On Monday, shares of Tempur Sealy International TPX are crashing-and frankly, burning-after it announced it ended all contracts with Mattress Firm, one of the company's key customers. In mid-morning trading, TPX stock was already down over 27% to $45.72 per share.
If Tempur Sealy stock stays on this course today, it stands to suffer its biggest one-day drop since March 12, 2008, when it tumbled about 38%. In the past one year, TPX has actually gained 4.72% but year-to-date, the stock is down 7.45%.
As of January 27, contracts were terminated due to disagreements over changes and many failed attempts to enter into a "mutually agreeable supply deal," said Tempur Sealy. The company expects to completely stop doing business with Mattress Firm during the first quarter of 2017.
Mattress Firm is Tempur Sealy's biggest and most profitable customer, and because of this, estimates of future periods will have to be lowered, ROE Equity Research analyst Laura Champine told Reuters . Tempur Sealy said that during fiscal 2016, sales to Mattress Firm represented 21% of its total worldwide sales, falling 11% from the year-ago period.
Mattress Firm is owned by South African retailer Steinhoff International SNH , which bought the mattress company last year for $3.8 billion.
Tempur Sealy is expected to report its fourth-quarter fiscal 2016 financial results on February 16 before the bell. Zacks estimates earnings of $1.04 per share and revenue of $744 million for the company.
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