Greenlight Capital's fourth quarter positions (Part 6 of 8)
Greenlight Capital and Tempur Sealy International
Greenlight increased its stake in Tempur Sealy International (TPX) in 4Q 2013. It now accounts for a 1.33% position in Greenlight’s U.S. long portfolio. Tempur Sealy International is the world’s largest bedding provider. It develops, manufactures, and markets mattresses, foundations, pillows, and other products.
In its latest 4Q results, Tempur Sealy saw profits decline 2.6%, to $22.9 million or $0.37 a share from $23.5 million or $0.39 a share a year earlier. The 2013 results reflect transaction and integration costs related to the acquisition of Sealy Corporation. Revenue jumped to $678.1 million, mainly due to the inclusion of $333.5 million of sales from Sealy. In March of last year, the company (which was known as “Tempur-Pedic International Inc.”) completed its acquisition of Sealy Corporation (ZZ) for a total transaction value of approximately $1.3 billion. The company also changed its corporate name to Tempur Sealy International, Inc.
The company’s gross profit margin was 40.2%, compared to 50.0% in the fourth quarter of 2012. The gross profit margin decreased primarily as a result of buying Sealy, which has lower margins than the Tempur North America and Tempur International segments, and of changes in product mix, which were offset partially by lower sourcing costs.
CEO Mark Sarvary said in a press release:
- “Overall our fourth quarter was in line with our expectations. Sealy’s fourth quarter sales were above our expectations and Tempur International returned to growth with sales increases in Europe, Asia and Latin America. Tempur North America showed continued stability with sales down 1% as compared to last year.”
For 2014, the company said it expects sales of $2.8 billion to $2.9 billion, and adjusted earnings per share of $2.60 to $2.85. Management said on its earnings call that order trends have been somewhat soft in January due to sluggish retail traffic in the U.S. The first-quarter sales outlook also assumes a slight transitory impact as customers wind down inventory on existing models. Tempur Sealy expects to ship a number of floor models in 1Q 2014 as it launches the new TEMPUR-Cloud and Contour offerings as well as the new Stearns & Foster collections. Tempur Sealy faces tough competition from its peers Select Comfort Corp. (SCSS), La-Z-Boy Inc. (LZB), and Mattress Firm (MFRM).
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