Tempur Sealy Reports Q1 2021 Results

Tempur Sealy International, Inc. recently announced the financial results for the first quarter of 2021 which ended on March 31, 2021. The company also raised its financial guidance for the full year 2021.

2021 First Quarter Results Summary

  • Total net sales increased 26.9% to $1,043.8 million as compared to $822.4 million in the first quarter of 2020. On a constant currency basis(1), total net sales increased 25.1%, with an increase of 27.3% in the North America business segment and an increase of 13.8% in the International business segment.
  • Gross margin was 44.0% as compared to 43.4% in the first quarter of 2020.
  • Operating income increased 78.9% to $188.4 million as compared to $105.3 million in the first quarter of 2020. Adjusted operating income(1) was $120.8 million in the first quarter of 2020. There were no adjustments to operating income in the first quarter of 2021.
  • Net income increased 118.6% to $130.5 million as compared to $59.7 million in the first quarter of 2020. Adjusted net income(1)increased 85.7% to $134.6 million as compared to $72.5 million in the first quarter of 2020.
  • Earnings before interest, tax, depreciation and amortization ("EBITDA")(1) increased 71.1% to $230.1 million as compared to $134.5 million in the first quarter of 2020. Adjusted EBITDA per credit facility(1) increased 52.3% to $230.3 million as compared to $151.2 million in the first quarter of 2020.
  • Earnings per diluted share ("EPS") increased 121.4% to $0.62 as compared to $0.28 in the first quarter of 2020. Adjusted EPS(1) increased 88.2% to $0.64 as compared to $0.34 in the first quarter of 2020.
  • Net cash provided by operating activities increased to a record $86.3 million as compared to $15.0 million in the first quarter of 2020.

Company Chairman and CEO Scott Thompson commented, "Our strategic initiatives generated record first quarter results, which included triple-digit EPS growth year-over-year. Our strong results reflect our strong competitive position, our ongoing market share gains, and a healthy industry backdrop. We achieved 27% sales growth, driven by strength across all of our brands, channels and geographies despite a constrained supply chain and pandemic-related lockdowns in key European markets. Based on this momentum and the improving retail environment, we are raising our full-year 2021 guidance."


Business Segment Highlights

The Company's business segments include North America and International. Corporate operating expenses are not included in either of the business segments and are presented separately as a reconciling item to consolidated results.

North America

North America net sales increased 27.6% to $883.3 million as compared to $692.3 million in the first quarter of 2020. On a constant currency basis(1), North America net sales increased 27.3% as compared to the first quarter of 2020. Gross margin was 41.2% as compared to 40.6% in the first quarter of 2020. Operating margin was 19.6% as compared to 14.7% in the first quarter of 2020. Adjusted operating margin(1) was 16.6% in the first quarter of 2020. There were no adjustments to operating margin in the first quarter of 2021.

North America net sales through the wholesale channel increased $140.8 million, or 22.5%, to $765.5 million, as compared to the first quarter of 2020, primarily driven by broad-based demand across our retail partners. North America net sales through the direct channel increased $50.2 million, or 74.3%, to $117.8 million, primarily driven by an increase of more than 100% in web sales and strong company-owned same store sales growth as compared to the first quarter of 2020.

North America gross margin improved 60 basis points as compared to the first quarter of 2020. The improvement was primarily driven by brand and channel mix, partially offset by operational inefficiencies related to supply chain constraints. North America operating margin improved 300 basis points as compared to adjusted operating margin(1) in the first quarter of 2020. The improvement was primarily driven by operating expense leverage and the improvement in gross margin.

International

International net sales increased 23.4% to $160.5 million as compared to $130.1 million in the first quarter of 2020. On a constant currency basis(1), International net sales increased 13.8% as compared to the first quarter of 2020. Gross margin was 59.2% as compared to 58.3% in the first quarter of 2020. Operating margin was 28.8% as compared to 20.3% in the first quarter of 2020. Adjusted operating margin(1) was 22.1% in the first quarter of 2020. There were no adjustments to operating margin in the first quarter of 2021.

International net sales through the wholesale channel increased $18.2 million, or 18.6%, to $115.9 million as compared to the first quarter of 2020. International net sales through the direct channel increased $12.2 million, or 37.7%, to $44.6 million as compared to the first quarter of 2020.

International gross margin improved 90 basis points as compared to the first quarter of 2020. The improvement was primarily driven by favorable mix as well as operational efficiencies, partially offset by increased commodity costs. International operating margin improved 670 basis points as compared to adjusted operating margin(1) in the first quarter of 2020. The improvement was primarily driven by improved performance of the Asia-Pacific joint ventures, favorable operating expense leverage and the improvement in gross margin.

Corporate

Corporate operating expense increased to $31.2 million as compared to $22.7 million in the first quarter of 2020. The increase in operating expenses was driven by variable compensation due to a reduction in prior year when the full year outlook included worldwide shutdowns and significant retailer door closures.

Consolidated net income increased 118.6% to $130.5 million as compared to $59.7 million in the first quarter of 2020. Adjusted net income(1) increased 85.7% to $134.6 million as compared to $72.5 million in the first quarter of 2020. EPS increased 121.4% to $0.62 as compared to $0.28 in the first quarter of 2020. Adjusted EPS(1) increased 88.2% to $0.64 as compared to $0.34 in the first quarter of 2020.

The company ended the first quarter of 2021 with total debt of $1.9 billion and consolidated indebtedness less netted cash(1) of $1.7 billion. Leverage based on the ratio of consolidated indebtedness less netted cash(1) to adjusted EBITDA per credit facility(1) was 1.95 times for the trailing twelve months ended March 31, 2021. Over the last twelve months, the Company has extended the maturity of its long-term debt by 6 years and lowered its annualized interest expense by approximately $23 million.

During the first quarter of 2021, the Company repurchased 8.9 million shares of its common stock for a total cost of $313.1 million. As of March 31, 2021, the Company had approximately $113.2 million available under its existing share repurchase authorization. In a separate press release issued today, the Company announced that its Board of Directors increased the authorization under its share repurchase program to $400.0 million.

Additionally, the company recently announced that its Board of Directors declared a quarterly cash dividend of 7 cents per share. The dividend is payable on May 27, 2021, to shareholders of record on the close of business on May 13, 2021.

Financial Guidance

The Company raised its financial guidance for 2021. For the full year, the company currently expects net sales growth to exceed 20% with adjusted EPS(1) between $2.50 and $2.70. This projection implies 2021 adjusted EBITDA(1) of between $925 million and $975 million. The mid-point of this guidance implies an increase of 36% from the Company's prior year adjusted EPS(1) of $1.91.

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.

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About Tempur Sealy International, Inc. 

Tempur Sealy is committed to improving the sleep of more people, every night, all around the world. As a global leader in the design, manufacture and distribution of bedding products, we know how crucial a good night of sleep is to overall health and wellness. Utilizing over a century of knowledge and industry-leading innovation, we deliver award-winning products that provide breakthrough sleep solutions to consumers in over 100 countries.

Our highly recognized brands include Tempur-Pedic®, Sealy® featuring Posturepedic® Technology and Stearns & Foster® and our non-branded offerings include value-focused private label and OEM products. Out distinct brands allow for complimentary merchandising strategies and are sold through third-party retailers, our Company-owned stores and e-commerce channels. This omni-channel strategy ensures our products are offered where ever and how ever customers want to shop.

Lastly, we accept our global responsibility to serve all stakeholders, our community and environment. We have and are implementing programs consistent with our responsibilities.