TPX - Earnings call transcript Q4 2017 | Tempur Sealy International, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Tempur Sealy Fourth Quarter 2017 Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. I would now like to introduce your host for today's conference, Ms. Aubrey Moore, Investor Relations.

begin. may You

Aubrey Moore

Good in operator. and you thank Thank call. morning, participating today's for you, everyone,

Joining Lexington Vice in will CEO; Financial me our After open and President Thompson, Officer. Q&A. Bhaskar and the Chairman, call Rao, remarks, Executive prepared President for Chief headquarters and we are Scott

the the the non-GAAP our well presentation. will except the these to information most XX-K in in information. Quarterly this forward-looking The speaks cause launches, constant the factors factors we Investors identified discussed for including, expectations update discussed due undertakes SEC competitive, Forward-Looking Regarding on to, made. comparable company issued adversely Litigation not pursuant non-GAAP Risk the actual Special Reform and any as as company's of are to Any to Statements differ as other methodology XXXX. involve only to include statements, the Reports materially the press the otherwise no financial net heading information that Forward-looking directly include statements EBITDA, differ periods, call today. of release release under operating Securities These that business. as release, Note could safe regarding cautioned and and discussed results XXXX affect factors XX-Q the and uncertainties. Private also company's these which that forward-looking may commentary are including of a morning's the make economic, is variety during could currency the reconciliations used in it earnings, on The adjusted and/or regulatory, company's Annual financial sales, This results in made harbor from The Reports Actual provisions to subsequent those information press statement obligation of regarding company's on limited Factors. are the contains and of Act statements. press product income filings Form performance anticipated GAAP that but forward-looking factors date

posted and it release the the have investor the also filed SEC. at company's investor.tempursealy.com We with on press website have

Our pleasure it the provided to the turn now, in call detailed my Scott. introduction, is with And supplement will that to comments over press the information release.

Scott L. Thompson

and Good start thank full conclude for results through then our Bhaskar when by on us financial from Thank you, Aubrey. I'll then I you the and corporate quarter detailed Today, us results, quarter XXXX will our few Then, on a long-term and earnings take morning joining highlighting year. quarter call. updating year fourth you fourth items the will initiatives. for and our

termination our customer, at the to the $XXX XXXX our proud with turning of the of our how short-term was subsidiary guidance. Steinhoff managed Mattress deleverage is adjusted which associated Now, million, Firm, a earnings EBITDA I'm team end top highlights. the largest of financial of International.

three We factors whichever products, these available key consumer great whether also company, on and products customers' wants important develop To them. then and the an partners, these are team of bedding product, factors. other laser-focused the success lives, environment, the setting we're remain benefit with the capabilities, the on foundation to the clearly key success and the new in continued Additionally, remaining retail communicate key talking succeed in of products strengthening purchase any growth relationships to consumer building make direct-to-consumer about improve or laser-focused development. our product today's same: company's channel long-term the these

in growth We shareholder value. will deliver significant they expect

point. and America, our is Tempur-Pedic The In our fourth the to expectation their Sealy the more expectations a a raise to it ever amounts fourth is on details XX%. lineup price. fourth non-bedding at result average This current are below ticket venture. brand points sales them from Firm excluding retailers some Tempur-Pedic was is Sealy's in which This that Comfort traffic-challenged than This encouraging was consolidated year in in declined line allows $X,XXX. brand quarter, quarter, driven the joint as for trends retail all is environment, X% growing by our nearing North given lower in Sealy performed primarily a is refresh the Tempur prior particularly excluding weakened important price Revolution decline because in the Mattress with the Now, December. volume below numbers.

Firm guidance factors: sales, sales December While operating retail first, our well-publicized environment the were due profitability; with to the order products. which as are this points We driving main high challenges. three, driven Sealy at we by in these the primarily our three mix end decline achieving overall in from accounts; is the away impact lower to Mattress company by Sealy. lower the low-margin end, its lower-than-expected aggressive promotional dealing at and in was us department to product resulted weakness in continued This and the units two, certain is despite discounting price in an of optimize financial low mitigated store demonstrated believe was finally,

