TPX - Earnings call transcript Q2 2018 | Tempur Sealy International, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Tempur Sealy Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, Ms. Relations. Investor with Moore Aubrey Ma'am, you begin. may

Aubrey Moore

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

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

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

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

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

Scott L. Thompson

Aubrey. with review I you regarding in of morning performance comments second our us our financial joining call. start growth. resetting positioning will will in quarter detail. earnings XXXX and our Good Thank quarterly earnings some the us you, progress for and on Then company for long-term with you thank Bhaskar foundation our

I'll our Finally, up initiatives. long-term wrap of review with our corporate

the results expectations. of quarter Our short overall our fell for

North performance value proud progress We long-term. continue new In product shareholder I'm and Sealy company Tempur the create lines. to America, of especially on to over positioning our the of our Hybrid

Our out detail. gross more our the of which direct discuss and of build I'll continued in all channel, margin

performing our out mostly are initial round new products are now and First, above in expectation. rolled our America of North our significantly

our phase includes band first price have a new the launch recent of bedding large ProAdapt $X,XXX segment of is not in in The Adapt and we $X,XXX. market in entry-level six and our Tempur-Pedic mattresses, performed This years. to well all

share market of our we range. products, Following believe significant this gaining in the launch new price we're

on sold many customer. a In Firm fact, is year as June June, a Tempur to That in in nearly this Mattress as we give we XXX% as you had unit XXXX, perspective, almost recapture basis. units a

well the in quarter the side, first On marketplace. products and to launched our the continue in Sealy were Hybrid perform

our in the is fact, history share Sealy's bestselling band. growing $XXXX Sealy's above and Hybrid a In is it in price

critical premium grow is partners essential retailer's value at retail profitability. environment to higher to highly providing traffic and with success. mattress ASP brand that understand customers retail competitive In the their in a real challenged is Our emphasizing

better features second from pillows, new bases the grew and quarter for Sales bases retail than system. functionality excitement prior new the new completing launched the XX% and bases offer also partners. our bedding considerable in We adjustable are adjustable in as line Tempur-Pedic generating these

about of And in for direct our third-party area targeted we at year a retailers with an ago. growth XX% sales is our our pillow both seeing channel. new business and Finally, development strong line-up results is

higher also highlight further which America future these North through was actions, channel. The our Tempur in positively are All mix given implemented our take impact and we the our we new I as announced expect well in faster productivity In as from would Sealy, success significant expanded second headwinds which quarter able grew despite direct our basis pricing of in as these XX price margin, Tempur to new brand increase our headwinds, our improve margin initiatives, operating fourth gross week, the Tempur ProAdapt on grow be Adapt were should the XXXX. incremental will efficiencies mention quarters. launch we results than lines; cost. them our efforts product achieved commodities, mattresses, ongoing of and and of last to phase points the

this in will anticipating a small XXXX, price are minute. of increases discuss Bhaskar but increase price a in in material benefit impact significant more impact We a will provide XXXX.

our The is channel. ongoing third the highlight build direct out of

bringing we fill premier our direct market retail count stores incremental not ahead always experience While working partners. these generating quarter; store also expectations, retail we as are sales identified North these generating the increasing are and six continue believe Tempur-Pedic's XX stores distribution perform but gaps of and for they to our our new awareness focused will also We've XX. local on for only offering are up to of brand sales business, partners. be total closely local in America incremental network. gaps high-quality retail they our These shopping Tempur-Pedic our and third-party a We June opened during primary with stores focus supportive, helped the in

through Despite and continue our these in XXXX. this the progress in to meaningful results growth impacted help progress, balance Our adversely three several of by factors. earnings year were areas especially this will overall drive

largest in the retailer financially-troubled of mattress Mattress the U.S. Firm, Steinhoff subsidiary a activities in First, irrational and promotional International. the

bedding growth challenges significant with import third; product scale finally, associated low-end launch. headwinds, market. our commodity the of the And Tempur in significant Second;

of Although nature. the performance headwinds our that temporary these believe these are many we items in hurt in quarter,

company. first The best of the the Steinhoff's promotion this losses at our to Firm its unit opinion, and magnitude some market Mattress activity appears activities believe lenders restructuring given is XXXX, has irrational the has focus the uneconomic. or Firm. operating is impacted that other have our or volume Mattress mention, We noise emphasized headwind, in of not Mattress primarily a These In Sealy ongoing created strategy, is This and interest irrational be heavy activities promotional an in discounting unprofitable publicly Firm's reported business. lower-end I'll and parent in of folly debt sustainable stakeholders.

