Shares of bedding manufacturer Tempur Sealy International (NYSE: TPX) fell as much as 11.2% on Thursday and finished the trading day down 8.8%.
The stock's decline follows Tempur Sealy's fourth-quarter financial results, which featured declining sales and profits. A worse-than-expected adjusted profit on a per-share basis, driven primarily by terminated contracts with Mattress Firm, may have sparked concerns from investors.
Tempur Sealy reported revenue of $648 million, down 15.9% year over year. Adjusted earnings per share was $0.79, down significantly from $1.18 in the year-ago quarter. On average, analysts were expecting revenue of $679 million and adjusted earnings per share of $0.82.
Tempur Sealy's terminated contracts with Mattress Firm played a significant role in the company's worse financials this quarter compared to the year-ago quarter. In the year-ago quarter Mattress Firm sales were $155.7 million, but since contracts were terminated at the beginning of Tempur Sealy's second quarter of 2017, the company didn't record any Mattress Firm revenue in Q4. Excluding Mattress Firm sales in the year-ago quarter, North America sales would have been up 4%, management noted.
Highlighting the strength of its flagship mattress product, Tempur-Pedic sales in North America increased 19% year over year when excluding sales from Mattress Firm in the year-ago quarter.
Management said it is entering 2018 as "a much stronger company" thanks to a more diversified base of retail partners and its fast-growing direct-to-consumer business. In Tempur Sealy's fourth quarter, the company's North American direct-to-consumer channel saw sales rise 56% year over year. This demonstrated Tempur Sealy's "ability to change with consumers' purchasing habits," management said.
For 2018, management expects adjusted earnings before interest, tax, depreciation, and amortization ( EBITDA ) to be between $450 million and $500 million, up from $403 million in 2017.
10 stocks we like better than Tempur Sealy International
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Tempur Sealy International wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of February 5, 2018