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TS

TEMPUR SEALY INTERNATIONAL, INC. (TPX)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $1.2079B (+3.2% YoY), adjusted EPS was $0.60 (+13.2% YoY), and adjusted operating income rose to $167.6M (+8.0% YoY); strength was driven by International (+14% YoY) and operational efficiencies, while North America was flat as advertising investments and a foreclosed OEM customer weighed on margins .
  • The company completed the Mattress Firm acquisition on Feb 5, 2025, changed its name to Somnigroup International (ticker change to SGI effective Feb 18, 2025), and initiated FY2025 guidance: adjusted EPS $2.60–$3.00, reported sales $7.5–$7.8B (net of intercompany eliminations), adjusted EBITDA $1.3–$1.4B, CapEx ~$250M; quarterly dividend was raised 15% to $0.15 per share .
  • Management highlighted significant gross margin expansion for 2024 (+130 bps consolidated), robust free cash flow of $569M, and leverage improvement (2.31x FY2024; ~3.5x pro forma post-close, with a path back to 2–3x) as the integration and synergy realization begin (at least $100M annual run-rate by 2028) .
  • Near-term stock catalysts: clarity on synergy cadence (advertising effectiveness and sourcing/logistics), national Sealy Posturepedic relaunch (“largest bedding launch in history”), and model resets for intercompany sales eliminations (optically lowering reported revenue but neutral to EPS) .
  • Wall Street consensus estimates via S&P Global for Q4 2024 were unavailable in our tool, so beat/miss vs street cannot be determined; comparisons are shown vs prior year and prior quarter only.

What Went Well and What Went Wrong

What Went Well

  • International momentum: net sales +14.1% YoY to $313.8M; gross margin +230 bps to 58.0%, operating margin +200 bps to 21.2% on product launch success and operating leverage .
  • Efficiency and margins: consolidated adjusted gross margin reached 45.3% (+110 bps YoY); CEO: “We delivered record sales and gross margins while the industry is experiencing trough volumes.” .
  • Cash generation and deleveraging: FY2024 free cash flow $569M; leverage improved to 2.31x ahead of the Mattress Firm close; dividend increased 15% to $0.15 per share .

What Went Wrong

  • North America margin pressure: adjusted operating margin declined to 14.8% (–110 bps YoY) on ad spend deleverage and incremental bad debt tied to a foreclosed OEM customer; GAAP gross margin fell to 38.2% (–200 bps YoY) even as adjusted improved slightly .
  • OEM/customer disruption: Q4 included $26.7M customer-related transition charges (foreclosed OEM distribution), $9.8M transaction-related interest expense (Term Loan B held in escrow pre-close), and $1.3M supply chain transition costs, depressing GAAP EPS to $0.40 .
  • Asia JV headwind and muted U.S. holidays: management cited weakness in China JV and a “less robust” President’s Day period as near-term softness, though overall demand appears to be “bouncing around the bottom” .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Millions)$1,233.6 $1,300.0 $1,207.9
EPS (GAAP) ($USD)$0.60 $0.73 $0.40
Adjusted EPS ($USD)$0.63 $0.82 $0.60
Gross Margin (%)44.9% 45.4% 43.3%
Operating Income ($USD Millions)$173.3 $201.8 $127.6
Adjusted Operating Income ($USD Millions)$180.6 $223.7 $167.6

Segment performance (North America vs International):

MetricQ4 2023Q3 2024Q4 2024
North America Net Sales ($USD Millions)$895.4 $1,015.3 $894.1
International Net Sales ($USD Millions)$275.1 $284.7 $313.8
North America Gross Margin (%)40.2% 42.0% 38.2%
International Gross Margin (%)55.7% 57.3% 58.0%
North America Operating Margin (%)15.4% 19.0% 11.6%
International Operating Margin (%)19.2% 18.2% 21.2%

KPIs and guidance:

MetricQ4 2024FY 2024FY 2025 Guidance
Operating Cash Flow ($USD Millions)$129 $666.5 N/A
Free Cash Flow ($USD Millions)N/A$569 N/A
Net Debt ($USD Billions)~$2.1 N/A~3.5x net leverage post-close, target 2–3x
Leverage (Net Debt / Adj EBITDA)N/A2.31x Return to 2–3x target
Adjusted EBITDA ($USD Millions)$219.4 (Q4) $923.8 $1,300–$1,400
Dividend per Share ($USD)$0.13 (declared Nov 7, 2024) $0.13 (ongoing) $0.15 (raised 15%)
Advertising Spend ($USD Millions)N/AN/A~$730
CapEx ($USD Millions)N/A$97.3 (purchases of PP&E) ~$250 (incl. ~$50 Mattress Firm refresh)
D&A ($USD Millions)N/AN/A~$295–$305
Interest Expense ($USD Millions)N/AN/A~$265–$275
Tax Rate (%)N/AN/A~25%
Diluted Shares (Millions)178.7 178.2 ~210

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025N/A$2.60–$3.00 Initiated
Reported SalesFY 2025N/A$7.5–$7.8B (net of intercompany eliminations) Initiated
Gross MarginFY 2025N/ASimilar to 2024; ~$15M FX headwind Initiated
Adjusted EBITDAFY 2025N/A$1.3–$1.4B Initiated
Advertising SpendFY 2025N/A~$730M Initiated
CapExFY 2025N/A~$250M (incl. ~$50M Mattress Firm refresh) Initiated
Tax RateFY 2025N/A~25% Initiated
Diluted SharesFY 2025N/A~210M Initiated
Dividend per ShareQ1 2025$0.13 $0.15 Raised 15%
Leverage TargetFY 20252–3x historical target Maintain 2–3x; ~3.5x post-close near term Maintained target

