TPX - Earnings call transcript Q3 2021 | Tempur Sealy International, Inc.

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Operator

Thank you for standing by, and welcome to the Tempur Sealy Third Quarter 2021 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference to the host, Mr. Aubrey Moore of Investor Relations. Please go ahead, ma'am.

Aubrey Moore

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

on After Chairman, are variety President could may CEO; of Officer. includes will forward-looking involve today to This uncertainties, me are statements safe for affect President XXXX. the These differ due and business. are remarks, call open the Scott Financial materially statements Vice Joining forward-looking call Executive These harbor Private that including Thompson, and Securities company's discussed provisions Litigation Q&A. Reform of to we Rao, company's the and Chief subject that in prepared the the actual adversely SEC Act results factors of factors and Bhaskar filings, the forward-looking Statements commentary headings Note made. any found This morning's non-GAAP press no as it SEC. and Form XX-Q its the The Risk information on and of investor filed can at which posted undertakes annual statement reports under the website include Regarding the of Reconciliations Special reports Form speaks Forward-looking is Any with company's company release, will this quarterly XX-K accompanying forward-looking Factors. on on statements. only to non-GAAP in has date be the information. investor.tempursealy.com obligation been financial update financial which the and also

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

Scott Thompson

performance. review performance our detail. record third Thank few of with earnings quarter begin you more joining financial call. a you, for us on Aubrey. Good quarter in Bhaskar our our XXXX everyone, morning, thank will and highlights financial then third I'll

to America the points. blocks growth. XX% of comments the with strong across sales report North conclude brands, deliver strong third In year-over-year, on pleased International Finally, continues across quarter results and results. quarter our some and to I The price around all growth with world. and all for team performances with the future building robust third XXXX, We're segments will grew channels

was Tempur-Pedic the year. note adjusted now an I'd products in our sales $X.XX, to worldwide. sales initiatives, earnings X EPS I quarter third versus a last from industry was quarters. of strong period we've XX out a by highlight the same grown backdrop strong XX% also digits the performance Adjusted company for Our increase that driven per the items and should bedding share quarter. solid couple double last and the of U.S. demand of for for like

to Dreams in pleased our are integration the officially growth our family. vertical omnichannel furthers acquisition we to the recent Sealy organization, The welcome of and First, U.K., the addition strategies. Tempur Dreams

well. and integrating perspective. We are it ahead line from of a its both bottom is It's expectations, the initial top business, and line successfully performing

We track expect combined to profitability. excellence operational drive of further synergies, to record over leverage time unbudgeted will realize our which

material. market and Sealy layer our hybrids. price wide This new with lineup of America. intended offering the new we We're in of launch planning line new also the niche early to customers, with in address, in looking Starting to consistent products, XXXX, grid gel point. a feel are price leadership a a legacy in of includes industry industry-leading new to a launching a which of by America of markets Sealy-branded world. North premium we're We products Sealy brand's Second, to and sourced the support with launching a is Sealy new lineup extend products highlight excited Furthermore, North plan made to around to our plan eco-friendly some mattress target mattress consumer-appealing launch we pressure-relieving collection best-in-class at a the a material. non-premium mid-market emerging proprietary addition of targeted responsible variety at the superior designed with niche to to a nontraditional point for consumers innovative

Looking ahead Innerspring prefer is & brand Foster competition, of working and appeal from also a consumers designed the mattress. late products. Stearns traditional next These to distinguish line the on to traditional XXXX, team that high-end further the Innerspring our to products are

While Foster through sales advertising. this awareness a of have further introduction is and by continuing new ample this the dollars, record year, Stearns supported & to expand amount on consumers' track advertising to see we products of of record opportunity segment

International. to Turning

and products As U.S. we've at to the markets success wider previously feature new products great International are Tempur offerings. sold year. next be a These that the Asia-Pacific price in our we and Tempur a line experienced in European will innovative announced, compared legacy launching will of new technologies Tempur-Pedic range

