A recent earnings announcement out of TempurPedic suggests that the pressure from competing brands, namely the Serta iComfort as far as we are concerned, has posed a serious threat to the company’s revenues; TempurPedic in fact suggests that a 3% to 5% drop in this quarter’s revenues could trickle down to as much as a 50% cut to its Earnings-Per-Share (EPS) number for the year (EPS represents the amount of earnings attributed to one share of the company). A 3% to 5% drop in quarterly earnings may no seem like to much given the “product sale” article below, but shareholders have punished the company’s shares, which traded as low as $21.05 as of June 7, 2012, from its highs of over $80 over the past year. Definitely a story worth watching!
Discerning shoppers who were holding out for the “impossible” can breathe a sigh of relief at last. Earlier this week, leading memory foam mattress maker, TempurPedic, announced that one of its product lines would go on sale in an upcoming sales promotion. According to information available in the press release and reported by trade publication, Furniture Today, TempurPedic will offer discounts at a rate between 12% and 17% on selected Cloud Supreme models. These are among the company’s mid- to high-end of models.
As most buyers already know, mattress “Sales” at TempurPedic never happen. The announcement marks the first time that TempurPedic has offered its product below regular price and the expectation is that it will drive sales to retailers and increase the number of units sold in the coming quarter. Given the price point of the Cloud Supreme models, consumers can save as much as $612, a substantial figure for most consumers (and much more attractive than “free memory foam pillows” or a free set of sheets that many retailers were offering on their Tempurpedic sales).
What This Means For Memory Foam
Discounted prices on memory foam mattresses are not new to the industry. However, there is little doubt that TempurPedic has begun to feel pricing pressure from specialty foam models like the Serta iComfort gel beds. Not only do these mattresses sleep cooler than memory foam, but they offer comparable comfort (or better, depending on the sleeper) and all of this at more attractive pricing. And in looking at the Serta iComfort as a heavyweight competitor, it should not come as a surprise that TempurPedic chose its Cloud-Supreme model for its sales incentive.
Compare the TempurPedic to the Serta iComfort in our TempurPedic vs. Serta iComfort post. The findings highlight the importance this battle between the two companies and offers good insight into why the leading memory foam mattress company is offering this surprising price discount. Only at qmattresses.com
As far as TempurPedic goes, the announcement of the sale has evidently upset its investors. At one point, its stock price got beaten down by more than 15% following the announcement. Clearly, investors are worried that this sale will cut into TempurPedic’s enviable profit margins, something the investment community does not like to see. At the same time, a loss of market share to alternative products (and the Serta iComfort pops to mind), then a sale makes sense as a defensive measure.
What This Means For the Serta iComfort
Given that the Serta iComfort has taken direct aim at the TempurPedic memory foam mattresses with its hugely successful and highly marketed gel beds, it makes sense that TempurPedic has launched this counterstrike. However, the expectation is that the Serta iComfort Sale that we have been forecasting for nearly 6 months will happen fairly soon (or sooner than Serta was hoping).
Ultimately, the end result is that the battle between TempurPedic and the growing number of specialty memory foam (or gel bed) mattresses will be that consumers benefit. The biggest downfall is that the companies that pour money into product research and development will suffer and, perhaps, suffer a lot. Nobody wants to see TempurPedic go away, but depending on how Serta and the others respond to this apparent preemptive strike there could be some casualties – if not in actual companies, than most definitely in actual mattress models. Can the world survive without the gel beds? Probably. But then the consumer suffers.