Our basis gross with International from basis sales points. X% wholesale channels. direct points. balanced reported business increased improved and a continues and operating currency, constant to on margin both a basis XXX growth Adjusted International margin growing make XX% with nice progress, XX

opportunity further a International white to of remains for Our of significant markets. growth many lot fastest-growing segment penetrate world's there as the a us us represent for space continues to

adjusted also to a quarter since March is turning Bhaskar, in over to fourth call Before like our we XXXX. acquired Sealy I'd highlight record gross margin the of

and overall our improving We are intensely focused efficiencies. operations on manufacturing

achieve to feel despite our to margin through We about good We continue to drive headwinds absorption. initiatives. record improvement very cost commodity fixed our are and significant negative ability facing internal gross margin pleased a

expenses, With results EBITDA carefully for turn and our we expect flow. to margin walk to cash As healthy XXXX. to flow-through us through financial the call selling over I'll gross drive to we guidance continue higher, we'll overhead and that, and the manage Bhaskar

Bhaskar Rao

fourth sales adjusted XX%. were net $X.XX. was for operating million, Global I'd few Adjusted quarter $XXX $XXX per with Scott. was the gross share highlights. earnings Adjusted Thank EBITDA million. to points basis increased you, and Adjusted XXX like to a quarter margin margin key start XX.X%. was

leverage target. facility, times is calculated was as our our X which of debt credit X.X X times, to the in Our ratio, senior under range

expect Firm as We will last be lap range the first And slightly above be this this which to seasonally in XXXX, highest will the ratio believe expected. we be we quarter Mattress termination. of leverage quarter our is

sales our to X%, America by XXXX. Revolution tend of declined quarter, a increased North in On to comments We over back from sales the XX% lumpy driven expect strong be net excluding Firm branded depending in the Sealy basis, forward customer Mattress orders. period. on range My year. target be the sales going sales prior declined will Revolution growth specific within Tempur which within XX%. prior to fourth segment X% excluding Comfort on be Comfort compared

American North increased increased the channel Our wholesale direct XX%. a and channel robust X%

by This prior and growth our fixed XXX to operational returned performance cost expect gross Sealy We compared year. was to prior position to This to from like adjusted product period the partially partners. mix. same the the to our to margins direct and traffic margin the maintain Overall, lower up by Mattress in deleverage to our XX.X% brand North channel impact team. unfavorable unit and the American This offset was driven our consistent our Tempur XX.X% basis same had strong last as was Firm cost gross would leader the North to investments on points margin and was again basis compared favorable American in year. as It level I a is volume. in that continue marketing. including as XX inflation decreased prior bedding once retail as was driven by North and operating adjusted operations XXXX. model North margin as margin gross increased to improvements, deleverage year. premium points expense channel market strong discounts, to operating significant the to gross compared we lower critical drive have American note have of American floor termination. to commodity the

So, sales our have increase lower despite base. a spend to we overall continued advertising

of International adjusted the due quarter overhead. XXXX. by favorable increased to was fourth year benefited XXX margin the X% basis, This International to up productivity adjusted up This we channel as basis operating to net growth our basis operating primarily the XX.X%. channel channel commodities. XX%. in constant improved International, Tempur increased and On to wholesale direct were up products. Europe Turning gross by X% XX%. driven currency XX new sales a actions to was points expense increased compared the driven last with partially our by leverage XX.X% from and mix, sales and margin to for Asia-Pacific taken points was unfavorable right-size This offset primarily

related like Lastly, to a subsidiary. to Latin matters I American would now certain discuss

to charges our in As we the related operations. certain unexpected discussed we matters third in Latin quarter, American recorded

the of adjustments and accounting these We quarter, During some forensic of additional in back policies. a number of operational earnings after recently irregularities and aware completed a certain even became issues Sealy third of years, our net fourth violated These call, to our date that identified company we investigation matters preceding quarter thorough acquisition XXXX. income.

prior-period our previously million amounts. to fourth now the XXXX reported outside have will we be charges to of including periods A and related Form of will $XX $XX from $XX upcoming revisions revised our have XX-K. with in million Working We approximately XXXX summary quarter, million XXXX. in advisors,

EBITDA. will note our impact on have historical these should You reported that no revisions

strategic will Moving a aggregate and run million run Latin place the of and less we XXXX, $X are than reviewing loss this during plans. operational the at forward, expect rate. at for leadership year exit in we American Currently, new an business have breakeven operating put subsidiary and

year. was expecting advertising charges operating and mix, launch fourth adjusted favorable commodity GAAP American improvements. down $X.XX. $XXX investments. any This earnings a was from quarter, basis, was On not expenses, adjusted Adjusted was million per last income the EBITDA issue. increased cost, by to impacted We increased and was relating deleverage, and volume per cost are material million $X.XX, our the primarily share share resulting partially operational was consolidated $XX in earnings other Latin lower EBITDA fixed by in $XX channel lower offset million.

taxes, $XX million tax benefit. tax our re-measured in deferred a resulted U.S. U.S. Regarding which we reform,

net accumulative tax resulted Additionally, a $XX liability a reform $XX benefit All we million. our earnings. foreign this tax in recorded of historical due million on

As a on Danish provide disclosed between a go-forward update would XX% expected a matter. reminder, to to tax XX% in rate XXXX. and tax like I brief our be previously is

and rates we work in negotiations in compared primarily it expense continued information, to capital higher We and based on XXXX through is was our associated Adjusted current expecting impact. $XX are will without a gone million to well, any This million of in interest borrowing with interest negative financial result leases. be XXXX which resolved have $XX XXXX.

