Tempur-Pedic gives shareholders nightmares
The mattress maker has been sleepwalking while smaller, aggressive rivals have jumped into the market.
Tempur-Pedic (TPX) used to be the king of the specialty mattress market. But the company snoozed while smaller rivals jumped in, and now shareholders are paying the price.
The mattress maker's stock plunged nearly 50% Wednesday after executives said its per-share earnings will fall by half in the second quarter from a year earlier. Sales are expected to drop by as much as 5% from $342 million a year earlier. The stock dropped again Thursday morning, but by midday had clawed back to a slight gain over Wednesday's close.
Post continues below.
Other mattress stocks also rebounded Thursday after seeing big drops Wednesday. Sealy (ZZ) was up 4% to $1.68, Select Comfort (SCSS) rose 7% to $22.10 and Mattress Firm Holding (MFRM) was up 3% to $28.86. Tempur-Pedic was up 1% to $22.62.
The problem? Traditional mattress companies are being hit by a wave of rivals and are finding it harder to compete.
"Everyone is in it at once," Tempur-Pedic CFO Dale Williams said on a conference call with analysts, according to The Wall Street Journal. "Everyone is engaged in a land grab at the same time."
And these upstart mattress companies aren't just going after customers. They're also wooing mattress retailers, making deals to get better promotion on the showroom floor.
One analyst told the Journal that Serta in particular is doing a great job of getting valuable showroom space and appealing to retailers. As a result, the company's iComfort mattress is doing very well.
What's extraordinary is how clueless analysts were about this unfolding disaster. Analysts were expecting Tempur-Pedic's earnings to rise 12% to 85 cents a share for the quarter. They also expected sales to jump by 15%. As a result, many had to admit Wednesday that they were caught dozing.
"It appears that competition caught up to Tempur-Pedic much faster than we expected in the specialty bedding segment, which calls into question the company's brand," noted Jim Yin of S&P Capital IQ in a note Wednesday, according to Barron's. Yin cut his rating on the stock to "hold."
The signs were there. Tempur-Pedic did not raise its full-year outlook in April, causing the stock to drop as investors fled. Still, just about every analyst covering the stock had a "buy" or "hold" rating on it, perhaps because they were looking at strong overall sales in the mattress market.Those strong sales just didn't hold up for Tempur-Pedic.
"While we feared expectations for the 2Q were too high, we were not expecting anything as dramatic as (this) announcement," noted KeyBanc's Bradley Thomas, according to the Journal.
It's a new day for the mattress industry. With aggressive rivals coming in, Tempur-Pedic and other big names can't afford to be sleepy. And their margins may never be the same again.
More from Top Stocks
"Everyone is in it at once," Tempur-Pedic CFO Dale Williams said on a conference call with analysts, according to The Wall Street Journal. "Everyone is engaged in a land grab at the same time."
Welcome to the wonderful world of competition. I think you've been using your product too much...you snooze, you lose.
I have had my lower back replaced and my neck also has metal in it. We had a pillow top before all the surgerys and it seemed to be ok, but since the surgeries the pillow top gave me the worst nights sleep I've ever had. I shopped around and bought and tried different beds and slept on them for a couple weeks at a time and I never found a bed i could get a good nite's sleep until I bought a tempur pedic. To me a good nites sleep is worth any amount of money. People will spend more money on a high dollar vehicle that has really no benefit and complain about the price of a bed that provides you sleep which in return helps you make the amount of money you need to pay for your overpriced vehicle. I am a constrcution worker that doesn't make a lot of money, but I will spend the money on a high priced bed, rather than a high priced vehicle any day. Thats just an opinion
Sleep Cheap,
I still have a waterbed that I bought in the late 80s, and have had to replace the 'mattress' a couple times at about $230.00 each ... it's comfortable, has no 'waves', is temperature adjustable and it is far cheaper than some of these super foam money pits that people pay thousands for. Keep it simple.
Peace
I hope anyone reading these comments realizes how incredibly subjective mattress purchasing can be. What works for one person doesn't always deliver the same results to another. And for anyone to tell someone what they should or should not get is laughable. Unless of course that person is your sleeping partner. Different strokes and all that jazz. Take your time, shop around, and find what works for YOU. Not what works for your neighbor, mother, cousin, etc etc. And above all else, don't buy based on what some random person says on the internet.
Had a Tempur-Pedic. Paid almost $4,000 for it. Nasty off gassing that (finally) dissipated after almost 2 years (during which time my wife had headaches due to the fumes).
After approximately 3 years, my wife and I started waking up with back and neck aches, the mattress sagged where we slept, no "memory foam" recovery as advertised. When we finally realized something was amiss, we contacted the company to utilize the return warranty (which was honored with no problem), but had to get another mattress (rather than a refund-which we understood). We sold the mattress and used the $$$ to buy a latex mattress. No off gassing, sleeps great, and the "bounce" is back when we ...well, you know.
Tempur-Pedics are vastly overrated. Check carefully before purchasing.
MORE ON MSN MONEY
DATA PROVIDERS
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Japanese stock price data provided by Nomura Research Institute Ltd.; quotes delayed 20 minutes. Canadian fund data provided by CANNEX Financial Exchanges Ltd.
STOCK SCOUTER
StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.
125 | 272 | 424 | 589 | 696 | 590 | 666 | 435 | 260 | 143 |
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
LATEST POSTS
In this installment of Investor Beat: The Fed chief tells Congress that it's too soon to end the stimulus program.
FIDELITY VIEWPOINTS
- How to sell covered calls - Fidelity Investments
- Savvy year-end tax moves to consider now - Fidelity Investments
- Seven ways to prepare for tax changes
- Five reasons an annual review is crucial - Fidelity Investments
- Take a look at mid caps now - Fidelity Investments
- State of the sector: Health care - Fidelity Investments
VIDEO ON MSN MONEY
ABOUT
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.