It doesn't look like memory foams will not cushion this latest news for Tempur-Pedic (NYSE: TPX). Shares of the company tumbled over 48% on Wednesday, after it was announced that second-quarter profits will drop 50% from last year. Analysts had expected 86 cents per sharing of net income, but the expectation is now only 34 cents. Much of this is due to increased competition from mattress makers. An analyst from Gilford Securities is quoted in saying that Tempur-Pedic "needs to institute a strategy where they drive more brand loyalty, not only from consumers but also retailers."
The history of Tempur-Pedic goes back to the 1970s and NASA, which was "[developing] pressure-absorbing material to help cushion and support astronauts during lift-off." In 1992, the company was formed in Lexington, Kentucky, where it is headquartered now. From 2008 to 2011, profit had climbed over 270% from $58 million to $219 million. However, as CEO Mark Sarvary claims, the environment in North America has seen "unprecedented number of new competitive product introductions which have been supported by aggressive marketing and promotion." Notably competition has come from Sealy Corporation (NYSE: ZZ) and Select Comfort (NASDAQ: SCSS), which also saw losses of over 5% and 20% on Wednesday, respectively.
Sources:
