Due to the government shutdown, we didn’t get the official retail sales report for December until just last week—and the numbers were not good. Retail sales dropped by 1.2% in the last month of 2018, marking the largest drop since September of 2009. At the same time, two major mattress players—Tempur Sealy International and Sleep Number Corp—both reported strong fourth-quarter earnings to close out the year. What does this say about the state of the bedding industry? And what impact might it have on the rest of 2019?
The December drop in sales came as a shock to many economists, who expected sales to stay relatively flat as we closed out the year. Sales declined across almost every category—but analysts were most surprised by the 3.9% drop in sales at internet sellers, which also marked the biggest downward turn since the recession. Department store sales fell by 3.3% as well, though that came as less of a shock to most as this category has been struggling for years.
According to the experts at MarketWatch, there are a number of potential explanations for the drop in sales. In addition to notably bad weather and the announcement of the government shutdown, December also saw the stock-market go haywire, which precipitated whispers of a possible recession. All of which could have caused consumers to be skittish about spending money.
Despite these tumultuous factors, both Tempur Sealy and Sleep Number ended their year on a strong note. Tempur Sealy reported that its fourth-quarter revenue was 7% higher than this quarter last year, with sales volume for Tempur-Pedic mattresses climbing 36% in North America and key successes across both its wholesale and direct sales channels. The company attributed some of this success to the fact that it settled litigation with Mattress Firm, thereby quelling much of the uncertainty that has surrounded the brand over the past year. After experiencing a dip in overall earnings in 2018, these strong end-of-year sales numbers have the company predicting a rebound in 2019. Sleep Number Corp. also reported higher than expected fourth-quarter earnings. Shares of the company rose more than 10%, as it pulled in $27 million to close out the year, which was up from $16 million the year before.
So what does this mean as we look forward to 2019? According to Ian Shepherdson, chief economist at Pantheon Macroeconomics, the overall retail sales report is “unlikely to be representative of the trend over the next few months." The stock market rebounded in January and the labor market remains strong as companies continue to hire. But, at the same time, many consumers are expecting less lucrative tax cuts and returns this year, which could have an impact on their spending. All in all, MarketWatch suspects that economic growth in 2019 will likely be weaker than it was in 2018.
When it comes to the bedding market, these sales figures paint a complex picture for the year ahead. Strong sales from the major brands often have a ripple effect throughout the industry, as these companies have the finances to invest in nationwide marketing and advertising. Both Tempur-Pedic and Sleep Number are also on the higher end of the price spectrum, a segment that has been doing well over the past year. A more general shift away from online and department store sales could have a greater effect on how people shop, especially in the accessories category.
This article originally appeared in Sleep Retailer eNews on February 21, 2019.
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