large facing rise steel, chemical, the the sold of percentage experienced these history business demonstrated We've headwind our across costs on, including second large of and we've headwinds rapid Input passing pass cost pressure. earnings wood, almost and commodity industry, prices. experienced goods headwinds in of The a commodity increases temporary have which are is transportation. large a take categories but a and these increases results through to all price in time

had priced import third influx to is cost. possibly below that an face The of beds, low-end headwind we've

headwind increase dumped in to Specifically, are below the in been industry many these China, U.S. imports cost. has in that the we've a from the market view is significant being a It Sealy our of products. Chinese seen lower-price point which imports

be not may activity this sustainable. So,

in Finally, well delay launch products; at created largest and lower-priced challenges: the this a trade while in the new Tempur to the cost launch; incremental history have highest received some a been Tempur's and products ensure retail, our it's is new short-term to product product down launch quality.

costs launch connection during in anticipated, with incremental the As incurred quarter, Tempur product roll-out. our we primarily

a we reminder, XXXX. in to As $XX in an launch incur expect million incremental costs

of our Tempur impacted TEMPUR-ProAdapt North in some new America Breeze ahead mattresses. preforming products quarter higher-end and our strength Luxe of of came the the mattresses expectation, the negatively earnings Next, are the while at new as TEMPUR-Adapt and were expense

but until greater out. reminder, as with in experienced a than roll-out our this these and down, trade We high we've expected. Breeze down are rolled our continue our models headwinds higher-end As new anticipated by Also, and later be entry-level XXXX. year will will early some products products trade phased we Luxe believe mentioned, and previously followed ASP we started

point we the in short delay the Tempur e-commerce the in Sealy robust held of masterbrand quarter. retailers but cost to distribution the to compelling In our new is liquidating highest ensure rolled stores, of out by our in Lastly, retailers. transitional this the team to Quality our I some omni-channel year, the our times approach, retail network as us launch intentionally in platform a our conducted not Tempur until at to very web we offering is but during our business. summary, quarter, with consistent is gaps appropriate business market, delay long opening web experienced launch did been partners. did direct also and the also line, largest our This cost invest as existing own mostly as direct be product web us of we some models, our the in run Complete well to it This continues with had strengthen over the when history. XXXX Tempur's wins headwind are a website customers during we a products fill feel products temporary a partnerships sales out and performing delay second retail was impacted are and sales. our to on our rollout in total our should quality. products network the the market of as distribution the currently floor

we our progress EBITDA. we're will take this of expect and driving increased some making and are transition time, on the deliver to complex While encouraged is by goals that

complete will and deliver the mentioned. conditions confident current in we factors second proud to Sealy performance over as financial Tempur ability walk full price feel that launch, over the call and I in to past benefit to face move expect turn I'm Bhaskar earnings of product market to move the our accelerate significant XXXX, just I the of team's Tempur of our entire us to results. growth value increases long-term. we our we shareholders quarter the the now realize some into As through our temporary

Bhaskar Rao

Thank you, Scott.

points year. the points sales, Sealy to quarter. XX.X%, margin for were per million, $X.XX. basis $XXX of an North On and going America adjusted increased down to being details, sales X%. with operating to prior $XX improved margin adjusted few Global million, EBITDA basis, versus in sales improved the second key the of segment highlights XX share was quarter increase net a Tempur million $XX Before adjusted $X XX basis million from slightly earnings into X% and a Gross net financial increasing the X.X% increased

XX improved year consistent channel channel points by as American American product margin was the wholesale and direct large mix the to This XX% North cost XX.X% Our in positive improvements, with year. grew and to This North quarter. increased prior Sealy. basis compared and was the gross commodity prior operational faster offset launches. incremental driven from was our increases pricing, than brand by as the partially Tempur

increase in price As XXXX quarter inflation, mid-March. we response a effect in commodity to went first the announced into in fourth reminder our significant that of