Next, capital recent allocation I'd our like to activities. highlight

approximately share we've over XX repurchasing in to reduction allocated In same acquiring months in ratio. billion investing million the dividends average million paying operations. During bringing repurchase of per the we At robust total $XX leverage an the shares, XX ongoing $X Dreams, repurchased third the shares, our share. last quarter, our price capital our opportunistically in months, of our at last earnings $XXX over a time, drove our $XXX and

the opened X Regarding manufacturing recent XX investments months, in new facilities. we've the last business, over

will inputs capacity, making locations. in to products. we chemical are chain broke key disruptions on The our expanding our exposure several our stock warehousing our overall for American within products. investments we outlook is XXXX. of dramatically footprint We're existing And future to which foam-pouring safety leading long-term allow strategy service operational Additionally, plant and planned expand reduce demand that investing hold see our a of we and recently industry's us Crawfordsville, expand are and certain be ground in part domestic brands manufacturing we're third our to in broader to by the expanding to today manufacturing Indiana, to space facilities which operational capacity also supply North

the grew as wholesale robust brands the As you quarter. ranked with given in sales and our are a pleased which especially the The last Tempur unable this fact year comp is in same and demand #X best-selling to business, mattresses States. of year. strong quarter we all know, the the to the ship market as that currently highlight #X Sealy and prior were XX% period these United performances, next worldwide We're compared

backlog. As took market to the the on North end, expected, our Tempur-Pedic has backlog. backlog our exited issues, allowed us Sealy working of off Unfortunately, quarter. chain record seasonality expanded normal to allocation, allocation. in Tempur-Pedic for and Thus, in supply Post make products we progress tremendous the demand quarter we the and with quarter recently for domestic be down customers continue on a customers to the America third due significant

down quarter positioned better by fourth meet to $XXX XX, brands, has and enter as Across this our of the both the We quarter about backlog consumers' expect from in end the to second XXXX of September increased XXXX. fully work demand. million backlog total

Turning to the item final to I'd like highlight.

excluding Our last a sales. rate growing has XX% quarter's third basis, growing direct-to-consumer years. is annual run the XXXX of XX% With quarter, over direct-to-consumer grown performance, the generate strong this annual another track $X rate On X of growth billion over our XX% compound quarter over to our Dreams business and an had of sales channel now the acquisition. record quarter third on direct

a and both company-owned had growth standout our Our same-store sales stores double-digit company-wide drove stores legacy performance year-over-year. quarter. Dreams retail The this stores

also e-commerce operation Our very quarter. performed well this

order driven double-digit value. sales growth improvement continue average We conversion and see by in robust to

to investing brands paying commitment in of off. is Tempur-Pedic presence Our online the

again we the turn unrealized once supply in our to estimate backlog, quarter. our you us it away $XXX million While business our wholesale from quarter. this remind sales our increased over constraints about $XXX constrained this have sales with higher was again that could and Considering We forced period. results, and chain sales are have America been that pleased this million. by The I been should once direct both the North in

XXXX, Turning outlook and a our grow that to impacted approximately sales pleased COVID. our by XX% drivers. I'm period to not XXXX will growth reaffirm expectations over

and over earnings industry. X-year the period growth has the sales overall significantly outpaced Our

our last partnerships. of estimate about So the retail half to what a growth. I'd is you to attributable to X-year this new moment like said quarter our we components of We growth about take remind

our our to We worldwide comes from Another deploy brands driving our promote commitment our the serve; to attribute highest-quality key our with third, products develop our to bedding drive initiatives: X-year first, industry. XX% prudently from powerful and fourth, growth in addressable second, compelling platform; optimize gains that estimate markets. EBITDA derived We activities from we M&A and expected X previously untapped marketing; the broader capital. and performance distribution markets only growth all the of XX% omnichannel is of our share about increased

robust years. solid flow Our cash the generated clear over supported free growth we've long-term explosive have sheet balance initiatives, the X last that and

over and to and EPS to expect that, double-digit We sales I'll it growth beyond. XXXX With drive turn in future Bhaskar.

