Tempur Sealy International has announced that quarter-to-date order trends have improved from previous expectations and the company now estimates total third quarter net sales to grow more than 30% compared to the prior year. The change in expectation was primarily driven by improving order trends on U.S. Tempur-Pedic products. The company continues to experience capacity constraints for U.S. Sealy products, including supply chain limitations outside the company's control. Working closely with suppliers, Tempur Sealy is seeking to find solutions for component shortfalls to support the elevated U.S. Sealy demand.
Tempur Sealy Chairman and CEO Scott Thompson stated, "Over the last five years, we have made tremendous progress in strengthening the foundation of our company. The strong foundation we have in place with our brands, products, operations and people have positioned us well to capitalize on industry growth for years to come."
Thompson continued, "We continue to see strong growth that is broad-based across geographies and channels. Tempur-Pedic branded products are now growing materially higher than the growth on Sealy products in the U.S. which has raised our profit expectations for the quarter. Free cash flow has also been strong and our confidence in positive industry trends has increased. Accordingly, in September, we are using operating cash flow to repay the $200 million 364-day incremental Term Loan we closed in the second quarter. This repayment will remove certain restrictions on share repurchases and dividends and result in an annual interest saving of approximately $5 million. Additionally, with this improved outlook, we expect to reach the higher end of the payout under our long-term aspirational plan at the end of the third quarter."
The company's Board of Directors has approved the early termination of its shareholder rights plan (the "Rights Plan") to now expire at the close of business on September 14, 2020. The limited duration Rights Plan was adopted on March 27, 2020 with a previous expiration date of March 26, 2021. Shareholders are not required to take any action as a result of this expiration.
The company also announced Cliff Buster will be promoted to the CEO of Tempur Sealy North America effective January 1, 2021. Buster has served as Executive Vice President, President U.S. Direct to Consumer, and is on the Board of Directors of the company's highly successful Asian Joint Venture. He joined the company in 2017, leading the domestic direct-to-consumer business from an almost standing start to a top 10 bedding retailer in the U.S., and has previously held various executive operational and financial management roles at Berkshire Hathaway Automotive, Inc., Dollar Thrifty Automotive Group and Group 1 Automotive, Inc.
Reporting to Buster in leading the North American operations will be the current U.S., Canadian, and Mexican executive teams, including Steve Rusing, Executive Vice President, President, U.S. Sales, and Tom Murray, Executive Vice President, Chief Marketing Officer, Marketing U.S.
Thompson said, "Cliff's intense focus on execution and fostering a strong culture played a key role in the rapid and successful expansion of our omni-channel strategy. Today's announcement reflects the Board of Directors' continued actions to strengthen our leadership bench and optimize our structure for continuing growth. As I continue to serve in my role as Chairman of the Board and CEO of Tempur Sealy International, Cliff's promotion will allow me to spend more of my efforts on capital allocation, our international operations and global strategy, while facilitating the development of our leaders. This is consistent with our culture and track record of internal promotions."
About Tempur-Sealy: Tempur Sealy International, Inc. is the world's largest bedding manufacturer. Tempur Sealy International, Inc. develops, manufactures, and markets mattresses, foundations, pillows and other products. The Company's products are sold worldwide through third party retailers, its own stores, and online. The Company's brand portfolio includes many highly recognized brands in the industry, including Tempur®, Tempur-Pedic®, Sealy® featuring Posturepedic® Technology, and Stearns & Foster®. World headquarters for Tempur Sealy International is in Lexington, KY.