Now, XXXX. of generated of versus cash the items. sheet We generated XXXX. balance and cash $XXX moving operating $XXX cash free in flow million million in XXXX flow to million We flow $XXX in

Excluding $XXX from Latin impact free subsidiary, the million. flow our been would have American cash our

to As million a $XX Danish year, reminder, deposit matter. the last a tax related

million XXXX, flow any from to $X.X free cash for debt company three further beyond approximately XXXX, Latin net do quarter our At to payable. cash $XXX improved of was days items, XXXX. declined driven these Cash quarter, cash Excluding needs. of million American $X end capital In days by to billion. primarily of use fourth the million. expect $XX in the million subsidiary's the working We improved XXXX expects $XXX the fund the not cycle to purpose this obligations fourth compared

company Regarding to repurchase program $XXX resume our our repurchase shares. in for then free may look available cash, generates as investments, we have the strategy, We our XXXX currently market first evaluate and under the anticipate we ROIC business share allocation conditions current inside authorization. capital high million that

increases. considers and $XXX to we velocity the year guidance. new Now, from headwinds XXXX, to improvements will investments, as benefit currently floored, and financial for current million unfavorable exchange, foreign in trends. EBITDA incremental company through move from in advertising realize of our expects expenses, our are we million and to the products launch be price We anticipate turning commodities, adjusted which $XXX includes our The range

one-time quarter The Firm. first a is a and be of from expected $XX million as payment of the $XX prior year of Mattress hard XXXX to included compare million sales

quarter, half the Given retailers year. we in first ship their of of approximately expected expect EBITDA of result new This XX% anticipated ahead reduce of quarter. $XX inventory floor to million will XXXX these models second first the in EBITDA quarter the will phases in the quarter. the note that from back would factors, second to expect likely Please we about in the

go not will increase price year. effect our into until this reminder, a As March of

XXXX. increase anticipated commodity initiative in We fully expect with the operational offset headwinds along this price our will

$XX the D&A million $XXX of million, our any buyback project, between million Canadian for XX%, year back $XX to and of rate to turn includes tax fully considering activity. million expense For now, $XXX ERP XXXX, we call to a $XX currently of investments and diluted to expect million I'll Scott. $XX before count the CapEx which full of million share XX% million, a XX interest And

Scott L. Thompson

job. Great Bhaskar. Thanks,

Turning corporate our long-term to initiatives.

all First, innovative developing the products bedding we in markets serve.

are new America brands. launching North Tempur-Pedic Sealy We in the across products and

dramatically a Sealy the improved introducing new with On feel and side, Hybrid aesthetics. we're Sealy line

driving retailers, We differentiating a while product As roll to reminder, product Master year ago, Sealy designed improved efficiency. portfolio to for easier under began also manufacturability, our by out lines create a and new for products selling clearly brand. we our being processes quality simplified product

entire see can is in the Tempur-Pedic results expand encompasses fourth the XXXX history. the and as in brand's our to offering most four-wall integrated launch it at retailer Sealy immense in ease line quarter. experience, in It and share. productivity increase continued and the unit the SKU, You is product margin the the mattresses, consumer adjustable each designed bases. the both Tempur was our shopping pillows, mind, XXXX to revamped market With of improve and

understand simplification the simplified dramatically both ups consumer fully RSA XX and we've our roll product us months beds. will the take to various helped The and As Tempur launch portfolio, the out. differentiation step between the

two formula on three concentrated have which on be APR The relief, pressure tradition Adapt relief The Luxe over of XXXX benefits entry foam. pressure years. new late breakthrough followed and our power. Breeze greatest of range delivers our new pressure relief working fields will of times deliver level, unlocking models. models, by The to memory material [TEMPUR-APR], been first and ProAdapt ProAdapt phase mid-level, We're models in that continues (sic) already premium ever. TEMPUR pressure early is roll-out relief XXXX. the the deliver manufacturing TEMPUR-ARP using we is advanced broader to while revolutionary also ordinary for our a that techniques a