Bhaskar Rao

the I Scott. increased $XXX highlight like per compared XX% adjusted a prior to to million. Sales share items to earnings Adjusted you, X% billion. XX% over as to increased $X.X Thank year. And EBITDA few $X.XX. would increased to

margin items the These to year. increases quarter's issues. with and As included: records customers driven a price were expected, brand customers few last inefficiencies our this unfavorable dealing margins operational by supply chain the compared provide supply while period to service in issues; impacting to benefit; same there the again, to best transitory mix, without chain possible

expected, been pricing neutralizing our to actions. through dollar impact commodities As the we have

best change no for dilution dollars. sales shareholders. XXX points strong. change business is quarter. bottom margin also profit Our the the with that for reiterate year-on-year margins want driving rate returning gross basis accounts value line way I was in consolidated gross to was increased to underlying remain and the of of incremental impacted the for expected, This as in This gross belief the margins profitability our

America. XX% decline reported XX% North driven XX%. items. mentioned margin basis, XXX basis a North increased adjusted gross wholesale profit the was in by the On the points channel direct This to the XX.X%. American third previously to turning increased Now sales declined increased quarter. and channel Net

actions last to over offset have input months XX implemented costs. several the We pricing rising

the neutralizing beyond been have prior prices our commodity dollar we While have forecast. impact, increased

headwinds expense fourth a actions margin compared pressure gross adjusted feel the decline decline previously operating We bit of quarter discussed, to offset in as year. a of in points to XXX basis quarter. I America the North by cost we the was operating these additional pricing expect third although is will XX.X%, leverage. XXXX, driven margin offset This by partially in prior

on basis, of acquisition a increased International. Net On International basis, reported Now XX% inclusive to currency increased Dreams. XX%. the of a sales sales constant turning

the prior compared was to declined profit. gross by margin change and driven primarily decline gross XX.X%. pricing year, As This International to in the acquisition without of Dreams our benefit

declined in a operating the year have current expense to to acquisition deleverage XX.X%. operating normalized the returned of This was margin costs decline, the gross Dreams, decline level. International again, Our in driven margin and by as more

price of which range multi-branded Dreams is the Their retailer, historical points. variety of a products a major International As margins a internationally. is our year-over-year in margins, than margin sells driving profile across lower change

Dreams, Asia margin across was expectations our the Europe with and in Excluding Pacific. internationally underlying performance both line and sales

moving sheet of items. Now to on the and third We generated quarter flow strong $XXX operating million. cash flows balance cash

inventory would our the third less quarter, in was are we and very support increase light leverage the expect sales ratio billion, to credit was of expected inventory, XXXX. that At the consolidated and running the debt under our year We cash growth end $X.X on our would of X.Xx. by facility our days end

balance markets. the Our from capital resulted sheet signals strong performance positive and financial in

upgrades First, company's in resulting credit we agency the received ratings the history. in multiple the quarter, strongest during rating

impact the which bond, incremental This Second, market. billion XX-year transaction $X liquidity the historically third long-term quarter. we million low in in interest of issued end $XXX was and QX will by record This resulted significantly of bond X/X% have rates at secures an near-term $X.X of at the our an oversubscribed the of million flexibility X XXXX.

temporarily over incremental funds holding EPS. to excess time, invested are And cash. will be these We drive

Now guidance. turning our to XXXX

remove between quarter year. guidance for sales to XX% at our XXXX XX% to $X.XX to third performance, elevated the We I adjusted of costs expectations I the the to will large quarter's customers We EPS $X.XX, midpoint. expense carried allocations. have note over on exceed reduce expect the unusually third interest through our expectation strong we before. to and to balance off our the work that rate from with incremental our full-year and as includes noted increase incur of fourth a Consistent we currently backlog headwind of want updated from expect off our and backlog prior growth we adjusted be be commentary, and to a we the service quarter this growth expect the $X.XX EPS the quarter in customers reflect

in quarter fourth versus in of XX% grow EBITDA in to At prior than and fourth year. result in the quarter higher our to the being this this expect over We profits sales the the guidance, the third midpoint implies quarter.

a like I'd Lastly, few to modeling flag items.

between of Scott. currently For million expense call diluted we to million, million about total a XXX the $XXX year turn rate about that, $XXX over full of XXXX, be interest and $XXX a $XX and share XX% to expect back tax With CapEx of I'll shares. million, million, the D&A of count

