Tempur Sealy International Inc. announced financial results for the fourth quarter and year ended Dec. 31, 2023. The company also issued financial guidance for the full year 2024 and spoke about the pending Mattress Firm acquisition.
Total net sales decreased 1.4% to $1,170.5 million as compared to $1,187.4 million in the fourth quarter of 2022, with a decrease of 4.0% in the North American business segment and an increase of 7.8% in the International business segment. On a constant currency basis, total net sales decreased 2.6%, with a decrease of 4.3% in the North American business segment and an increase of 3.5% in the international business segment.
Company Chairman and CEO Scott Thompson commented, “Regarding the pending Mattress Firm transaction, we certified compliance with the Federal Trade Commission’s second request in the fourth quarter of 2023 and expect the transaction to close in the second half of 2024. Both Tempur Sealy and Mattress Firm continue to make joint progress in integration planning, including the signing of post-closing supply agreements with numerous companies providing Mattress Firm product. These agreements provide access post-closing to certain consumer-desired products, solidifying important supplier relationships. Additional discussions regarding post-closing supplier relationships are ongoing. Overall, we are optimistic about Tempur Sealy’s future and look forward to welcoming Mattress Firm into the organization later this year.”
Key highlights of the company’s fourth-quarter results include:
- Gross margin was 43.8% as compared to 41.2% in the fourth quarter of 2022. Adjusted gross margin was 44.2% as compared to 41.6% in the fourth quarter of 2022.
- Operating income decreased 17.1% to $121.9 million as compared to $147.1 million in the fourth quarter of 2022. Adjusted operating income decreased 1.0% to $155.2 as compared to $156.8 million in the fourth quarter of 2022.
- Net income decreased 24.2% to $77.1 million as compared to $101.7 million in the fourth quarter of 2022. Adjusted net income decreased 2.4% to $93.9 million as compared to $96.2 million in the fourth quarter of 2022.
- Earnings per diluted share decreased 24.6% to $0.43 as compared to $0.57 in the fourth quarter of 2022. Adjusted EPS decreased 1.9% to $0.53 as compared to $0.54 in the fourth quarter of 2022.
“We are pleased with our fourth quarter and full-year 2023 financial performance, especially in light of the soft demand within the bedding category,” Thompson says. “We believe the company outperformed the category. Our competitive advantages of developing and marketing differentiated products through consumer-centric innovation, world-class manufacturing capabilities, successful omni-distribution platform and vertical integration enabled the company to deliver solid financial results. The company is uniquely positioned to realize significant sales growth once the bedding category returns to growth.”
The company ended the fourth quarter of 2023 with total debt of $2.6 billion and consolidated indebtedness less netted cash of $2.5 billion. Leverage based on the ratio of consolidated indebtedness less netted cash to adjusted EBITDA was 2.87 times for the year ended Dec. 31, 2023. Additionally, in the fourth quarter of 2023, the company recognized $3.2 million of loss on extinguishment of debt associated with the refinancing of its 2023 Credit Agreement.
Dividend Increase
The company announced that its board of directors increased the quarterly cash dividend by 18% to $0.13 per share. This is the fourth increase to the dividend in the last few years. The dividend is payable on March 7 to shareholders of record at the close of business on Feb. 22, 2024.
Company Chairman and CEO Scott Thompson says, “We are pleased to announce this increase to our quarterly dividend. Our board of directors increased the quarterly dividend to $0.13 per share based on the strength of the company’s market position and demonstrated ability to generate significant free cash flow. This marks the fourth increase to our dividend over the last three years, approximately doubling the cash dividend since its initiation in 2021.”
Financial Guidance
For the full year 2024, the company currently expects adjusted EPS between $2.60 and $2.90. This contemplates the company’s current sales outlook for low to mid-single-digit year-over-year growth. At the midpoint, this adjusted EPS guidance represents a 15% increase from the prior year.
“We are pleased to issue 2024 guidance that targets growth in both adjusted earnings per share and sales,” Thompson adds. “Underpinning our guidance is recent distribution gains and a belief that category demand is stabilizing around the world from negative year-over-year industry units. We expect full-year 2024 industry units to be consistent with 2023 levels.”
The company noted that its expectations are based on information available at the time of this release, and are subject to changing conditions, many of which are outside the company’s control. The company is unable to provide forward-looking EPS guidance and the applicable reconciliation to adjusted EPS, without unreasonable efforts, because the company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact EPS in 2024.
