July 25, 2013 / 9:09 PM / 4 years ago

UPDATE 2-Tempur Sealy slashes forecast on weak North America sales

* Second-quarter adjusted earnings of $0.36/shr vs est $0.40/shr

* Second-quarter revenue doubles to $660.6 mln vs est $662.8 mln

* Cuts FY adj profit view to $2.25-$2.40/shr from $2.75/shr earlier

* Cuts FY revenue view to $2.43-$2.45 bln from $2.50 bln earlier

* Shares down 11 pct after market

By Maria Ajit Thomas

July 25 (Reuters) - Mattress maker Tempur Sealy International Inc slashed its full-year profit forecast as it continued to battle weak sales at its high-end Tempur brand in North America, while the acquisition of the mass-market Sealy brand dragged down second-quarter gross margins.

Tempur Sealy’s shares fell 11 percent to $37.50 in extended trading, after closing at $41.96 on the New York Stock Exchange on Thursday.

The company dominated the high-margin specialty mattress market for years, but sales have taken a hit more recently due to rising competition from Select Comfort Corp and privately held Simmons Bedding Co and Serta Inc.

“We experienced softer than expected demand, and in particular didn’t experience the seasonal lift in demand by the fourth of July,” Tempur Sealy Chief Executive Mark Sarvary said on a post-earnings call with analysts.

Tempur North America sales fell 4.9 percent in the second quarter to $215.5 million.

The company expects sales at the division to be down 5 to 10 percent in the second half of 2013, but plans to increase investment in advertising to boost sales.

“I do think (North America sales) will improve going forward, but for right now the sales at Tempur are going to be lower,” Wedbush Securities analyst Joan Storms said.

The company, which completed the Sealy purchase in March, cut its full-year adjusted profit outlook to between $2.25 and $2.40 per share, from the $2.75 it forecast earlier.

Analysts on average were expecting profit of $2.75 per share, according to Thomson Reuters I/B/E/S.

Lexington, Kentucky-based Tempur Sealy lowered its full-year sales forecast to between $2.43 billion and $2.45 billion, from its earlier forecast of $2.50 billion.

The company also reported a 12.1 percentage point fall in second-quarter gross margin to 38.6 percent, due to the inclusion of Sealy, which has lower margins, and changes to its product mix and higher new product launch costs.

For the quarter ended June 30, it reported a net loss of $1.6 million, or 3 cents per share, compared with a profit of $29.1 million, or 46 cents per share, a year earlier.

On an adjusted basis, Tempur Sealy earned 36 cents per share. Analysts on average were expecting a profit of 40 cents per share.

Sales more than doubled to $660.6 million in the quarter due to the inclusion of Sealy sales, but fell slightly short of market estimates of $662.8 million.

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