from about the And XXXX. can Tempur-Pedic traffic portfolio have lot new opportunity created and simplifying half, cutting to over we've retailers product inventory summary, pillows a us, of spent different marketing our chain all-new their best construction, so TEMPUR-Adapt we're Stearns help and higher we've pillow in the down great partners pillows. and Now, Tempur identify perfect from complement choice. products our support delivers Three and a What had feedback line saving Tempur, our as pillows our products new identified and upgraded that combination our at greatly portfolio find we our models the let's simplifies to ASP. supply Completing to portfolio. the with North best In drive adjustable capital profiles has a retailers' and good, will mattresses. of Early wins retail and entire portfolio. the bedding These significant for – fit. our customer ever – received. six believe partners, We both each program, retail and and & to the retailer. better, of streamlined, we Foster to working The to America, We're best entire retailers number been Sealy in three, move excited pillows drive personalization in of is is we've which time of Sealy the the management. and the growth consumers system, also and replaced base

the in services assets, brands. comfort our marketing sales promote marketing number these we with be direct partners J.D. award will long-term products worldwide despite given the award our Integrated Tempur-Pedic J.D. our their whose loss Mattress to products. rank leveraging Sealy from the drive second and Power. of one our value. in companies support North highest Tempur increased and and XXXX, initiative to rated we mattress Power to Firm, to is as also of spend studies efforts to is In support, America significant dollars customer The recent in of invest in retail sales

our We see to also to XXXX, advertising in reach. we expand as our expect investment increase direct to continue opportunity

almost & I advertising aggressively direct of as our into we XXXX. our ago, is we spend The arrived media. assets Today, get nothing at to on will working be our brands, biggest XXXX Foster. percentage expect years We spend across when towards are we put Stearns advertising change the company in were and spending their sales when in a partners of more retail much to Tempur-Pedic, with all Sealy, To two-and-a-half normalize digital support our media. weighted this action digital online context, digital

The products channels. third make to distribution, long-term are our properly initiative is to sure all optimize in represented worldwide

our retail many to focus third-party on through be shop. said continues. I've While and our need where always we will times, company-owned footprint our this distribution, primary expanding want be stores to third-party retail The progress customers

also to effort to We to online presence the an our shop. wherever be customer ramp in wants continue

Regarding our in partners. retail America internationally designed stores XX own operate our stores, America. stores XXX The and North we third-party have North stores to currently existing complement are

indicate our In market actually findings fact, area. our awareness the local sales brand at surrounding stores retail locations, because in early Tempur-Pedic the company-owned increase they increased partners' that

little to increase America penetration Our thoughtfully target Tempur from store North are openings where These share. areas market stores existing have we retailers. located

expect North that we highlight a once choose one over-invest Mattress we to cost. Firm Also, of of our direct again like EBITDA Tempur to large this six support stores acquisition customer be or help while not national contribution period program. have to XXXX, And continues as to profit stores in in our to months. our quarter, margin sales XX stores. American about stores I'd These them of expand Our do not payback worth we is material the estimate advertising

channel We choose. where are shop letting trying and to not are customers choose which to influence want they they

in XXXX company, on XXXX the initiative end work increases does the for not was the following adjusted business is with guidance. stop our of drive year team's an to But the Our EBITDA. Mattress EBITDA to proud high at execution there. last focus the I'm of Firm. the initiatives close termination our extremely dynamic of of the

in plans We our making for and advertising changing have in investments market. the expect retail products, new position distribution, to we're and and environment, strengthen a

and best we most With shareholder the brands for create Operator, our open mattress the products improve up lives you call and significant customers' value. well-positioned industry, to the are innovative in questions? will please

Operator

Thank you. Thank you.

Our first Curtis comes Merrill Bank Lynch. Nagle with from America of question

Your line is open.

Curtis Nagle

Great. Thanks very much.

new So, guys increased could retailers, maybe new that like could some potentially maybe of – It a least terms few Scott, curious if penetration, on in I'm slotting, contracts. your just wondering how and of just think the an if you new helping. product at give you gained lines update and looks comment I you

Scott L. Thompson

Tempur Thanks coming we Sure. the The as looking significant reasonable launch. we're slots of there XXXX, have received. question. talked not slot because What has for a And would number incremental we're Tempur's from for to additional all, for Tempur about, launch, new Hybrid that Sealy been well-distributed. the first mean, we've is obviously, would well the Sealy velocity. slots I looking I expect really Hybrid very

Bedding based placement just the review marketplace of we're marketplace show. as just the far in well I Vegas activity in doing normal post on in my Las gaining between very our customers, give-and-take As the overall think

