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Tempur Sealy's U.S. Tempur-Pedic Products' Order Improves

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Tempur Sealy International, Inc. (TPX - Free Report) has been witnessing improved order trends for U.S. Tempur-Pedic products. Backed by strong quarter-to-date order trends, the company expects third-quarter net sales to grow more than 30% from the prior year. Notably, the stock gained 8.4% on Sep 14, post the news release.

However, capacity constraints for U.S. Sealy products owing to supply chain limitations have been grappling the company. It has been working closely with suppliers to mitigate the shortfalls and support the elevated U.S. Sealy demand.

Chairman and CEO of Tempur Sealy, Scott Thompson said, "We continue to see strong growth that is broad-based across geographies and channels.” It is also seeing strong free cash flow and expects positive industry trends to aid it further.

Additionally, Tempur Sealy plans to repay the $200 million 364-day incremental Term Loan, which will result in an annual interest savings of approximately $5 million. Also, it will remove certain restrictions on share repurchases and dividends, as well as support its long-term aspirational plan to reach the higher end of the payout in the third quarter.

Over the past few years, Tempur Sealy’s business has been rallying on new innovative products’ development, operational synergies, the go-to-market strategy, healthy gross margin expansion and broad-based sales growth. However, the COVID-19 pandemic significantly impacted demand trends, which ultimately ailed the company’s bottom-line performance.

In the first half of 2020, net sales grew 5.2% year over year, driven by a 10.2% increase in North America net sales, partially offset by a 14.8% decrease in International net sales. Despite the impact of the global pandemic, expansion of its retail distribution network and growth of the e-commerce business supported the business.



Over the past three months, the stock has gained 39%, outperforming the industry’s 30.5% rally. The solid price performance is primarily a reflection of its decent earnings surprise history, having surpassed the Zacks Consensus Estimate in the trailing six quarters. The company believes the recent shift in consumer spending habits, pent-up demand, government stimulus and its powerful omni-channel platform will benefit Tempur Sealy in the future.

Earnings estimates for 2020 have moved 0.4% north in the past seven days, indicating 36.4% year-over-year growth. Also, its earnings are expected to rise 15.4% over three to five years. This can be further ascertained by a solid VGM Score of B.

Zacks Rank

Tempur Sealy — which shares space with RH (RH - Free Report) , Williams-Sonoma, Inc. (WSM - Free Report) and Haverty Furniture Companies, Inc. (HVT - Free Report) in the same industry — currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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