Shares of Tempur-Pedic (TPX) are trading with losses up to 20% in after hours trading on Tuesday. The manufacturer of premium mattresses and pillows reported a surprise loss for its third quarter, after the market close.
Third Quarter Results
Tempur-Pedic reported third quarter revenues of $347.9 million, down 9% on the year. A strong dollar had a negative impact on sales, and on a constant currency basis sales were still down some 7%. Analysts expected the company to report revenues of $364 million.
The disappointing revenues are attributable to weak performance in North America, where sales fell by 14%. International sales increased 3%, and were up 11% on a constant currency basis.
Gross margins fell 320 basis points to 49.2% as a result of a changing product mix and increased promotions. Operating income fell 34% to $63.4 million. Operating margins fell seven percent points to 18.2%. Operating income includes a $3.6 million charge related to transaction costs from the acquisition of Sealy, and a positive $8 million re-evaluation of incentive stock based compensation.
The company reported a GAAP net loss of $2.0 million, or $0.03 per share. The company was forced to report a net loss as a result of acquisition costs of Sealy and tax costs related to the repatriation of foreign cash balances.
Adjusted net income came in at $42.3 million, or $0.70 per share. On average, analysts expected Tempur-Pedic to report adjusted earnings of $0.69 per share.
CEO Mark Sarvary commented, "Changes in the competitive environment that we experienced during the second quarter in North America continued to have an adverse impact on our third quarter performance. We recently launched a broad series of new initiatives in response to the new competitive landscape in North America, and while it remains early, we are seeing some stabilization as a result. The initiatives