As price commodity a increase, year, the go which will to fourth second announced continue prices rise in this we effect quarter. into

minimal can addition, This increases XX.X% this the This demonstrates a an like expense structure the currently basis In operating Tempur streamline effect North incremental million by XXXX. have our in support believe acquired we Comfort XXX expect of XXX% operating estimate EBITDA fourth highlight increase and realized go demand was – while this improvements have points joint to the to If new our American U.S. of in we in improved impact price fact, to we been provides recently our a gross to we Revolution, robust improved driven margins the XXXX. sales and these We venture leverage announced mattresses power for to to recently quarter. growth. year. quarter of in I we EBITDA have we price that as specific $XX commodity products, will long-term would the pricing in compared inflation are prior operating a due margins. quarter and absorbing. fourth would to to the offset our had into

new implement develop to Before increased in prior to new into moving ERP segment, the direct system some wholesale X% a a the to the successfully reported different and year International anticipate slight the resulted by implementing Canada. XXXX. the many new sales to increased quarter. system the robust the collaborative and X%. This as was was teams currency as increased International business constant on soon channel and On a we with in system. U.S. this basis in plan, basis, implemented This inefficiencies channel net consistent a effort the We XX%. have

International the sales joint consolidate venture, the quarter Asian increased you If for X%.

allocate returns our have an resources operations of our We make the evaluation completed properly sense. where more international to risk and

targeting low operating difficult with are markets higher divert environments operational We into licensee risk returns, to and relationships.

$XX context, targeted exchange of halfway about through expect reduce approximately total our million markets For this annual these we risk. and sales, foreign will we are

consolidated also we In a has retailer, established joint long-term addition, we attributes. which have believe compelling with venture a

count the All of this of adjustments licensee not in with in head be material professional reductions, to connection EBITDA the fees, overall optimization store XXXX, structure $X In conversions, but accretive closures. EBITDA approximately had and to operating we believe the it million to we including is in XXXX. quarter will

the was XX.X%. basis was of to in Germany. increases expectations, partially to margins. commodity This and royalty these commodities, International in margin to into XXX Taking offset gross points other declined was markets all second in unfavorable During conditions profitability line primarily in by consideration, below as XX.X%, reclassification. exchange, factors our driven International primarily royalty mix. adjusted performed basis the to All decline quarter and was due with our International second unfavorable due and operating This expectation. by the declined This market gross the compared headwinds generally XX margin XXXX. quarter, to reclassification the points foreign

driven up sales, the year, turning was our million by productivity. commodity versus performance. adjusted $XX totalled unfavorable income expenses, product Adjusted $XX pricing was Now from by EBITDA $X mix. offset increased million, was which million actions last was back company's model Commodity global expectations. quarter, which and to and operational This floor million, operating was a partially the headwinds million headwinds, in unfavorable few $XX

for outlook recent the million year has commodity for of to headwinds most $XX XXXX. Our full increased

headwinds approximately reminder, the million coming into $XX a we expected As the for year. of year,

was clearly was XX%. was $XX quarter adjusted have rate Interest for So, been adjusted tax and commodities expense the incrementally unfavorable. EPS The million, $X.XX.

new cash the Now generate flow year operating moving sheet cash back of in million of was in with balance our the launch working the the and flow cash driven prior higher second slightly cycle onto quarter quarter expect compared from capital. we end flow of of generated years XXXX. second Cash and the second by to Tempur-Pedic half to days was driven the inventory debt the $XX improvements products unfavorable North At quarter, of the the in operating by levels three the to by we support This second majority consistent improved was America. of EBITDA items, in of XXXX. down quarter our net $X.X billion

X is to was target leverage our which above ratio times. X.X of Our times, X range

alternatives XXXX. We expect expect be by of position the capital. within we to to range be in the target end a consider to other allocations Then of and

million. incremental implemented This commodity headwinds, EBITDA adjusted $XXX some we of wanted of around range actions revised flag midpoint guidance few mentioned. that to modeling narrowing due and to headwinds items for purposes. a is pricing near-term our I previously we net to million Lastly, the $XXX the million $XXX to

depreciation we $XX the million, to CapEx over $XX be and rate turn total $XX $XX $XX to count Scott. million, $XXX million. CapEx tax XX%, million to $XXX XXXX, call the For full-year of currently million to and the amortization approximately expect diluted million. million of to of including of share expense I'll Interest now, maintenance between XX% $XX and And back million

Scott L. Thompson

Great you, Bhaskar. Thank job.

