Tempur Sealy International recently announced financial results for the third quarter ended September 30, 2021. Net sales for the company increased 20% compared to the third quarter of 2020, with direct sales increasing by 79%. Additionally, the company also issued updated financial guidance for the full 2021 year that reflects the improved business performance.
"Our strong third quarter sales performance was driven by growth across all brands, products, channels and segments,” said CEO Scott Thompson. “Our broad-based performance is especially notable given the strong prior year comparative period and our inability to fully meet market demand in the quarter due to continued supply chain constraints. We continue to see opportunity to further grow our business and extend our lead in the design, manufacture and distribution of bedding products over the long term.”
Tempur Sealy’s total net sales hit $1,358.3 million in Q3 of 2021, increasing 20% from the $1,132.3 million in the third quarter of 2020. On a constant currency basis, total net sales increased 19.2%, with an increase of 11.9% in the North America business segment and an increase of 71.6% in the International business segment.
For just North America alone, the company’s net sales increased 12.6% to $1,120.0 million compared to the third quarter of 2020. North America net sales through the wholesale channel increased by 11.7% to $991.2 million during this time, primarily driven by broad-based demand across the company’s retail partners. North America net sales through the direct channel increased by 19.7% to $128.8 million, thanks to strong company-owned stores sales growth.
Tempur Sealy’s international net sales increased 73.2% from Q3 of 2020 to $238.3 million in 2021, with gross margin declining from 61.9% to 54.6%. International net sales through the wholesale channel increased by 7.9% to $108.0 million, while the direct channel increased 247.5% to hit $130.3 million. The steep increase in direct channel sales was primarily driven by the acquisition of Dreams Topco Limited on August 2, 2021.
The company’s gross margin was 42.5% in Q3 of 2021, as compared to 46.8% in the third quarter of 2020. For North America, gross margin declined 490 basis points as compared to adjusted gross margin in the third quarter of 2020. The decline was driven by pricing benefit to sales with no improvement in gross margin, operational inefficiencies and unfavorable brand mix driven by supply chain issues. North America operating margin declined 260 basis points, as compared to adjusted operating margin in the third quarter of 2020. The decline was primarily driven by gross margin, partially offset by operating expense leverage.
The acquisition of Dreams Topco Limited was also the primary driver behind the decline in international gross margin, which dropped 730 basis points. Dreams' margin profile is lower than Tempur Sealy’s historical international margins, as it sells a variety of products across a range of price points.
Looking Ahead To 2022
“Our key building blocks to future growth include the meaningful expansion of our total global addressable market via our OEM initiative and our TEMPUR international product launch, our industry-leading innovation capabilities and our balanced capital allocation philosophy,” Thompson explained. “In 2022 and beyond, we expect to leverage these complementary building blocks to deliver double-digit sales and EPS growth.”
Click here for more details on Tempur Sealy’s Q3 earnings.
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