Scott Thompson

you, our details for to about some Thank provide additional growth. Bhaskar. job. Great want future I plans

complementary have that We will and in blocks our growth building for next beyond. we drive in business place believe year

into segment launch us market super-premium The Tempur reach the allow a The new substantially products European ASP our customers, of new first with maintained of addressable the products price premium major in will increasing and new have ceiling and the of Asia-Pacific expanding will internationally. a This line building block to total ASP is range our the category. wider floor our markets.

launch these will our international in invest in and products across new XXXX. We markets

of is first to Second we by generated - in in OEM to our believe In $XXX key in believe best-in-class decrease we can We grow building Tempur to block for year. XXX% by and recognized the capabilities the advantageous spread earn expected more product that due per fixed market by the our $XXX to into allow also non-branded unit domestic costs approximately our initiative OEM expand our of continuing we is million continuation to and Sealy XXXX, manufacturing XXXX successfully product. of million opportunity the XX% our continuation sales market sales whitespace cost serviced fair us OEM. branded share of This bedding our drive to agreements. our and This utilizing for manufacture logistics as will supply is we market.

opportunities block supply products chain able the growth customers building to and our bringing through and away we issues, Beginning third Throughout non-branded demand approached is we've XXXX, service to had the reengage us in demand wholesale for that on brands and our past on e-commerce service in customers American with future those anticipate have we'll new North fully with new expectation including the allocation. a of and had our robust our products. The to of our customers, existing entirety about operations, retail being turn be able and who XXXX, channel. because brands

Sealy to return both expansion for brand mix continued We building our dynamics channel. supply operations. block as improves fourth The also expect direct through is to normalized a chain Tempur and

we As before, bedding profitable the I've said direct-to-consumer one we believe most world. that have of the fastest in growing, businesses

and opportunities e-commerce our stores to both robust expect have We forward. company-owned going growth

is about same-store will Our growth new organically, increase of operations our currently directly worldwide store e-commerce from driving purchasing count continue both operate XXX double appreciation on and Consumers and, overall in are over customers converting of see our online importance technology result, searching brand, increasingly - annually stores investment retail counts. a a have to block while for continued help growing their sales consumers expansion store years. are building for drive in further new to sleep interested to next the solutions that retail wellness We growing and growth opportunities future health to focus a digits several our and improve The will sleep. the are fifth as and for innovation.

backed solutions century strong by knowledge a legacy have industry-leading provide of R&D and capabilities. of over that consumers, breakthrough products sleep delivering to award-winning We a

launch to XXXX bring market. solutions drive relentlessly product planned Our simplifies we to will to consumer-centric continue innovation how

businesses enhance We capital that repurchase believe via expect In blocks that value. core sustain run building help strategy execute well basis, company the sustainable and key which Lastly, environmental, double-digit to our want and, growth these the competitiveness. and global closing, on EPS XXXX across supporting sales will contemplates to value to continue opportunistic We've growth. returning balanced allocation on I long-term touch on into We allocation our strategy. our our for acquiring to factors to dividend and in ESG. share social execution we briefly shareholders very capital deliver position embedded business, plan, a government and long-term

I a ago. made mattress eco-friendly For collection discussed moment example, sourced We a responsibly our material. new

us foam-pouring local employees. We to our allow also approximately new hire to expect U.S. facility XXX

national Our energy will employees year. it's to the basis. is This is average annual above please include which salary that, about you will efficiency for also on our improve the average, operator, a up state-of-the-art questions? equipment, manufacturing facility U.S. for expected $XX,XXX a product per and With call open

Operator

Instructions]. [Operator

of from Bank comes question first Our of America. Curtis Nagle

Curtis Nagle

have what past, 'XX of se, per print, think in of the question - of beyond important. the which think I sales and new, I terms it's is a comments, it just earnings. guys you sort on in Scott, said is right, sort don't double-digit but and in

So And issues that very are just then Yes, I the guess, are supply quick what gives hitting biggest one the Tempur on at a the chain confidence? moment. it. what that's