to long-term our initiatives. Turning corporate

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

take Tempur and Luxe Vegas mattresses, faster, was range build the enjoyable marketplace. continues in broader been we a momentum motion products will a new ever formulation We've advanced the Adapt breakthrough the rounds on share sleep. The our than the TEMPUR-Adapt you The previously, our means to the ProAdapt to week Adapt and mattresses. new pressure Tempur-Pedic and power, and the which which of Las a and precisely customer. so Mart. is that Tempur perfect higher ordinary by two-time foam, pressure of new launched America, year, LuxeAdapt fall out memory collection deliver with LuxeAdapt of consumers balance $X,XXX, more to benefits engineered can next their pillows we'll also feels feature TEMPUR-ProAdapt which with pressure well-received relief in in extremely also At technology, new maximum North for superior offers created Tempur-APR, launch comfort by anticipated we are asleep Sealy highly a expect Later cancellation relief mentioned in deeper as ultimate I relief to experience stores delivers Hybrid, Furniture and this As bases. be and showcased our our easier, support, Luxe launched mattresses, unlocking to drive models. the retailers has ASP

XXXX, be ahead Breeze the featuring the products, we're to most cooling the system of is expect Breeze as in all Looking highest-priced to stages final market. and The retail launch a innovative incredibly the at retailers. market the development the to and in drive to winner excited new our at big Tempur point we most product new industry's Breeze is ASP the and

want models, duration both our cycle. the true and For invested value can entire quality heavily at of to for deliver retail of product new the higher not also in from just to an but year, standpoint of components and Sealy our to all products terms in Tempur R&D ensure win marketplace. this extended we've that We the

continue the percentage the past to significant above initiative revenue We of continue average to highly-desired marketing industry. some brands to a of advertise most ones our three worldwide consider in long-term our Consumers dollars to is of brands. years. the be invest second the plan to as The promote to

distribution all choose. customers in beds to vast represented want our test optimize trying sure products We're which believe shop the influence properly purchase in to to The third are channels. they worldwide customers majority not decision. of initiative making they long-term to choose where make is store to We before channel letting and want

is retailers. top So, our third-party priority

purchase is prefer to a customers products However, there segment bedding growing who of online.

So, have such our and with recently alternative as in we've partnerships online more large invested out other potential building e-commerce exploring marketplaces. channels been platform own

in laying growth believe is ongoing increases of the the headwinds, Despite initiative price expansion we groundwork the new beyond. increases, stores, to initiatives for platform, omni-channel products, is create Tempur iconic customer operating products, brands, a an back last model distribution flexible half Sealy industry-leading several of the and to XXXX Our shareholder in and Tempur and With EBITDA. value. are lives drive the improve well-positioned retail productivity significant

like as I I'd the partner new an Managing call the Ernst retired a member. the and Before with served Young open Gates as moment questions, She Cathy for & to recently as welcome our Tulsa Partner take up board office. in insurance

the in she public tenure, her questions? up manufacturing consumer products, drilling clients open and During will you Operator, industries. worked and transportation, retail for both please and private call contract the

Operator

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

is now line open. Your

Peter Jacob Keith

wanted ask trend Hi. the was Sealy America. quarter, a it pretty Tempur because in wide during Thanks. about up I declined Good of everyone. sales growth and there the X% morning, between to negative North disparity X% the

the acceleration you. you to progressed was new the those some products I'm see Sealy, an Tempur periods? see then did So, in with the just quarter the it holiday quarter, you And curious breaking apart weakness Thank did throughout of or isolate marketplace? if as the sales, on

Scott L. Thompson

for products quarter. strength. weakened last year actually question. thank the Certainly, to the continues your then showed Sealy and quarter new and above as morning, during the started rolled and perform out very you well were Tempur Good

Operator

Nagle Thank Bank America. Curtis next you. with our And of from comes question

now is line Your open.

