Somnigroup International Announces Financial Results for First Quarter

May 8, 2025  by Karen Parrish in Business Strategy, Industry   

On February 5, 2025, the Company completed its previously reported acquisition of Mattress Firm. The Company's 2025 first quarter financials include Mattress Firm's operations for the period February 5, 2025, through March 31, 2025 (the "stub period").

FIRST QUARTER 2025 FINANCIAL SUMMARY

— Total net sales increased 34.9% to $1,604.7 million as compared to $1,189.4million in the first quarter of 2024, primarily driven by the inclusion of $593.7 million of Mattress Firm sales for the stub period, offset by the accounting elimination of $130.1 million of sales from the Tempur Sealy North America segment to the Mattress Firm segment during the stub period.

— Gross margin was 36.2% as compared to 39.9% in the first quarter of 2024. Adjusted gross margin⁽¹⁾ was 42.2% as compared to 40.1% in the first quarter of 2024.

— Operating income was $13.2 million as compared to $131.5 million in the first quarter of 2024, primarily driven by costs during the quarter related to the Mattress Firm acquisition. Adjusted operating income⁽¹⁾ was $182.8 million as compared to $149.4 million in the first quarter of 2024.

— Net loss was $(33.1) million as compared to net income of $76.3 million in the first quarter of 2024. Adjusted net income⁽¹⁾ was $97.0 million as compared to $89.7 million in the first quarter of 2024.

— Loss per diluted share was $(0.17) as compared to earnings per diluted share ("EPS") of $0.43 in the first quarter of 2024. Adjusted EPS⁽¹⁾ was $0.49 as compared to $0.50 in the first quarter of 2024.

Company Chairman and CEO Scott Thompson commented, "Our results this quarter both reflect the transformational acquisition of Mattress Firm and highlight our ability to navigate a weak global market. All of our business units, domestically and internationally, successfully made progress on their growth opportunities as we leverage the core strengths of our business, including scale, operational flexibility and manufacturing capabilities I continue to be impressed by our people, all around the world, as they focus on execution and taking care of our customers to deliver share gains and efficient cost management across the Somnigroup enterprise. Everyone in the organization has stepped up to quickly advance our near and longer term initiatives to continue delivering value to shareholders."

Business Segment Highlights

The Company's business segments include Tempur Sealy North America, Tempur Sealy International and Mattress Firm. Corporate operating expenses are not included in any of the business segments and are presented separately as a reconciling item to consolidated results.

Tempur Sealy North America net sales were impacted by the accounting elimination of $130.1 million of sales to Mattress Firm for the stub period. Net sales decreased $194.9 million to $706.2 million as compared to $901.1 million in the first quarter of 2024. Net sales through the wholesale channel decreased $192.4 million to $584.5 million as compared to the first quarter of 2024, primarily driven by a 16.7% decline from this accounting elimination of $130.1 million and an 8.0% decline from continued macroeconomic pressures impacting U.S. consumer behavior of $62.3 million. Net sales through the direct channel decreased $2.5 million, or 2.0%, to $121.7 million as compared to the first quarter of 2024.

North America gross margin declined 340 basis points to 34.0% as compared to 37.4% in the first quarter of 2024. Adjusted gross margin⁽¹⁾ improved 760 basis points to 45.3% as compared to 37.7% in the first quarter of 2024. The improvement was primarily driven by the elimination of sales to Mattress Firm for the stub period, operational efficiencies and favorable mix. These improvements were offset by operating expense deleverage and commodity cost inflation.

North America operating margin was 5.7% as compared to 14.9% in the first quarter of 2024. Adjusted operating margin⁽¹⁾ improved 190 basis points to 17.2% as compared to 15.3% in the first quarter of 2024. The improvement was primarily driven by the improvement in gross margin, partially offset by investments in advertising.

Tempur Sealy International net sales increased 5.7% to $304.8 million as compared to $288.3 million in the first quarter of 2024, primarily driven by the success of new product launches. On a constant currency basis⁽¹⁾, International net sales increased 7.7% as compared to the first quarter of 2024. Net sales through the wholesale channel increased $5.3 million, or 4.9%, to $114.2 million as compared to the first quarter of 2024.

Net sales through the direct channel increased $11.2 million, or 6.2%, to $190.6 million as compared to the first quarter of 2024.

International gross margin improved 130 basis points to 49.0% as compared to 47.7% in the first quarter of 2024. The improvement was primarily driven by decreased product launch costs.

International operating margin improved 130 basis points to 16.8% as compared to 15.5% in the first quarter of 2024. The improvement was primarily driven by the improvement in gross margin.

Mattress Firm net sales were $593.7 million for the stub period. All Mattress Firm sales are reported through the direct channel.

Mattress Firm gross margin was 32.2% for the stub period. Adjusted gross margin⁽¹⁾ was 35.1% for the stub period.

Mattress Firm operating margin was 1.1% for the stub period. Adjusted operating margin⁽¹⁾ was 7.2% for the stub period.

Corporate operating expense increased to $85.0 million as compared to $47.7 million in the first quarter of 2024, primarily driven by costs related to the acquisition of Mattress Firm. Adjusted operating expense⁽¹⁾ was $32.8 million as compared to $32.9 million in the first quarter of 2024.

Consolidated net loss was $(33.1) million as compared to net income of $76.3 million in the first quarter of 2024, primarily driven by the acquisition of Mattress Firm. Adjusted net income⁽¹⁾ increased 8.1% to $97.0 million as compared to $89.7 million in the first quarter of 2024. Loss per share was $(0.17) as compared to earnings per share of $0.43 in the first quarter of 2024. Adjusted EPS⁽¹⁾ decreased 2.0% to $0.49 as compared to $0.50 in the first quarter of 2024.

The Company ended the first quarter of 2025 with total debt of $5.1 billion and consolidated indebtedness less netted cash⁽¹⁾ of $5.0 billion. Leverage based on the ratio of consolidated indebtedness less netted cash⁽¹⁾ to adjusted EBITDA⁽¹⁾ was 3.51 times for the trailing twelve months ended March 31, 2025.

Financial Guidance

For the full year 2025, the Company revised its expectations for an adjusted EPS⁽¹⁾ range of $2.30 to $2.65. This contemplates the Company's current sales outlook, which includes approximately 11 months of expected Mattress Firm operations, net of intercompany sales, and the previously announced divestiture of Sleep Outfitters and 73 Mattress Firm stores, which closed on May 1, 2025.

The Company noted that its expectations are based on information available at the time of this release, and are subject to changing conditions and risks, many of which are outside the Company's control, including the possible imposition of new tariffs or retaliatory tariffs, increases in existing tariffs and other changes in trade policy and regulations, and the resulting uncertainty of the macroeconomic environment. The Company is unable to reconcile forward–looking adjusted EPS, a non–GAAP financial measure, to EPS, its most directly comparable forward–looking GAAP financial measure, without unreasonable efforts, because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact EPS in 2025.

Dividend Declared

The Company's Board of Directors declared a quarterly cash dividend of $0.15 per share, payable on June 5, 2025, to shareholders of record at the close of business on May 22, 2025.

Conference Call Information

Somnigroup International Inc. will host a live conference call to discuss financial results, After the conference call, a webcast replay will remain available on the investor relations section of the Company's website for 30 days.