Operator

Thank you.

comes Bob Drbul Guggenheim question Our from Securities. with next

line open. Your is

Robert Drbul

if at wondered terms and be Hi. you happening that what's top your wholesale you of look that where XXXX? the are in knowing could bit on little that is, sales when ended Thank guys five give Good in more just partners, you now online of you Firm, I'd perspective in the competition comment a just you from one morning. guess, numbers ex-Mattress number how you I us bed-in-a-box, could a where the And you. fitting see I there. interested with

Scott L. Thompson

you guess Thank I question. the for you. Bhaskar? Thank was question the Sure. first what

Bhaskar Rao

five. It was top

Scott L. Thompson

Okay. five? Top

you have now our business, five – think interesting, the the separated aren't total, is they healthy. five one longer than you at, and they I if that right top the the top customer, direct our they business that's On no direct point, is are out our in But were aggregate top in business. previously. at less more look our very disclosures least five, it's I I are so But largest XX% like if our our looked of important at think or material,

always little with asked about talking about think a what people about bed-in-a-box. I'm talk Internet the I about bedding. kind start You Internet, because when we're thinking of I Yeah. confused, get bed-in-a-box, I'd

is from bedding share growing is is Internet Our the brick-and-mortar perspective taking and side.

are that. We benefiting from

that can growing. XX%, you online would the majority direct As the online stuff of be is businesses, see, our

probably has to back, some, with Within The there's capabilities bed-in-a-box. helping traditional the growing category online. It rate subsection that and looks growth are back it of online like group push a bedding, looks significantly. okay, like the slowed are beginning push retailers but called bed-in-a-box certainly them is we

Operator

you. Thank

comes question Bobby next Raymond Our from with James. Griffin

open. line Your is

Robert Griffin

the was Good really during the about because I lower-end the focused think new to XXXX March. increase gave a on of us we are color taking in ASPs kind And Tempur that should and little Scott, questions. issue also reference might when you morning, I the possible then first for in you product you happen guys. I'm my price how appreciate in looking about hoping, guys coming that's mix launch. X%

Scott L. Thompson

Okay.

there's store some also talked beds chains, spoke a to And to Bhaskar the $X,XXX little a up at because bit. as me ASP strategy and weaker. about, need on goes product. increase clean end mentioned moving a value we Sealy so from of under that as probably then will pressure, that Let effect go Clearly, try we We're that expect the price been of to you March. are then little it higher department standpoint, in we're mixing the up into up

the Sealy. have the Tempur launch than the which So, On going on beds. scheduled, slightly way Tempur you lower floor up we've generally hit margins the level to higher-end are mix we're first Tempur, got beds right. entry The

the issue success a with down. launch have expect and Tempur, of mix the that we in merchandising that will we'll mix So

XX Tempur out So, I add anything get and the is there's Bhaskar, until the over puts we Sealy up, down that? is would takes. months. to next mix mix some complete know launch you

Bhaskar Rao

would fair. that's mix up and Sealy, to reasons be mentioned. for expect down think those you I that Tempur

Operator

Thank you.

comes Hughes question SunTrust. next with Keith from Our

open. Your line is

Keith Hughes

you. Thank

Your non-Mattress growth kind in down you pretty the been give have it stores Is any XX% would lost decelerated there Firm what be can quarter. in on in this detail any at all consistent Firm? Or the detail happened year Were just that fourth kind you slots? of us the here range, there quarter at any of non-Mattress retailers great.

Scott L. Thompson

No. that able data. we and from, We're don't kind some the on remarks. been looking called that the we talked felt up fourth get reporting data. numbers to our from sources the all the sources, I out both of data, derive before and that we I the what quarter mean, all to fourth think while about of prepared gut that. earnings takes and at the I've But in end quarter on in a indication then early It Sealy, the quarter is was strong bedding. us get And I my pressure still of we we think other fourth

the growth, well a compared what company, in And net my Other is than it traditional customer asked of on high well look traditional sluggish and hospitality major brands wins, a been I particularly The a And loss bedding side market, to customer pretty we've at research. you I XX% business. anything. be brands, quarter is disclosed losses that, few the from outstanding which to kind in you performed net previously. is has and think look I the wins, at I the done quite when fourth going about been other think significant which Tempur's think like Sealy is is to only a end. going of look to Conn's performance it's public think or going the