Scott Thompson

question. your I quarters is I at out our and from XX ninth look growth. confidence our think, of reported, standpoint. this about it we've going for the the you sales We I Thank into mean just mean double-digit asking 'XX. you're EPS had last

with of lot the a momentum So within start business. to

Tempur. the you about in and America been in an look Sealy. our backlog clearly highly constraint. tried at at And If had increase growth primarily that's customers impact think had were constraint, outline sales, $XXX third North constrained. We of to XX% We million, particularly the then of we primarily I quarter, that we've driven but by on

for organization probably the million, XX%, realize the to we if in the that the quarter, underlying to I mean were feel demand. and So $XXX demand able was our we wasn't closer you really constrained put product

capacity. can comments from our very to see our hard working increase You we're that

is, produce, in relatively that's the And demand. something it's kind normalize. 'XX assuming way feel feeling really very into worldwide. business, virus at is our X it ability that we're in particularly assuming business prepared which Tempur you about we annual is events, a control years, chains running control growth have it macroeconomic and I of, about just same-store about go very rate remarks, supply I'd also the the to total we But sales. good, over our direct and no of assuming So XX% good the obviously XX-plus the out we the look last that's percent what, say, think over, called the are if that compound trending stores,

So in us give confidence. retailing our expertise to continues

you're that. because an You question at skillful also slipped in extra very

in threw chain, of kind you general, the So supply in getting better. is would supply say, Look, I a question.

we have the bit fragile, as is realize are still improving. world something up all it in about. think know that I get the chain a supply chain issues to today, sit we we little shaken supply could the by so here don't But

As we are I seasonality, we've out America, called hoping normal think get constrained. we been Sealy last where in we North quarter, particularly

We relates the seasonality up - normal But time have rapidly the some that in good week fourth Sealy. last what, quarter in it gotten is year? it takes constraint to And that's they've unconstrained backlog the and Sealy, in or first been probably in starting caught America as customers North our news about so. the the on we've about off a Bhaskar,

Bhaskar Rao

Correct.

Scott Thompson

get about last times with Thank we've drive feel the Sealy in struggled and year. for new really to America our good So delivery to thrilled out back over on to North question. you the your salespeople customers that

Operator

Our Wedbush comes Securities. from next Basham question Seth of

Seth Basham

quarter. Nice

on Just guidance. quick the a questions combined of couple

of moving about these full EBITDA should margin outlook, And First, how relative the given quarter fourth pieces? some secondly, that for gross we why no year? then guide quarter the to on think third the explicit

Scott Thompson

What the question? last Sorry. was

Seth Basham

release results. the quarter in I for see with full you with to second the - year. press had guidance that EBITDA third relative your what didn't the

Scott Thompson

Okay. it. Got

Bhaskar Rao

Sure.

we the $XXX in way that about we accumulate about think as the called is flipping side, way in And percent the is, quarter backlog out, did the So on Tempur think million. that's the just quarter. I fourth fourth easy and to about GP

should X. perspective we see So from from to X a sequentially, GP going meaningful improvement

we EBITDA, full give for a year, the basis. plus the way to As would year-over-year said did XX% it on we where grow fourth quarter to think relates a we about

get months X of sorry, So X add the first if quarters to it. you first can - you actuals,

Scott Thompson

EBITDA to simplify towards our Yes. And we're trying and on thing, move I more to pointing going guidance think the just EPS forward.

Operator

question Griffin next Robert Raymond James. comes of from Our

Robert Griffin

long-term do lot that growth you growth cash more Dreams, good EPS and of a a margin of see term going model out, you is question, long in here think peers? initiatives but opportunities? algorithm on laid quarter. still OEM, drive in robust EBITDA the powerful A and business, of margins Or low the some the this let's in When generate above on you Congrats hold and XXs, the brand of flow interesting stuff.

Scott Thompson

about Great think basis. question. The way margins is unit we a on business

And which those customers' And that's We're the the and I are business. business, think business than GP. So what there's preferences execution. business a But units. the margin but various business. is certainly lot to into great consolidated the business be as mix an units our Tempur total, know example, just going as our margins on really getting the OEM based in opportunity lower are started OEM a how to determined about in don't for the us, of

So blend differently. it may

what how a see answer. tell difficult they to them continue you roll when at individual the we up question mix in at So individual would opportunity budgeting and businesses, but is margin I we process, our businesses point to look this through is I

Operator

Atul UBS. Our question next of from Maheswari comes

Atul Maheswari

XX% slows? the fourth third you're growth be as quarter about demand is Scott, you the fourth assuming the case? demand mentioned core well? work guidance grew the when nearly - demand revenue rather So quarter nearly why expecting some And but so, or implies grew would that of to the that XX% if through the quarter that XX%, guidance backlog

Scott Thompson

going into Bhaskar, normal call the - what mentioned, seasonality to into is, returned bumping as in have quarter. you we've you're on can - we and weigh fourth I this think what I

Sealy, what some that into robust we is third he's normal quarter quarter, right you Tempur has into? in Is come the - the as usually know, primarily third as most the running you probably for felt the through. have most plowed seasonality, And The quarter, industry.