Curtis Nagle

perform? and for about specifically very that doing doing taking other question, received, question. least was thinking Yeah, this segments called of of Comfort was the piggyback still a at off more well reasonably you the guess in, Revolution but understand & but issue of is well the as well I quarter Peter's thanks or quarter been some low I just but much just I and is fourth to the Hybrid how issues and on little end year? doing Foster Sealy. Maybe is I'll did poorly just very Stearns they it it's kind clearly sales soft an the last for out, of due think, that the

Scott L. Thompson

question. Thank you your for

unpack bit me a you. Sealy Let little for

from that a better we've certainly you're did of right $X,XXX. than trend price Sealy before First That's Sealy $X,XXX all, and a talked standpoint, below about band trend continued. over

was line took we The rolled other Conform. thing it product experienced we'll product the Tempur quarter Sealy new shift from the Sealy the second call so That up some in out we Tempur Sealy until that into is rollout. in as not that the certainly the significant saw product new we downturn, a the had Conform had was a trend Tempur really

a bit a feel which that of standpoint when easier because about quarter you we've probably a is We downward should from the continue get pressure compare little department quarter. the before, this from that's store stores, talked big gets that into to department third the be last compare

one of Sealy's with the the seeing at well Hybrid in the On positive very we channel and performing you Clearly, in strong plus. we're alternative mentioned, in growing we're and mentioned Sealy working also alternative marketplace. Sealy the as area Hybrid sales in to channel continues history. XX% the do them And best side,

and got in puts takes some So, brand we've the portfolio. Sealy

Operator

question our next James. And with from Raymond Griffin you. comes Thank Bobby

now Your open. line is

Bobby Griffin

everybody morning, thank and you for my questions. taking Good

Scott L. Thompson

Good morning.

Bobby Griffin

import headwinds the the incremental the the of besides couple reduction commodities it Firm of months? about about kind are and million At is there hearing and we've guidance, resulted in that you. else now Thank the that of been XQ, million was about the EBITDA midpoint, last of it a at from like at $XX headwind solely $XX million midpoint at it pressures or for is end looks the Mattress $XX discounting versus anything the just by reduced competitive

Scott L. Thompson

Sure, sure.

self-inflicted reconciling robustly headwinds a performed that. what's had I decline if than than see, of Tempur Clearly, launch greater remarks between prepared we the slightly than guidance. expected. We when think has that that sales. of or the in me we you script our else changed. help of kind was can some asking we some Bhaskar the Anything would that little out was costs either is out reconcile Its expected Clearly, us Let you the commodities expected. what and bit less I called with called commodity that you're Sealy more in you guidance. can we Clearly, in we delayed think

Bhaskar Rao

you've or said, Bobby, the continuing with Mattress it say that Firm, relationship has and of then I'd hit with low-end. behavior that – Scott the what the the pressure on the

Scott L. Thompson

of specific well be a that more – to think The execution kind an International Asian other it only dive the I rock be if country, then Yeah. internationally, you would group through. other can Asia that especially joint underperformed. issue, a bridge that's slightly the that's issue, of would other go of and you into only every more into That When really opposed of Germany they're issue performed working area as in country venture. and really

Operator

question comes you. next And Capital with Brad our from Thomas Thank KeyBanc Markets.

open. now is line Your

Bradley B. Thomas

looking of that with start look we to guys cadence that rollouts trade down to? the with some wanted Good Thanks. about the models? and from pressure was the we on price, in I down hoping are the zoom ahead in morning. business think which selling terms more the how Scott, little the And North some you talk if forward, you about how when of trends might America timing new trade much to to average a reverse there could then units, the should of Tempur

Scott L. Thompson

Sure.

volume of good to set by everybody, ProAdapt Adapt ground expectations kind a exceeded our the has unit bit. and Just

the then cannibalization Breeze until That Some cannibalization we out. the has line. as greater expected rolled we is some on we of planned the line cannibalization. of in marketplace that out than taking that as going cannibalization has the Luxe rolled and the be when hurt share that's we And get product to full is and and although, that been said we I've expected been

forward We have moved launch some. Luxe the

so, going quarter. out And in the that get we're fourth to

behind fixed process will first cannibalization through would the that out pick of this and be and then So, up, Breeze be part then we'll will quarter issue come us.

the some taken talked script. We launch, other volumes were prices, strong right and the so are also industry. on strong problems cannibalization having, that have both is Adapt the ProAdapt in which help the general, after moved retailers to with we raised ASP in unit so but a the prepared $XXX We've the unusual about and quite and price was the the retailers with we launch in up as help relatively that actions frankly to

Operator

And from you. Basham next Wedbush our Thank Securities. Seth with comes question

is line Your now open.

Seth M. Basham

Thanks good a lot, morning. and

Scott L. Thompson

Good morning.