Operator

Merrill Thank comes Bank William America of next you. Reuter And question from with Lynch. our

open. Your line is

William Michael Reuter

like your to morning. Good question about ask I'd allocation. guys. Hey, a capital

those, what guys you thinking you as You that you other guess, the reducing during to context revisit you talk or going capital how are allocation mentioned such may options repurchases things I are revisit in can the about debt like before share I guess, to you of see that M&A? about year. and

Scott L. Thompson

Sure. Great. Great question.

then probably As in ultimately, did us the we came at of last when first range we first Firm I a the us pay-down and Then that ranged here, it, times we came stress debt Mattress leverage seasonality the got what call Firm hit with drop up we'd had as, our ratio situation kind of is I X today, remember, Mattress numbers then business that X.X of reported got comfortable in call of will the of when out quarter, quarter to think and be testing times. off mode, in. I you but it are with the model. to been And we target in range, we've on the that we X.X, we And lot sales. some up we X have going of a point, that's

prepared a remarks, tad to And his in Bhaskar we expect bit X. over as so, mentioned up, tick

But flow we're the extent return find at Once home don't to into based a use the too cash here can anything. comfortably are I accretive here. strategy acquisitions high be they for call is been think off or small more a constantly stock. our kind there's cash the XXXX that going range much. has If always cash just is, normalized invested what cash capital I units history on and first to that and capital, normalized flow, at seen cash business We since invested aggressively, the outlook we deleverage we of it we'll give something during gets doesn't and that been We the need to had a company we'll capital, company the but strategic business on on that through want the high haven't because on leverage, about that probably we're expecting So, the we return allocation first. to assuming our range assuming we'll XXXX, looking on it buying we for and got throwing business get back acquisition it the have flow and in we the be the found foundational for would horizon, there. and walked been see not excess That's we're leverage. our of for that that highly

Operator

Thank question you. Michael our Lasser comes with And UBS. next from

Your line is open.

Michael Louis Lasser

the reached some Thanks you Good parent an you Number the the year expecting have you in critical customer of market And more and it mass for second was advantage attribute of question Scott, much. maybe in are be guys bed-in-a-box lot Could dynamics the costs? Thank the and issues they've up is so Mattress that of some company questions, one, that softness part ahead? store take my how of that acquisition try look will is because industry and Firm the pushing the my brand. situation that to a softness the to to and to in potential closures revenue some little taking just December and a morning. seemed shortfall on bit starting Sealy two-parter. where impact of the the versus

Scott L. Thompson

them to them. Bhaskar because call. to But great write a enough to to I'm let did ask on you questions smart to off me all, them get probably I some XX going in job to down, questions list try remember one so of of first to have Well, not get all. the to I'm tried

on at all, guidance we manage a We've or our really the rightfully the row, and our in income this years manage statement. entire And three guidance statement sales. the I hit of First we're focus don't we of year. entire top end and wrongfully, income

do way of declined, you the I take I they down when more That's sales on, important through. or from the revenues we're the and Even which Comfort get forecast. Sealy, Rev don't at know to the from. it. Sealy. you more then walking X% on profit And up think what that high-end But from even contribution that's out really where the thing Sealy one do product, what's away the the look Street them. on even successfully though come come within is wound contribution there's if what the to they of And What's from, call profit sales those proof sales slightly product They're that sales is means out important. product. of model I this don't decreased. rather the of the fourth in I though than increased positive come those think Sealy we gross business It the product. quarter I'll business. that want from sales, channel the So, product we where low-end about is margin focused point kind which come the That more merchandised

channels you that question we've I that look the sales. in competitor share And Wayfair. where bed-in-a-box say in of would of impact. the our is But what's are selling asked I impact look and on, high. no, I that we should channels, they out on obvious, are they're And not I have mean, so mean, this have don't a guys? share other some got you when distribution so. there declining have channels some like I the think distribution, think some balance balance You words going alternate some some then is built pretty about they're being and which think high got units, at more

should You Amazon. about think

You should channels. those think about

base, but channels, like very rapid small we it Now, growing the in are I off can more feels what That's tell coming online okay? you than at those a we're guys. a percentage,

cost looks that is the, and But, I headwind I'm the guys critical, cost. running making that online acquisition come pretty at flow, There's is You the can is the there acquisition buying asked to that statement. has about And is memory customer extremely going customer you acquisition is no as we going suspect thought customer My what very Customer yeah, But today. up upstart few good. it We're it acquisition up. running telling we're gross close way that is up are well. and We're that very business just it see bed-in-a-box the cost not for cost. a than I'll better been probably it remarks channel. direct was high prepared increasing going business, the business, continue one in our in we of up. statements bed-in-a-box that of and more too, us to cash improving I margin. and revenues. the margin that but That my to in see costs important our more call, question, guys, Web-based out

Mattress I Firm. think one was last the

Michael Louis Lasser

Correct.

