In very short order you will no longer be able to shop for Sealy or Tempurpedic Mattresses at Mattress Firm in the Fairplain Plaza in Benton Harbor, or any other Mattress Firm store nationwide, for that matter, following failed negotiations between the two companies on new terms going forward. Tempur Sealy International has issued formal termination notices for all of their brands to Mattress Firm, and will cease doing business with the massive retail chain during this first quarter of the year.
Tempur Sealy International, Inc. says that during the week of January 23, 2017, senior management of Mattress Firm Holdings Corporation and representatives of its parent Steinhoff International Holdings, verbally notified them of its intent to terminate all of their contracts with Tempur Sealy in the United States, if they did not agree to considerable changes to their agreements, including significant economic concessions. Tempur Sealy officials say they engaged in discussions to facilitate a mutually agreeable supply arrangement with Mattress Firm. However, the two were unable to reach an agreement, and Tempur Sealy issued formal termination notices for all of their brands to Mattress Firm as of January 27, 2017.
Chairman and CEO Scott Thompson commented, “Over the course of the week, we conducted discussions with representatives of Mattress Firm and Steinhoff, and we considered their request for a significant change in economic terms. Ultimately, we concluded that it was in the long-term interest of all of our stakeholders to terminate our contracts with Mattress Firm. This enables us to immediately reorient our employees and resources to support retail partners that exhibit a long-term commitment to Tempur Sealy’s brands.”
Thompson continued, “Tempur Sealy is the premium bedding leader, with the most recognized brands in the mattress sector and industry-leading product innovation. We remain committed to maintaining our leadership position and to collaborating with our strong global network of retail partners to create value for both our customers and our shareholders.”
The company expects to report record financial results for the fourth quarter of 2016 and for the full year. For the fourth quarter 2016, Tempur Sealy expects to report total net sales of approximately $770 million, a slight increase versus the prior year, net income of $61 to $63 million.
For the full year 2016, the Company’s net sales to Mattress Firm were approximately 21-percent on a worldwide basis which includes sales to HMK Mattress Holding, LLC (“Sleepy’s”). The company’s sales to Mattress Firm declined approximately 11-percent in 2016 as compared to 2015, including sales to Sleepy’s in both years. As previously disclosed, Mattress Firm was acquired by Steinhoff in September 2016. All other Steinhoff-owned entities represented less than 0.5-percent of the Tempur Sealy’s total net sales in 2016.
Excluding sales to Mattress Firm and Sleepy’s, the Company expects that its net sales increased as compared to the prior year by approximately 4-percent and 2-percent in the fourth quarter and full year 2016, respectively.
Tempur Sealy’s decision to pull out of Mattress Firm’s more than 350,000 retail stores didn’t score well on Wall Street Monday, as the company’s stock was downgraded by no less than five firms including Piper Jaffray, SunTrust Banks, Instinet, Stifel Nicolaus, and Nomura.
Tempur Sealy’s stock plummeted to its lowest closing price in more than 4-years, and sustained a 28-percent drop for it’s largest one-day percentage drop in nearly nine years. Volume soared to nearly 27-million shares traded and the stock finished at $45.49 Monday…and resumed the free-fall this morning trimming another $2.50, or nearly 5.5-percent off the share price down to just over $43.00 per share just before noon.
