Image source: The Motley Fool.

What happened

Shares of Tempur Sealy International Inc. (TPX -0.82%) might give investors insomnia today as the mattress maker's stock has plunged on lowered guidance. As of 10:55 a.m. EDT, the stock was down 23%.

So what

Tempur Sealy management said that third-quarter net sales were below expectations and that it was lowering its full-year sales outlook to a decrease of 1% to 3%, below a previous range of a low-single-digit increase. It also lowered its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) range by $25 million, to between $500 million and $525 million.

CEO Scott Thompson said, "While our net sales are below expectations, our operational initiatives are going well and are continuing to drive considerable margin expansion," adding that adjusted earnings per share were still expected to increase 20% for the year.

Now what

The mattress industry has been especially volatile in recent years as Tempur Sealy is up against Select ComfortMattress Firm, and privately held companies such as Casper. The industry has seen some consolidation as Mattress Firm bought Sleepy's for $780 million, and Tempur Sealy itself resulted from the merger of Tempur Pedic and Sealy.

Since the 2013 merger, Tempur Sealy's stock has outperformed, but revenue growth has gradually slowed, now dipping into negative territory. Operating in a highly competitive industry with little secular growth and no discernible competitive advantage, Tempur Sealy looks too risky, especially after today's guidance cut.