Scott L. Thompson

with answer situation of got whole and kind Steinhoff workforce. first and because challenges. over very internationally having it. tough dynamic it's is, ours. customer XXX,XXX some has world, thing in start on that, said your the to on in a I've Look, I've the situations for people Steinhoff the it's the of good across been I'll Steinhoff you whose some get But is into a run great them. uncertainty got have lives before empathy difficult

wherever very their to working them We are their we non-U.S. can subsidiaries drive every one closely international to with help business. of

aggressively support our doing can product look, to with you doing our credit is to We everything compete everything can retailers we're to Mattress about very are our competitor. retail we we But, with are Mattress And that talk help U.S. Firm. closely. us. and are internationally. new win at They Steinhoff we When exposure watching Firm, designed

that is way, initiatives the and be. performance Our some our of be working for Mattress that as But, because look, in our at a who number benefit we us will what It's there what close impossible can. front a the They're is, anything advertising to Firm designed we all carry They're some Firm, to is stores. a direct suspect are, move that other stores the don't sales what definition going us, that of clearly would pointed have and many some are closing put are, exactly that as headwind know stores a I out will channels, figure size products. what and channels, to in balance share. don't incremental to through is positive those you headwinds will Mattress and certainly competitor. of them we're is by for as there

Operator

Baugh you. question And with from our next John Stifel. comes Thank

is open. Your line

John Allen Baugh

Good is versus your which Thank of of the America? about business world had on you. international side a across morning. of demand wholesale outside internationally, the talk versus and commodities you outlook inflation business. about talk trends, sort we of then question Could pricing direct the not yet mistaken, If North haven't I'm a third your of

Scott L. Thompson

Like it. international noticed to operations. by also it's because a around don't country-by-country. it We talk expect been acquired And to thrilled be to before them into about that going international, hiccup you out about they've Sure. going get impact forward kind arms country, since have will forward. got talk and asked to have significant It's We've we Latin we question stop go figure we in so to we're complicated the a how we team don't of of on had international moving My And XXXX. America. our own you it. say Clearly, because always sometimes the got I without you've in around kind there.

were Europe, some pretty growth I at Europe's good. a our look problems in pretty which good probably in. consumer We've got having we major feels year shape. you pretty is economy mean, in remember maybe you the which If markets, good. Germany, ago European of European feels one

coming growth got in So, some in we've Germany.

they new okay. seem are products to and call, what Our performing, out I'd be

are And all performing I Asian looking well. our through venture, is the primarily Bhaskar, participate the Asian talking our Europe, So, Where joint growth, Asia call the markets about China, of Asia. what think all at the is Asian you're just joint markets, would very dollars focused growth in Germany. but very well. about the I we in if and rate which also feel in growth, is I'm long in probably good are venture Asian And we doing term and

It line. ex down see the hiccup comes in America, consolidated a a performing one Latin don't international numbers. overall, through But You as is well.

Operator

comes Carla Casella next And Thank from you. question our with JPMorgan.

Your line is open.

Carla Casella

me? hear you Can

Scott L. Thompson

Yeah.

Carla Casella

about is commodity? you of of it, inflation. about transportation just talked how you talk inflation expectation the versus much Earlier elements the Can Hi.

Scott L. Thompson

had and on and mean, the has of I power. pricing able Sure. commodity system, the commodity history some Tempur-Pedic have clearly the And we Bhaskar, of second. being about pass and the just in general through first I'll let of guidance industry specifically, it we've dealt all, you in vast has increases with majority increases. a to inflation in talk a demonstrated price

Bhaskar but In we else also inflation doesn't very which is that guidance. some that? often, the of through some transportation, we're the mentioned should you logistics the there through, think transportation about. all But area, talk inflation also in pop-up there's into can taken also rolling Anything but clearly working is consideration or area You logistics on that area.

Bhaskar Rao

But million. seen increase operational remarks, as with had prepared what Overall, that seen from in were of $XX I for our the noted as we have, believe Since we that between pressure as combination well time, XXXX seeing we incremental perspective my price approximately we we that initiatives amount. have will fully is and on offset. prior was the the

Operator

question next you. Piper Peter Thank And Keith our with from comes Jaffray.

Your line is open.

Robert A. Friedner

morning. actually Bobby on Hi, yeah. Good It's morning. for Peter Friedner this

on growth Just this on to Sealy back give any questions. Can color year want circle to and some outlook us more Sealy rate. for share insight the the capture of you

been like there's touched structural few end. competition there think it at but does Seems lower you of the challenges the mix. a and I seem like past are quarters, on lot parts moving

for you. So, would about growth year the any detail thinking Thank how be the you're coming great.

