Dan Silverstein

Dan Silverstein from UBS followed up on the 2028 EPS target raise, asking if it was solely due to additional synergies or if there were changes in the outlook for industry recovery pace or Somnigroup's growth relative to the industry.

Answer

Bhaskar Rao, EVP and CFO of Somnigroup International, explained that the raise in the 2028 EPS target to $5.15 is primarily driven by achieved and anticipated synergies, particularly in logistics and advertising. He also cited increased confidence in the company's competitive position, noting growth across all geographies despite challenging Q4 markets. He emphasized that the raise was possible even though the 2025 industry performance was below initial expectations for the original $4.85 target, highlighting competitive positioning, revenue synergies, and cost synergies as key wins. More details will be provided at the upcoming Investor Day.

Dan Silverstein inquired if the raise in the 2028 EPS target was solely due to additional synergies or if other factors, such as the pace of industry recovery or Somnigroup's growth, had changed.

Answer

EVP and CFO Bhaskar Rao attributed the raise primarily to additional synergies, particularly in logistics and advertising, and increased confidence in the company's competitive position, evidenced by growth across all geographies in a challenging Q4. Chairman, President, and CEO Scott Thompson added that the $5.15 target is notable given the industry's underperformance in 2025.

Dan Silverstein asked why the newly identified sales and marketing synergies wouldn't necessarily support a higher long-term earnings target relative to the existing $4.85 goal.

Answer

CEO Scott Thompson explained that while the company-specific performance and synergies are ahead of expectations and would be additive, this is offset by the underlying industry recovery being slower than initially assumed when the target was set. He stated that the company will update its long-term perspective at year-end, considering all the puts and takes.

Dan Silverstein asked about the potential pressure points for the fourth quarter gross margin outlook, given the 120 basis points increase in merchandise margins and a healthy inventory position. He also inquired how the increasing productivity of recent store openings, evidenced by a high single-digit comp, might provide a floor for next year's comp perspective.

Answer

CEO Steve Lawrence identified consumer health as the primary pressure point for Q4 gross margin, noting that customers are 'choiceful' and aggregate purchases around promotions. He stated that the wildcard is how consumers react to promotions, but expressed confidence in the seasonal inventory position. CFO Carl Ford expressed enthusiasm for the new stores' performance, which are achieving $12-$16 million in their first year and high single-digit comps once in the comp base. He noted that the 26 new stores in the Q3 comp set provided a 50 basis points comp tailwind, and with 50 stores expected in the comp base next year, this trend is anticipated to continue, though the 14th month (first month in comp base) typically sees a negative comp.

Inquired about the composition of additional cost savings beyond marketing, the long-term impacts of these cuts, and the strategy for future digital and retail partnerships.

Answer

The company stated that the $130M in savings follows previous patterns, focusing on structural changes in G&A and R&D for future scalability. Regarding partnerships, the goal is to enhance the existing vertically integrated model with new distribution channels that maintain strong margins and increase brand awareness.

Dan Silverstein asked for a breakdown of the additional cost savings beyond marketing and how the company is balancing these cuts with long-term goals. He also inquired about the strategy for exploring new distribution channels like digital-first and retail partnerships.

Answer

Linda Findley, President & CEO, explained that the cost savings are structural changes primarily in G&A and R&D, designed to scale as the business grows. She noted that marketing reinvestment will be at a higher efficiency level. Regarding distribution, Findley emphasized that the goal is to build upon the existing vertically integrated model, not replace it, by exploring an ecosystem of channels that can enhance distribution while maintaining a strong margin profile.

Dan Silverstein of UBS Group inquired about the expected revenue contribution from the expanded Mattress Firm partnership and asked for context on the growth opportunity within non-traditional retail channels like Costco and Walmart.

Answer

CEO Robert DeMartini confirmed the Mattress Firm partnership will expand the retail footprint to 12,000 slots by early next year, more than doubling the previous base. He framed the non-traditional channel strategy as a source of accretive growth that enhances the brand, highlighting the expansion of a Costco promotion from 170 to 450 clubs as a significant step forward.

Dan Silverstein from Heuristic Management questioned whether Origin Agritech has academic partnerships and if it is interested in developing them further.

Answer

CEO Bill Niebur confirmed that academic partnerships are foundational to the company's biotech trait development, highlighting the existing relationship with the Chinese Academy of Agricultural Sciences. He affirmed that Origin is actively working to extend these relationships to other academic institutions to access technologies like genome-editing and advanced molecular breeding.