Seth M. Basham

is a on My question Brad's. follow-up

Just much is your this quarter? year? the in you of effect cannibalization EBITDA, cost how the trying to what understand terms anticipation And for for cost the full

Scott L. Thompson

been point Seth, third have I out this we've issue. mitigates think And I I we you. – the How demonstrate third increase one I Bhaskar. America. price that in those But as got significant. it our so the done ability on a you number the to for don't pass and brand, just of significant, continues have industry. year, price should pass see Two to out, happens that's our which other manufacturer But characterize in And detailed price tell it followed the on the large would what commodity strength North characterize by the cost future. we'll would really price, I increase in would you that that increases

Operator

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

now is open. Your line

John Allen Baugh

was was affecting I negative course, a there adjusting EBIT, you. reference about are of on year and next little International more in And on in the a royalties. down Could the morning. International you Germany, International, EBIT, prospects then, for could detail side, guess, little accounting what shift into I the I the for on a you remainder I mix Thank Good maybe touched And what's think to you. curious on International, of the that this just then go the was going go year? of precisely margins. bit. into a and the saying Thank you was

Bhaskar Rao

the mean, of little all, in performing world, about and talked with is have that we're the first those is headwinds, businesses always of as of throughout and some countries America rethink in then a and I bit a exception having our International we're lots about to licensee well Sure. International Latin very be got run Germany. a obviously restructure general, should move I we we and And Latin American and then of format. rock-and-roll how

So to better But or I next out work that's to quarter indigestion. that's here the little two got going think. much a in a itself structure

new Germany, into do me bad. up but is probably of was couple But you recollection some is international has We and bit little a here performing, competitive back market. headwinds. little Going in through going really – country issues at when run some a Germany, business that feel got we're and Bhaskar we're And There's on was the more to area. problem, say you Germany I'm and some Germany, product high-profit some my a more this. around marketplace to a to of ago, recently Germany has end was high probably business and self-inflicted. working Germany Germany a we've a pricing become because growing been other turned that plans in years weaker that the in clean with

Bhaskar Rao

That's correct. It's mix. country

Operator

Guggenheim question from next our comes you. Bob Thank Drbul Securities. And with

Your line is open. now

Robert Drbul

morning. Good Hi.

dumping some you in new of questions, in a retail expand of really I or the and time? seeing targeting environment product, seeing mentioned is you're Chinese in point who either this those of that couple pressures the the a of and I either demographic at it Just can abate are the promotional but there? think, was And terms you International, of relationship sort are upon think of you these you that

Scott L. Thompson

that beds knows not with that I capital. an very joint Clearly, retail needed some It called And we're to a premium high-end – retailer. material, a in talent consolidated But it'll formed some Sure. how to management the and additional some don't SOVA. acquire it's or thrilled the a we be group. to the bedding some thrilled there team Great end. retail material venture stores Stockholm, experience, is them. premium with sales International although we at think question, retail entity have We're financials did be talented high a partners to

in very we might really you America, little bedding, and about demographics that's premium brand very we the a And alternative because of belongs. our think years go you continue worldwide, were Chinese in that you back not Tempur into experience. like think, think So area. to a Tempur premium area flagship it issue, stores North import on bit we that's I The focused that the the couple Chinese where imports, channels. work in we're the go When if focused

And some our into to channels, team I in refocused have as north the alternative of you alternative We energy grew of we XX%. channels. mentioned sales

in we're the think So, game. I

should China. from that some couple quite they sourcing I we'll single I us obviously channels actually over reached have that with alternative of the distribution, country that in also for in area that make products. mention of next a are to branded out risk the in marketplace. years. think their And very interested bit alternate progress competitive I can have be think we because alternative and The channels looking they're

in margins the that, average. through work that we'll fleet channel are So, at

were interesting catch to area but and an in the hard to up. channel we working party it's that for So, we're us, late

Operator

with comes Champine next our Thank you. question Laura Capital. Loop from And

Your line open. is now

Laura Champine

prices trying Thanks think through? three push mix for referenced you're taking year. my raising that, Scott, to I that this offsets a your confidence increases increases you the in won't lead fashion deterioration to that What's your already in question. this price price