Bhaskar Rao

Absolutely.

Operator

Piper Our from Peter comes of Keith question next Sandler.

Robert Friedner

on Friedner Peter Bobby It's Keith. for

and anything to Just strong. very out wanted around feedback to the we been low-end from trends there's with call leading between to the two hear that a premium versus bifurcation sales ask as high-end retailers if high-end has there

any if wondering divergence in trends X? starting between you're So to the see

Scott Thompson

my to Yes. data is exactly it. what feeling But you prove I don't said. have gut any analytical

think high-end best. is doing I and premium the

I might think some the cooled little of the from at a lower stimulus probably good, what is end clearly earlier it's been but still year, have off but premium checks bit in leading the way.

And focused may to experience consumers to be some and and being health that it of as from on more spend with on yes. willing their pandemic, health wellness relates the

the I that's good more end. trend make a but the well margin, Because Stearns we within And obviously, & think are quite the Sealy and frankly, Foster positioned the certainly industry at absolutely not and product on manufacturers. higher-end Tempur true. that's dollars, in just for premium

Operator

next of Keith Our question Truist. comes Hughes from

Keith Hughes

about product. gel Sealy I you that the you're just be get gel, questions the talk when you're in of launch, SKUs to share? any many product think about out to willing the that the new Can and how details market part other you going had will

Scott Thompson

kind you determined. SKUs number for the of it. a be product call is will tell of word it got been It the hasn't slang developed. kind We've Exact crushable market. product, middle Sealy I'd Sure. of my wafer

to here I material We it be expect think XXXX. it's find today. organization. worth there's one as probably I in don't best It's would make we believe a a there bedding testing to that niche those where we market the we in in make market manufacturer it sit another the attacking. don't the to big in It's of product. as of in think if sure opportunities. the not largest be there's we class a bed world, that's And examples can't it's

going And to we're so attack market. that

Operator

next Markets. comes KeyBanc Brad Capital from Our question at Thomas

Bradley Thomas

perspective could America channels if I next Congratulations I share talk business to bit And a about more your DTC bit the in back. year we here. you most momentum little look Scott, could you just as bounced in has North brick-and-mortar detail a North unusual optimistic all strong was a year. out channel very was was little hoping where year been a America. wondering from It's the more you're about an ago, in as on

Scott Thompson

to clearly online. premium kind a their a of Gee, without that's in-store, and about it's you as know but of more on and question. a mouth. lot question, wellness pick North their I'm channel, bit year - I X-year, sounds in-store are now, I'm best-in-class me, more and America. grows strong go there's would of. consulting had Online, optimistic said customers mentioned as store, are, a my a which Not I frame to than bit may comps. in online. right, go probably a of in if a interesting kind hell really might within I X-year difficult online people more coming in-store when the probably the they like time sound - lot health if a over in-store, months to but online grow - next such have But experience. to got online Because the they more you're a most than on We're product. funny that long frame, And faster, little which focusing But been think sit performance who volatility about I I to move next the of moving probably And to as tough XX you little probably term here, little optimistic say on out performance. the say being before, there's faster I'm before, the really over good, going we are seeing the compared funny. Because probably premium probably retailers channels to it's product probably the optimistic right

Operator

Our of next comes from Loop Champine question Laura Capital.

Laura Champine

is your that Dreams? that balance, acquired? in expect in significantly turns from And curious grew we terms inventory of that How of in inventory much recently what should I'm which business year-on-year. Dreams you've

Bhaskar Rao

Sure.

and correct. if basis. a now is I a as with service indicated, associated way would of We the to light little have to inventory. about Dreams at customers. run A our more year-on-year we and you is the you're on So vast we're think - majority The to underlying, sequential increase it able inventory on bit like that with be than is look to

Scott Thompson

Tempur-Pedic The piece.

