After Thursday's quarterly results from Tempur-Pedic
The company delivered a solid third quarter: Year over year, sales were up 17% to $240.9 million, earnings per share doubled to $0.34, and domestic mattress unit growth was 26%. The strong unit growth is a further indication of strong market-share gains over rivals, which include Hidden Gems recommendation Select Comfort
The only fly in the ointment seemed to be weak performance in Japan, while both the U.S and many key European markets experienced strong growth. To its credit, Tempur-Pedic is already replacing third-party distributors in Japan to try to improve things there.
With strong brand-name recognition coming from its ubiquitous advertising campaign, consumers are readily paying up for the original memory foam mattress. That willingness to pay up could easily translate to other situations as well. Signing up a major hotel chain as a mattress customer could be the next big step. Radisson Hotels is already providing Select Comfort mattresses at quite a few locations, and hotel chains have recently placed a renewed emphasis on providing comfort for guests with the so called "bedding wars."
In my mind, Tempur-Pedic would be a prize catch for any major hotel chain -- be it Marriott International
Even after a substantial run-up, Tempur-Pedic is still looking relatively cheap when compared with competitors. Despite stronger net margins (12% vs. 7%), and faster growth in the third quarter (17% vs. 6%) than Sealy, the companies still trade in roughly the same price-to-earnings range of 14 to 16. That kind of valuation may leave some more sweet dreams for shareholders.
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