Tempur-pedic International (NYSE: TPX) manufacturers and sells visco-elastic (or memory foam) mattresses, pillows, and a variety of other cushions and comfort items. The company charges a price premium for its high-tech foam compared to traditional innerspring mattresses (the foam is even certified by NASA). Tempur-Pedic distributes its premium bedding products in 80 different countries through bedding specialty stores, which represent 84.5% of net sales, and also sells directly to customers, healthcare providers, and others.
The company will likely benefit from the aging of baby boomers, many of whom are willing to pay premiums to ease the pains of growing older and sleep more comfortably. Already, consumers such as these have made the specialty sleep market the fastest growing segment of the $6 billion U.S. bedding market. However, a slowdown in the U.S. housing market could decrease the number of upgrades to larger homes (with more bedrooms) and second home purchases, both which directly drive mattress sales. Tempur-Pedic competes largely with traditional innerspring mattress companies such as Select Comfort (SCSS), Sealy (ZZ), Serta, and Simmons in addition to a rising number of memory foam imitators. In addition, a sluggish US economy means weakened demand for Tempur-pedic's mattresses. In 2009, the company's net sales fell 10.4%.
Tempur-Pedic operates in two segments, domestic and international. The International segment accounts for 37% of net sales. The company manufacturers its premium specialty sleep products in Virginia and Denmark, and in New Mexico.
The company sells at wholesale through three channels:
The mattress industry consists a few large national players, Serta, Sealy (ZZ), Select Comfort (SCSS), Simmons, Tempur-pedic International (TPX), and Spring Air. These six leaders account for more than 60% of the industry's sales and lead approximately 500 U.S. bedding 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), the largest bedding manufacturer in the world, and Simmons Bedding offer air mattresses that directly compete with Select Comfort's Sleep Number Beds.