Bhaskar Rao

The Tempur-Pedic correct. piece,

would So driven of overall days, the our couple the cycle to year, moving a would you think primarily increase cash by days. I inventory of that as about anticipate by end

specifically well. Dreams about a think as you As as retailer, also a they're is manufacturer

you back - turns retail and generally if So that, inventory low step has quickly. very very from very

as a a than manufacturing higher the given retail a be bit well typical what However, - would you'd retail retailer. as it, it expect nature of from

Operator

question of next Bob Drbul Guggenheim. Our comes from

Robert Drbul

about question I year. but do talked them customers, be guess bring believe you'll able I you bring on next new to on have the the inability to is that you

is additional getting Just of And anticipate you like understand supply perspective, from year? the to flow something quarter you on the the expectations customers a business. to chain said around next just better. it's like that wondered, some first of bringing I'm trying the

Scott Thompson

Right. we're talking generally that's in North constrained. been America here

still about supply the the You we're throughout should in to the they'll some And year be, I because they suspect, issues year. going quarter. grow during think come fighting first

standpoint. front-loaded year further think you're from probably and cautious, be probably a little a chain but back-loaded talking the during supply we'll I than about So

Operator

Our William Bank of Reuter question comes next from America. of

William Reuter

question on My capital allocation. is

that the mentioned now an you think basis. I LTM are $XXX on repurchases share million

the are I Given should expected be outlook the share the year, M&A what's about next thinking repurchases? guess, that flow for you strong over how additional generation And cash like?

Scott Thompson

Look, question. we've target X.X, running below leverage Bhaskar? - been our Great Sure.

Bhaskar Rao

Yes.

Scott Thompson

general I range the has to is that X. around world our And Yes, get once, to the health we're ratio, very clear, really the X. end X.X. We've X be would below X reason with think, we're do back to the on our X into crisis of the to Certainly, clear, perspective. leverage that at we'd stated low it, call it, And virus. call like we'll my been

would for you leverage a we'll estimates in and We're would have we If math, and a lot do fact, X X statement of either some that acquisitions that or be with like got ably year. our at a repurchase, extra to cash, ratio of that we've acceptable. take do It's powder next going flow. little in generate or we'll cash it play have look to of to significant bit drown liquidity. not those share be

So repurchase in acquisitions. pretty right robust could That goes year on change a year next that my now a share what from be is standpoint. expectation on will depending

hard always were if either people. buyback before, acquisitions not today. or acquisitions. know. As in we predict little to in to a sense patiently guessing to above active constantly see side. probably or wait talking reasonably suspect we're significantly stuff then don't whether a We I and I've active I price I be makes It's the other But bit and we'll said for it

William Reuter

Drowning that in bad doesn't me. sound to cash,

Scott Thompson

I if down, just will, it use It to debt though. pay

I've So with. we a It's it's with how got deal do know problem to but it. a to problem, high-class something

Operator

[Operator Instructions].

Our next Jonathan question comes from of Jefferies. Matuszewski

Jonathan Matuszewski

in question a marketing. quarter. Scott nice on had I Bhaskar, a big-picture Obviously, and environment. we're supply-constrained

in say marketing. on have have ad haven't feels could or Some you you other it all guys folks but pulling spend, this, been some been like on back done and

& just Foster asking in broadly Stearns of on But I stance kind think specifically forward? your terms marketing commented of remarks. in more going your you prepared

Scott Thompson

Great Good. observation.

thought the and the to why of constrained building We you long-term there. statements the because owe to money by part quarterly marketing. what Because But retailers. is demand we're brand ask you're and trimming chosen in at have financial it. look could as we we about We like spend a right, not a optimize environment, goal

standpoint. not marketing so going continue And be all on marketing. have pulled And to in." been And we have in a we're we back to "all from

year. that we're trends. a gives Foster a in a the quarterly goes out XXXX. years, strength the we're share. on all Stearns period this like to that that's But what like We brand advertising in worrying of a market next into of momentum I part taking into to optimizing again, over year Stearns We this confidence And high-end change & seeing of Because brand we're lean to in a back has, because us our called no, kind advertising. opposed have analytics. Foster, historical income the as has opportunity outstanding think statement it We more about grow & to

Operator

comes next Securities. from of Seth Basham Our Wedbush question

Seth Basham

is question backlog. My the on

the the of You would to on And do million seasonality? expect the normalized talked at What you end to what like a third the basis second relative third? backlog from that increase about to fourth for the look a quarter. be quarter $XXX the

Scott Thompson

wouldn't backlog. on talk even about a basis, would we normalized say I probably,

Bhaskar Rao

Correct. That's right.

