TRINITY, N.C.–Sealy’s first quarter of 2008 has ended with a 34.1 percent drop in net income.
A decline in sales, especially on the domestic front, and rising production costs led the nation’s largest mattress manufacturer to a disappointing quarter that was “below our expectations coming into the year,” said Larry Rodgers, interim chief executive officer and president of Sealy North America. Rodgers became interim CEO when David McIlquham resigned as chairman and CEO last month. Speaking on a conference call to analysts, Rodgers said the company is still searching for a permanent CEO.
Sealy’s overall first-quarter sales decreased 5 percent to $391.9 million, dragged downward by an 11.2 percent drop in U.S. sales, which offset a 15.4 percent increase in international sales. Along with this falloff, the company struggled throughout the quarter with rising costs for steel and foam, the added costs of complying with the U.S. Consumer Products Safety Commission’s new flame-retardency standard, which went into effect July 1, 2007, and the negative impact on sales and margins associated with the rollout of the new Posturepedic line. These added costs more than offset an 8 percent decrease in Sealy’s selling, general and administrative expenses.
Among the more hopeful signs for Sealy were a slight uptick in average unit selling price in the first quarter, and increased sales in the company’s specialty mattresses. Rodgers said Sealy will augment the latter with the rollout of new Posturepedic Latex models in the second half of this year.
Meanwhile, Sealy also announced it would suspend its dividend payment for the first quarter. According to Chief Financial Officer Jeff Ackerman, this decision was based on “maintaining our financial flexibility” and “so much volatility that we are seeing … in the credit markets.” Sealy’s share price ended yesterday’s trading at $7.10, more than $10 less than its 52-week high.
