Tempur-Pedic Gets Flipped

After all of last summer's rhetoric about whether the housing market would unravel dramatically or coast to a soft landing, we now know which camp was closer to reality. Now it's time to ask similar questions of a different part of the economy: you, the American consumer. Will you feel the kind of pain that Bear Stearns investors are feeling, or will it seem like touching down on a Tempur-Pedic (NYSE: TPX  ) mattress when you finally hit bottom?

If you think the mattress will help break your fall, think again. On Monday, Tempur-Pedic said that it foresees a 50% drop in first-quarter profit, with U.S. sales projected to fall by nearly 20%. The news pushed shares down 38%. But Tempur-Pedic isn't alone: Industry top dog Sealy (NYSE: ZZ  ) recently announced a similar slowdown in U.S. sales.

Foolish investors should keep an eye on consumer activity with respect to pricey discretionary items, because that's where we'll see just how cushioned the American consumer's landing will be. Tempur-Pedic and its peers could be a good barometer, since their products aren't cheap. With prices ranging from $700 to nearly $7,000, mattresses in general fall well within the big-ticket range of consumer goods. And if you're like me, you're not exactly ready to run out and drop thousands of dollars on a new mattress.

It's true that the spate of massive losses from banking institutions must cease before the U.S. economy can return to normal, but a recession stays put until the consumer decides that it's safe to begin spending and has the means to do so. Tempur-Pedic's news may suggest that we'll be tossing and turning for a while.

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