Scott Thompson

we Tempur Tempur, So will end a think I really backlog have Tempur fourth sales it's the going again. the possible to with Sealy how question continues normal we the first is guesstimation. normal. about smaller be quarter, everybody into that's one, And and a And And of like mentioned on expect backlog the is talk to to But are. back don't strong I demand backlog Tempur a of be totally my on quarter. that earlier, robust, I as expectation.

Operator

of question next Keith Truist. comes Hughes from Our

Keith Hughes

Yes.

growth would of you without follow-up without margins on international. in Can us maybe comment too, And was a be give International organic Just idea Dreams. Dreams? an what any there, on helpful,

Scott Thompson

Absolutely.

for margin dreams, I standpoint, accretive internationally, whole. from without quarter. we gross the as is Dreams So Also, did mentioned, to grow a the

specifically, perspective. it you is dilutive think GP International when However, about on the

Europe margins So in expectations. both Dreams outside line of with were the Pac Asia underlying for and our

Operator

Our next with Thomas KeyBanc Markets. Brad Capital from question comes

Bradley Thomas

margins, just of supply how much if the and was overall. some now, get in a are that structural of of that companies know right business come that to improvements are of helped for And in drive hoping how much to is headwinds. I coverage margins have to And all. some margins to question your question of but number our a the at face normalization I some we have back elements much address there chain over-earning may

going you And so I forward think talk that about all just was about you here. could how hoping

Scott Thompson

me and perspective, see overearning, From some us I that. don't Sure. let meat put around my

pull back As didn't have earlier this we we not I've that so on already changed advertising, mentioned expense. on call,

go are very no on not difficult When disruptions the plans there's into there. been the So plans, supply normal operations. optimization I These efficiency. at have running

I when because don't people the we're plan and I running our statistics, mean we an off we're standpoint operational term optimized that we plant. mean - and disrespectful But look the so operations there at hard. sloppy, I've are from used at plan. And are damn working

So the retailer. we're and hit been On with first, those There's on any we get this lag way. commodities, way then them over-earning there. commodities to numbers, a is in not we works certainly, pass the

where we've the experienced what them commodity in passed you've on seen So fully not numbers yet. costs reported but that is lag

that's So the in numbers.

like And retailers, feel our I'm to doesn't commodity that pass costs there. with then over-earning. them on don't we on So profit when we pass those

So a even margin rate, them that's cost. the offset. the margin And we on we our has dollars Bhaskar explained, though fully headwind just as to pass to offset

Now of because gets not little manufacturer but the on we with a bit retailer cost the does pass benefit there do margin, that. make

it the I sales total unusually So and the you is down, customers. sales in unless and can't is going expediting volume statement I like we're - Bhaskar, can there's over-earning. beds any find to come high the anything... volume income see think to anywhere I supplies don't service looks mean

Bhaskar Rao

Scott. No, that's right,

Scott Thompson

that I On over-earning. I'm to other kind back areas. the in the of some things see think kind improvements of go hoping normal because you'd

Operator

for turn back Thompson any to further call over no closing showing Scott to questions the I'm at time. I'd remarks. like this

Scott Thompson

you, operator. Thank

outstanding our you Sealy's thank around team your Operator, partners, to our the you. you ends make thank for every To Directors. To for lenders, world, thank of in our representation the call company Board shareholders So retail This what its nearly do thank of XX,XXX brands. you Tempur leadership you for and today. your employees and day confidence successful. the

Operator

conference. this you does gentlemen, Thank for today's and Ladies you. Thank participating. conclude all

disconnect. now day. may great a Have You

Tempur Sealy International (TPX) 28 Oct 212021 Q3 Earnings call transcript