep is the fastest growing segment of the estimated $6 billion bedding retail market in the U.S. An increasing number of consumers are looking for products to help them get a good night's sleep, and as a result, are buying specialty sleep products, which range from water, foam, air, and visco-elastic bedding (all of which are offered by Sealy). A complementary trend is affecting the pillow segment as well. Sealy is well positioned with its PurEmbrace, TruForm, SpringFree, and other specialty bedding products to capture the trend.
  • Aging Baby Boomers have increasing demands for Sealy's non-innerspring brands. As baby boomers get older, they will have higher demands for specialty sleeping products to address increases in joints and muscles pains.
  • The U.S. Housing Market could affect the overall market for mattresses. If Americans add second homes and buy larger houses, this would likely increase mattress demand. This increased demand would result from a need to buy bedding for a secondary home and an increase in space leads to buying bigger mattresses. On the flip side, if subprime woes depress the housing market, the demand for mattresses will likely fall.
  • Rising Commodity Prices could hurt Sealy's gross margins. Sealy depends on steel and petroleum to produce its steel innersprings and polyethylene products used in many of its mattresses.
  • A Sluggish Economy could adversely affect Sealy's sales. With the majority of revenue being generated in the United States, weak consumer spending could hurt Sealy's margins. Sealy's management has shown a price-cutting strategy in a softening market. If the consumer is overextended, he or she may opt to withhold renewing their mattress or buy the cheaper traditional one. The top end of Sealy's offerings cost as much as $5,000 per mattress.

Competition and Market Share

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.[4]

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.

References

  1. ZZ 2009 10-K pg. 1
  2. ZZ 2009 10-K "Geographic Distribution of Sales" pg. 33
  3. ZZ 2009 10-K "Selected Financial Data" pg. 25
  4. SCSS 2009 10-K pg. 8
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