Tempur Sealy International, Inc. TPX seems to be witnessing increasing demand, after facing disruptions caused by COVID-19. Consequently, the company has lifted its second-quarter 2020 guidance, given strong order trends. Shares of the company gained 5.1% on Jun 17, following the news.
Given improved demand conditions quarter to date, Tempur Sealy now expects total second-quarter net sales to be down 15% year over year versus prior expectation of a 30% decline. Notably, strong sales in May and early June are mitigating a very difficult April. Order trends have been broad-based geographically, driven by improving wholesale channel trends and robust growth of more than 125% from global e-commerce quarter to date.
The company expects to record at least $50 million of unadjusted EBITDA in the second quarter. It also anticipates a ratio of consolidated indebtedness less netted cash to adjusted EBITDA within the target range of 2.5X-3.5X.
Post-April, the company has been experiencing strong order trends. Internationally, trends have marked an improvement as the majority of markets have returned to growth. In its largest market, the United States, both Tempur-Pedic and Sealy branded products have also increased on a year-over-year basis in May and June to date.
Although most retailers are experiencing lower average selling prices and reduced foot traffic in stores, the online channel (including third-party retailers and direct-to-consumer) has been strong throughout the quarter. In fact, the company’s global e-commerce sales have increased more than 125% quarter to date, while experiencing lower customer acquisition costs.
Share Price Performance
Shares of Tempur Sealy have gained 124.9% over the past three months, outperforming the industry’s 106% rally. The company’s portfolio of products, courtesy of focus on internal initiatives to deliver the finest quality products, and highest level of manufacturing reliability and customer service have been driving growth over the last few quarters.
Tempur Sealy — which shares space with RH RH, Haverty Furniture Companies Inc. HVT and The Lovesac Company LOVE — currently holds a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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