Weak North American sales drag on Tempur-Pedic
(Reuters) - Mattress maker Tempur-Pedic International Inc's (TPX.N) first-quarter revenue fell 11 percent, excluding its recent Sealy's acquisition, hurt by a decline in sales at its core North America business.
Shares of Lexington, Kentucky-based Tempur-Pedic fell 2 percent in after-hours trading, after the company reported lower earnings for the first quarter.
Tempur-Pedic completed the purchase of Sealy on March 18 and its total quarterly sales rose just 1.5 percent to $390.1 million, even including $46.7 million from the newly purchased unit.
Tempur-Pedic's North America sales fell 16 percent to $225.9 million. Excluding Sealy, Tempur-Pedic's gross profit margin decreased to 51.7 percent from 53.6 percent, hurt by increased promotions and discounts.
Shares in the company, to be renamed Tempur Sealy Corp, have jumped 55 percent since it announced its Sealy acquisition in September.
The purchase brought expertise and strong brands to Tempur-Pedic, including Sealy Posturepedic and Stearns & Foster, and helped the mattress maker recapture lost market share.
But Tempur-Pedic said net income fell to $12.5 million, or 20 cents per share, in the quarter ended March 31, from $56.2 million, or 86 cents per share, a year earlier.
Excluding integration costs related to the acquisition and certain tax items, the company earned 62 cents per share.
Tempur-Pedic raised its full-year earnings guidance to $2.75 per share on revenue of $2.5 billion from $2.55 per share on $1.4 billion, taking into account its acquisition of Sealy.
Tempur expects to realize about $15 million in cost synergies in 2013 from combining the mattress companies.
"In 2013, we plan to invest some of the upside realized from the cost synergies back into our business, including investing more in advertising and marketing," Chief Financial Officer Dale Williams said on a conference call with analysts.
For the quarter ended March 3, Sealy's net sales rose 8.8 percent to $339.6 million, which Gilford Securities analyst Robert Straus said were "strong" results.
Rival Select Comfort Corp (SCSS.O), the maker of Sleep Number mattresses, last month reported lower-than-expected quarterly earnings, hurt by a shift in advertising strategy, and cut its profit outlook.
(Reporting by Aditi Shrivastava in Bangalore; Editing by Maju Samuel)
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