Earnings Call Themes & Trends

TopicQ2 2024 (Prior–2)Q3 2024 (Prior–1)Q4 2024 (Current)Trend
AI/Technology initiativesSleeptracker-AI embedded; ultra-premium ActiveBreeze; digital campaigns driving ASP uplift Tempur-Pedic smart bases and AI-driven sleep insights; app downloads at record levels Products with “AI-driven sleep insights” highlighted; Calm partnership announced (Jan 27) Building integration across products; expanding content ecosystem
Supply chain & manufacturingEfficiency initiatives; commodity tailwinds; PP&E spend down Optimization incl. closing 2 small facilities; adjusted EBITDA margin strongest in 10 quarters $1.3M supply chain transition costs; continued productivity; FY gross margin +130 bps Ongoing consolidation and productivity gains
Tariffs/MacroPromotional environment slightly more extended; industry declines moderating in H2 Tariffs expected to have minimal impact; competitive advantage due to scale Reciprocal tariffs risk manageable; potential competitive benefits and pass-through pricing; short-lived impacts if any Manageable; potential relative advantage
Product performanceTempur-Pedic top brand; OEM wins; mid-single-digit unit growth (ex-OEM low-single-digit) Stearns & Foster strongest brand; Tempur grew; Sealy relaunch planned for 2025 Sealy Posturepedic launch underway; “largest bedding launch in history” Shift emphasis to value/mid-tier with new Sealy lineup
Regional trendsInternational steady; Dreams U.K. resilient International double-digit growth; margins +200 bps International +14% sales; margins +230 bps; Asia JV headwind Sustained Intl outperformance
Regulatory/LegalFTC litigation and post-closing supply agreements; TLB financing Court schedule set; divestiture to Mattress Warehouse planned Deal closed Feb 5; name change to Somnigroup; divestiture expected by ~May 1 Regulatory process concluded; integration begins
Advertising strategyBalanced media mix; ~$475M FY spend; shifting some dollars to promotions ~9.2% of sales; ~$119M in Q3; less noisy environment improves effectiveness ~$730M FY2025 advertising plan; potential synergies from buying power and coordination Scaling and coordinating post-merger

Management Commentary

  • “We delivered record sales and gross margins while the industry is experiencing trough volumes.” — Scott Thompson, CEO .
  • “This is the largest product launch in bedding history… Orders… are on track with an estimated 80% floor samples to be shipped before Memorial Day.” — Scott Thompson on Sealy Posturepedic .
  • “We expect adjusted EPS to be in the range of $2.60 to $3.00… adjusted EBITDA of approximately $1.3 billion to $1.4 billion.” — Bhaskar Rao, CFO (FY2025 guidance) .
  • “We expect to return to our target leverage range of 2x to 3x… share repurchases to be minimal over the near term.” — Bhaskar Rao .
  • “We are internally targeting sales to grow at a mid-single-digit CAGR starting in 2026… adjusted EPS would increase… to approximately $4.85 by 2028, a CAGR of 20%.” — Scott Thompson .

Q&A Highlights

  • Industry normalization: First half likely softer, improvement in back half; overall “bouncing around the bottom” until normalization by 2026, with Sealy launch as a driver .
  • Synergy cadence: ~$10M in year one (back-half weighted), then ramp through 2026–2028; early focus on sourcing/back-office, with advertising effectiveness expected to be the bigger unlock beyond buying power .
  • Guidance guardrails: Low-end of EPS range implies industry down in 2025; Mattress Firm accretion begins in Q2 2025 .
  • Margins: NA adjusted gross margin +10 bps YoY in Q4 despite headwinds; mix effect from OEM and lower-income consumer still a watch item; Tempur margins targeted to expand on productivity despite commodities and FX .
  • Tariffs: Reciprocal tariffs manageable; potential relative advantage due to scale; any impact likely short-lived with mitigation and pass-through .

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 EPS and revenue was unavailable via our tool; thus, beat/miss vs street cannot be determined here. Comparisons are shown vs prior year and prior quarter.
  • Given FY2025 guidance ($2.60–$3.00 adjusted EPS) and explicit intercompany sales eliminations (approx. 18% of 2024 Tempur Sealy sales), sell-side models will need to adjust reported revenue trajectories while focusing on EPS neutrality of eliminations and synergy timing .

Key Takeaways for Investors

  • International strength and margin expansion offset NA headwinds; continued Intl outperformance is a key earnings lever while NA mix normalizes with Sealy relaunch .
  • The Mattress Firm acquisition changes optics (reported sales lower due to eliminations) but is neutral to EPS and margin-accretive; synergy realization (advertising effectiveness, sourcing/logistics) is the main re-rating catalyst through 2026 .
  • FY2025 guide frames EPS growth in a challenging category; the low end implies industry down, the midpoint assumes stabilization, aligning trades with macro bedding inflection risk/reward .
  • Dividend increase to $0.15 and robust FY2024 free cash flow ($569M) support capital-return quality while deleveraging post-close remains near-term priority (minimal buybacks) .
  • Near-term trading: watch national Sealy Posturepedic campaign (Memorial Day) and Q2 synergy updates; muted President’s Day and Asia JV drag are headwinds, but sequential Intl momentum and U.S. premium resilience help defend estimates .
  • Medium-term thesis: vertically integrated omni-channel scale (Tempur Sealy + Mattress Firm + Dreams), innovation pipeline (AI-enabled bases, cooling, coil tech), and advertising coordination can drive mid-single-digit sales CAGR and ~20% EPS CAGR to 2028 (management target) .

Notes:

  • All figures and statements cited directly from company documents and transcripts with references.
  • Street consensus for Q4 2024 was unavailable through S&P Global in our environment, so estimate comparisons are not shown.