What do both of these firms' results posted last week inform us about TPX? Both of those companies have been in the doldrums for over a year and their stocks have been marginal performers. Yet for the most recent quarters, both companies tip their hats to TPX advertising juicing up the business which combined with improving economic metrics (esp relevant here is housing pickup, increased job formation and improving consumer confidence) is driving a huge jump in MATTRESS SALES.
And it is not any one sector save the TPX niche of ultra premium (fattest margins of 50% plus) doing better in percentage growth terms than any other segment , it is all segments.
Some may not realize that MFRM is up some 21% since reporting last Wednesday with revs up 18% YOY -- 18% YOY... and yes they sell Sealy in a big way in addition to Serta and lower end stuff.
CONN is more exciting for TPX shareholders. They sell both TPX and Sealy products and also reported an unexpectedly HUGE surge in mattress revenues which were up some 40% YOY. And so, as momentum has soared on mattress sales as TPX went back to the old ads, d'ya think just maybe they can smash guidaed revenues of just $639M for the DEC Q when the pro forma incl Sealy last year was $699M? We think so...
So does David Einhorn and Kyle Bass. LOL
Here's some fun math for those not familiar with quant work... if a couple of key customers have matress sales up some 30-40% last Q and thus need to restock the obvious demand for new TPX models, do you think maybe TPX has a big sell through Q coming when they report Dec results. We're preety confident that if just 10% YOY growth will drive say $770m for the Q, that is going to drive stunningly better than expected/guided gross margins, cash flow and operating leverage and further accelerated debt retirement.
btw, Longs should listen to the conference presentation from last week -- $500m of debt retirements between now and 2016 is well ahead of prior guidance.