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A Good Night's Sleep

You may have heard that Tempur-Pedic (NYSE: TPX  ) beds will give you a good night's sleep. The patented TEMPUR material provides pressure relief, easing your way into peaceful slumber.

I've got a better way to relieve pressure. Just forget the bed altogether and sleep on a pile of Tempur-Pedic share certificates.


It's obvious that the company has become the darling that Select Comfort (Nasdaq: SCSS  ) used to be, until last year's debacle. Last night's quarterly report confirms it. Net sales rose 22% higher to $294.1 million. Fueled by healthier margins, earnings per share soared 44% higher to $0.49 a share. The numbers are well ahead of the $0.45 a share in profit on $278 million in net sales that analysts were expecting

Hooray for Tempur-Pedic. As a Select Comfort shareholder -- and Sleep Number bed owner -- I think I'm going to be sick.

It seems as if the market is willing to reward just one mattress maker at a time. Obviously, the bedding market didn't grow by 22% this past quarter. Retailers like Bed, Bath & Beyond (Nasdaq: BBBY  ) , Limited's (NYSE: LTD  ) Bath & Body Works, and Pier 1 (NYSE: PIR  ) would be flying high if folks were splurging on home furnishings and feel-good knickknacks. They're not. Tempur-Pedic is in its own cool groove at the moment.

If it's pulling those kinds of numbers, its premium-mattress rivals are going to come in weak. So I'm braced for the worst when Select Comfort reports next week. Sure, it had already warned of continued softness in its mid-quarter update last month. I was just hoping for something better, you know.

Innerspring giant Sealy (NYSE: ZZ  ) put up respectable net sales growth of 7.5% earlier this month. However, margins contracted, leading Sealy to post a dip in profitability.

About the only thing that Tempur-Pedic and Select Comfort have in common these days is that they are both buying back shares. However, Select Comfort is buying them as its shares head lower. Tempur-Pedic, on the other hand, has spent $300 million to acquire 10.4 million shares on the rise.

In a move that shouldn't surprise anyone, Tempur-Pedic is raising its guidance. It is now looking to earn between $1.74 a share and $1.76 a share for all of 2007, well ahead of its most recent outlook, which called for profitability to clock in between $1.63 a share and $1.66 a share.

Higher guidance? That brings back warm memories of when I was on better terms with Select Comfort, as the air-chambered mattress maker was blowing away bottom-line targets. Sadly, that is so 2005 right now.

Don't let my whining bring you down, Tempur-Pedic shareholders. Just stay alert to make sure that a bad night's sleep doesn't happen to you.

Get a good night's rest with Tempur-Pedic:

Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 19, 2007, at 12:28 PM, avonfred wrote:

    When is Hidden Gems going to realize what a dog Select Comfort is and drum it out of its selections? People who bought it when it was last recommended have been treated to an 40 percent loss.

  • Report this Comment On October 19, 2007, at 3:36 PM, bhk20 wrote:

    I am a dentist who, due to my vocation, often has issues with my back. I slept on a Select Comfort mattress for one year and liked it, but wanted to try a tempurpedic. So I bought a tempurpedic and slept on it for 4 months. It was ok, but I started to have more back issues. Anyway, after moving my tempurpedic mattress upstairs, and almost getting a hernia while doing so, I am back with the select comfort. After 2 weeks, both my wife and I are sleeping better and I have no more back issues. My tempurpedic is for sale and I believe select comfort is the SUPERIOR product. I think the problem is with the company, and I think long term, (once marketing issues are resolved) this company, and stock will prevail. I had 5,000 shares of the stock before and I just purchased 3,000 more after my "experiment".

  • Report this Comment On October 22, 2007, at 12:38 PM, lclaw wrote:

    Is there a potential litigation risk concerning possible health risks from the petro chemicals used to make the product?

  • Report this Comment On October 22, 2007, at 2:25 PM, MUChemEngr wrote:

    You eat and drink from and otherwise live with a vast range of products made from petro chemicals. Ever heard of plastic? 99% is the stuff is made from petro chems.

    I'm no fan of Temperpedic or memory foam sleeping products in general, but I doubt they are in any more danger of lawsuits than most other companies.

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