Scott L. Thompson

see Price you like commodity issues other in manufacturers, too up. price at are we industry increases look doing. and clearly followed great what where yeah, feeling alone, been obviously the mean, I have move you been and look they've when you mean bed-in-a-box, question. it pricing you even our is I do trying increases, at can't to look have large – you by aggressively price Yeah. know they to areas

pretty good So, really I done feel what think the we've the at you move if unpack maybe. up about we look so Also, is it far. price Bhaskar, increase, and ability to you it what and X%

Bhaskar Rao

right. That's

Scott L. Thompson

– with think X% so we exception across bedding price entire what going material of generally the deterioration with don't there's any and line, not the are seeing to we it's a in cannibalization. increases to really deal our did Maybe on of the order unit. not and just volume we're It's customer

those think pass issues are dealing So, the and But furniture being costs any people with bedding mix expecting all issue. able history we're to I commodity of a have don't through.

Operator

you. Thank

Our from UBS. question comes next Michael Lasser with

Your now line is open.

Michael Louis Lasser

It's for multiparter. a lot my a question. taking Thanks morning. Good

some Firm. discussed of you about your activity promotional the guidance. that aggressive at assumed within What Mattress you First, continuing have activity

the still you Thank be can three, will assumed your partners. update push that to numbers rightfully your reconciliation which get put particularly out out there's you give more you be to too it of potential the would couple quarters high, that point because next a you pointed profitable with to for an us have And So, disruptive there? less a more think, are as on over you. at impactful you Firm, Mattress the order so retail Two, you you in the much do industry? it price and to products can for

Scott L. Thompson

we is and we trends have consideration, appropriate are in as on trends with try into change, guidance, test reasonable questions the to can and of very ugly, setting current on we just wouldn't the bad, to to unless going guidance. range. them those a first good, five one. fast I for to I I'll as we can do kinds change model stress guidance I do writing and your in you, trying believe assumptions tell a a all into it. all best environment guidance current And general, we I'm find And what of model. time different reason Look, that take would Any in

can see Bhaskar, the remember you're And probably to that's with think of to best going if have way I the to I them. help that. answer some questions me

Bhaskar Rao

Sure.

Scott L. Thompson

potential with this friends was think, for reconciliation Mattress The our look clear on very next from at I've question the Firm. a And I beginning. been the

worldwide. And history relationship We I are with Tempur Steinhoff they've do have the all States than wonderful today them a over of outside with world. and been United relationships business stronger the in probably between you great Steinhoff Sealy. the the of company those that We tell would

we when of criteria job. somebody at them customer, our and through and you who to all But other to divorce would beds There's we wants any to Mattress selling meet look can and time, competitor. any treat the cannot sell products eventually. in do would piece put they good to you the who that's Firm. to the pay every they you have divorce One, the doesn't pay like customer we up. of tissue no me, show kind same international three our sell because first it Firm, So, same you we're to business scar they're just said, the beds, a of Mattress back go

your So, and next there's strategy, they test. thing are with and your financial brand look a with you strategy The does going at align is long-term strategy. what long-term do to their

people sell brands to branded do pivot an to going if into not products they're all the value private products. is low and label environment, You're to going use high-quality to

shows look contracts. we honor management do at that the those sure So, our up, believe that we That's team that third long-term to strategy we people in team. ability criteria align you through them long-term if their is, their the you every put through. put would same their the with everybody And filter. we make then and up, and And the and retailer that strategies one

it what I factually percentages from operating think trailing – Steinhoff, you the million is, release month, what so the when tell the Mattress know look on don't losing All I are. a can loss. X million about to the potential was you number loss I $XXX reported the is Firm at $XXX annualize a organization's So, operating

store When now. appear would of of out our run would mattress they're right out out stores is it mattress own look price what average comes our at at probably running retail our store, that working. stores we is we're of I Xx and per look that doing our not $X,XXX over So, what Mattress Firm

at you operations we're Sleep Number is which our at units, attachment at a the our by per divided XX% their revenue rate in and our running like adjustable. If retail retail way $X,XXX look look stores look profitability, on sold unit to likes you with

good the of same we're time retail, to ability we're in pretty the So, selling up beds. about business stand feeling our at but

out, demonstrate And on last we're different marketing it that the pricing. always products. I extent with than we're don't some product. that. team the that think prices, limit we agree your would think marketplace. very do Sure, when mean, But the – Breeze hurt you price raising can't don't – team to And able by know Breeze certainly Breeze have to be would to and with the an I worried new you'll is that we'll old just to comes R&D to question definition it's too there I But products up the had I when one, able pricing be and product that. about think think I improve see I actually the

yeah, the up may So pricing with pricing the the line products also quality going up, of certainly, but be increases. the in are,

Operator

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

open. Your line is now

Carla Casella

dumped goods do others and China? in Did tariffs Have those at the – they that from domestic low that coming some you low think being as you you say Hi. seen China you Is priced manufacturers on product mentioned do have that have, all? that versus greater abate you from And that impact cost, a China?