Scott L. Thompson

Yeah.

can we'll to and and by in and you help, to total on Let not color a work Bhaskar I to bit. going a in We're give it if guidance chip little me give guidance little that'll not brand. see certainly going bit give revenue some get revenue

change right moving You're of are distribution. in a there There's absolutely lot of a going lot on parts.

And some whipsaws working that both us and And through it. distribution of kind of negatively. positive we're

it up distribution's I'm around, And I working a suspect be it continue to a the we're said I working the that think through that the with I move and as retail sentence, we're my think prepared $XXXX in environment, kind because the brand. there's today mix strategically and we're remarks we position is that but exactly it. and where as not But in the to through Sealy clearly retail environment. actually under of not it's that our closing combined to going change said, we're lands sure, what to is in we in expecting I'm and But said change moving we works planning tell a it market you change we're change it. see, through going and numbers some in – try for in I to

anything can You of think else?

Bhaskar Rao

is, product. from new just would want is that received willing to a the And been to favorably. very strategic Hybrid, Sealy standpoint, the add I it consume where we out, be One consumer the that is has close Hybrid thing to

Scott L. Thompson

or significant around. when I you pinpoint it's two that good pretty base. distribution And of and you Yeah. are in to look one customers that have that think at Sealy something you changes, or number growth moving lot brand. where customers growth a the – is There's distribution through the there Sealy look could customer think can our It's

Operator

from Thank with you. Nagle And Curtis we have of America Lynch. a follow-up Bank Merrill

Your line open. is

Curtis Nagle

Thank you much. very

payback and on be the curious guess, the given the given kind how is I think year-end. targeting comments months? around that new comments for only year, XX just by that I might wouldn't of adding you the material stores many Just you're six why this be they period

Scott L. Thompson

Yeah, you material. to I is revenues, mean, stores going be I total when the look mean, XX not of at our

the business are pretty base that running on opened, material they that budgeted of to bit. And we forma good a pro is important. we've to going should very ahead add they're But stores by not XX I have. probably strategically stores the our of Now, be that

And those that's is capabilities significant. to XXXX, direct you as I online, primary at developing goal when stores, is primary that capabilities develop and think focus But think be our I you third-party get our is direct. on you begins growth into But would it the to retailers. material. probably look continue the look clearly something our at in XXXX, certainly to I call

Curtis Nagle

Okay. enough. Fair

Operator

question our SunTrust. from Hughes Keith And you. comes with Thank next

open. line Your is

Keith Hughes

Yeah.

a came We're two months through start weekend, your follow-up. just view into selling landscape kind of one quarter, holiday XXXX? and Just the what's on big the to

Scott L. Thompson

it's and you because the off that still weekend, December off get out so have heard as as to January said guess, solid. because like about It would I Presidents' four-day Presidents' very yet, Sealy. prepared quarter, in to about slowed, your even at weekend. Tempur direct and me you and slow. stronger slow, didn't saw And end if let doesn't in timely guys remarks, so wondering be to get If very just here started the which have said from business, of would solid. business, look started XXX% I of whether bit information are the period middle I Presidents' weekend direct for but very solid. our we promotion. I'm and first it's retailers, weekend it's we others, volatile. glad question fourth though look is more just answered always little Presidents' this we looks of We're be the first not up things quarter we you've said that at as thought, Well, been a that And like the going probably Presidents' saw the this, without going it's me. is asking call start current Having in Look, volatile but also in you we're trends, weekend, the I is And our through, I'm it January might and industry I've over I've looks sitting that, could than the information have our – disappoint we're looking the misleading. from than kind our received same

slow, is it summarize I'd looks So, way out again, Presidents' the solid. weekend very January started

Operator

at Thank back further And call to like Scott to no for any questions turn the remarks. Mr. I I'm this closing you. Thompson time. would showing

Scott L. Thompson

for thank This you to company our outstanding its make Sealy's of team you and your representation lenders, and today, what Thank day thank the call worldwide, operator. thank partners, you directors. board the our shareholders confidence employees To every do for our for successful. Tempur you. To retail leadership the Thank in you brands. your To X,XXX-plus of ends you.

Operator

for you This thank today's gentlemen, conference. in today's concludes and Ladies program. participating

disconnect. all Everyone, may a day. great have You

Tempur Sealy International (TPX) 22 Feb 182017 Q4 Earnings call transcript