Scott L. Thompson

some they dumping, so there's that, is say have evidence certainly don't I'm bit. will little products. there to not say I up people just enough but some indication are me Well, that that clean dumping – let I a know

but business, China, And that in to going Chinese consolidated them, probably import let we do you. a talking are I Canada, would We that I don't whatever have believe a that import call if a in share some based significant will know China. most positive. to have look should negative some abatement you're not of brand, answer and we tariffs obviously, north material. you would And look not basis. coming bedding tariffs as then, from it's bases at I be look recent know some adjustable tweet little at up seen net neutral, lion's issue, which environment caught net a understand the out directly. you on probably guess, base would anything a be of the But hard should fixing on for on Tempur import but me we worldwide question tariffs worldwide. and beds, at few to benefit unpack the issue for out million, when be When think tariffs tariffs today based of any the In I'm adjustable China come general, a but to bit on some impact in going Sealy as changing from is benefited, tweets you we of the issue say do Sealy change we what to on And we adjustable could XX% I'm I think get Tempur I the one of bases but the minor

So, on today. how I pass cost we just tariff kind will adjustable the base that's see industry of the on imagine tariffs the

anti-dumping to So, say foam to any Chinese maybe how depending I'm the issue going net the that there to activity. is on slight neutral a positive extent

point. that's think it really or in tariffs I that different issue and on not fully I'm than at this a a to position comment analyze

Operator

Piper with next Jaffray. a Peter is question follow-up our And you. Thank from Keith

Your line is open. now

Peter Jacob Keith

Hello, Thanks. again. Hi.

that EBITDA exactly clean-up $XX we shift Thanks with apart $XX QX saw lot. you and QX. break up at beginning was $XX quarters to I out point? – back just And looking of QX, a secondarily, a into Bhaskar the then questions frame for you million of if with you had this and model. two maybe big million numbers could of some So, two in how our incremental can launch the it At wonder costs what up QX year, the for between QX? how million

Bhaskar Rao

sure. Sure,

way I about is a far I got about in incurred. so be of quarter, our of the launch fourth the launch phase, that the balance anticipate be the the little full-year Luxe about the $XX which will conjunction and would the in to next that with in full-year. think for think at As we've still cost bit more million for And we're half the it looking launch is I cost we've seen

XXXX that and of to transition say to launch in to Scott out performance that the that and U.S. a will Tempur what and the retailers I'm of out with are with on saw Moving us. coming year I noisy are that you our at XX% going floor. What is as with was said, behind we pleased models is we and the our the item, in is we're majority growing the say transition very very correct, be pointed floor as transitioning as very, happy

rear-view at the in mirror. So, we're looking that

Operator

Thompson you. And closing over gentlemen for would I Thank remarks. and for back call. today's any concludes this question-and-answer to to session ladies Scott now like turn our the call

Scott L. Thompson

Thank our we've did We successfully. outstanding that the successfully demonstrated new turned we're well. the got an the system companies the during job that business get power. We you, Look, and logistics pillow done many implemented our very operator. the Canada protecting doing margins, plants base around, We've of the management business turned of not – see an our really team interesting quarter. at pricing and ERP in new got around, excited products about volume performance. quarter's We've Tempur very are

continuing to above growth. and perform are significant drive stores internationally making retail changes our long-term Our organizational to expectations we're

overall, report. the about very good feel So we

your thank representation for you. Tempur for Sealy's successful. Board. worldwide ends and X,XXX retail make you our confidence company to almost our shareholders call outstanding to you in This Thank your Management So, for Thank Thank partners do brands, employees the and everything you With lenders. of this you. our today. to

Operator

you today's have Everyone, conference. Ladies and This program today's does disconnect. a you conclude gentlemen, and day. thank participating for in may all wonderful

Tempur Sealy International (TPX) 26 Jul 182018 Q2 Earnings call transcript