Somnigroup International Inc. (SGI) Q3 2025 Earnings Call November 6, 2025 8:00 AM EST
Company Participants
Aubrey Moore – Vice President of Investor Relations
Scott Thompson – Chairman of the Board, CEO, President & Interim CEO of Mattress Firm
Bhaskar Rao
Scott Thompson Chairman of the Board, CEO, President & Interim CEO of Mattress Firm
Good morning, and thank you for joining us on our third quarter 2025 earnings call. I’m pleased to share with you that Somnigroup International delivered a record quarter across nearly all key operating metrics. These results were driven by the early benefits from the Mattress Firm combination and successful execution of our key operating initiatives. Importantly, we achieved this strong financial performance while the U.S. bedding market remains basically flat from a sales perspective, and it is still at trough levels, while the U.S. housing market is yet to recover and international markets continue to face numerous challenges. Additionally, we have not fully realized all of the benefits from the Mattress Firm combination.
This backdrop underscores the potential of our business, the strength of our competitive position and the meaningful opportunity ahead as our markets improve and we continue to deploy capital and optimize our vertical structure. In the third quarter of 2025, we’re pleased to achieve record net sales, adjusted EBITDA and adjusted EPS. Net sales were up approximately 63% to $2.1 billion. Adjusted EBITDA was up approximately 52% to $419 million, and adjusted EPS was up approximately 16% and to $0.95 per share. Now turning to some highlights for the third quarter.
First highlight. Our aggregate like-for-like sales growth was 5% over the same period last year, led by strong performance in our international operations, which I’ll discuss in a minute. Tempur Sealy North America reported 5% like-for-like sales growth which is the strongest quarterly sales trend in 9 quarters. This performance was broad-based across our portfolio and price points as we significantly increased our balance of share at Mattress Firm and experienced growth with our other third-party retailers. Both Tempur-Pedic and Sealy brands reported solid growth in the quarter, driven by our new Sealy Posturepedic products and our strong commitment to advertising, including over $110 million invested in the third quarter to keep our brands top of mind and drive valuable customer traffic to all retailers. Our collaborative marketing approach focused on delivering high-quality, brand-centric advertising to retail partners continues to drive strong results for us and the industry. Retailers who have actively participated in our brand activation program have seen a significant boost in sales of Tempur-Pedic and Sealy products. In short, we continue to win in the market with great product, robust advertising and a dedicated sales force to help our customers improve their business.
Second highlight. Mattress Firm continues to outperform the market, reporting strong same-store sales growth of 5% in the quarter. The strong third quarter performance was possible due to our relentless focus on delivering superior in-store execution and equipping our sleep experts with the tools and training they need to meet the customers’ sleep needs. Further, we continue to invest in consumer experience for our store refresh program, including installing Tempur brand walls to support increased customer engagement and education. Where placed, Tempur brand walls have shown to drive higher retail tickets resulting in strong return on investment. We began scaling this initiative in the back half of the quarter and expect to finish rolling it out to all 2,200 store locations nationwide by the end of next year. Other retailers have also taken part in this program as we are committed to an omnichannel approach.
Additionally, we are ramping up our previously disclosed 3-year program to invest a total of $150 million between 2025 and 2027 to refresh certain Mattress Firm stores, ensuring all locations meet our brand standards. Third highlight, our international business continues to deliver impressive sales growth despite a challenging operating environment. Our Tempur International sales grew 11% in the quarter and continued to outperform the market by a solid clip, driven by the refreshed Tempur product lineup, expanded distribution. Strong local execution, combined with meaningful investments in advertising that significantly boost brand visibility, consumer engagement, resulted in this double-digit performance.
We continue to refine our late-stage customization manufacturing process to support this momentum. This approach allows us to efficiently tailor products for specific markets, channels and customer segments. With a solid foundation and significant long-term potential, we are confident in the growth trajectory of our Tempur international operations. Dreams, our U.K.-based bedding retailer also delivered strong quarterly market outperformance, driven by same-store sales growth and new store openings. Dreams continues to drive cost efficiencies, advance strategic growth initiatives and deliver exceptional product quality and industry-leading customer satisfaction.
Our final highlight is related to the progress on our sales and cost synergy initiatives following the combination of Mattress Firm. Mattress Firm is focused on retailing high-quality products with differentiated innovation at all price points, while driving industry demand with market-leading advertising investments. On synergies, we are ahead of our expectations in achieving a more market-driven distribution of Tempur Sealy brands and private label products at Mattress Firm. We now expect Tempur Sealy to represent a mid-50% of Mattress Firm’s total sales in 2025, up from our previous estimate of below 50%. In total, we now expect sales synergies to result in $60 million of benefit to adjusted EBITDA this year.
Looking to 2026, we expect an incremental $40 million of EBITDA benefit from the wraparound impact of these share gains and is on track to comfortably achieve our targeted $100 million of run rate sales synergies. As a reminder, we held Mattress Firm sales flat in estimating the balance of share opportunity. As the U.S. bedding industry recovers and Mattress Firm sales increase, we expect the dollar synergies to grow. Our increased scale and vertical integrated operations are unlocking efficiencies throughout manufacturing, logistics and sourcing. Additionally, improved insights into in-consumer demand patterns is enabling us to optimize production, upcoming product introductions and product end-of-life strategies. We remain on pace to achieve a minimum of $100 million in annual run rate net cost synergies, beginning with $15 million projected for 2025, an incremental $50 million in 2026 and a further $35 million in 2027.
Long term, we’re excited about the potential to align Tempur Sealy and Mattress Firm’s messaging to increase our advertising efficiency, an opportunity which is not yet quantified in our cost synergy targets. Today, as a unified Somnigroup entity, we are positioned to deliver more cohesive, high-impact advertising to support both our brands and the broader U.S. bedding market. Our new Mattress Firm advertising campaign, Sleep Easy, launched mid-third quarter, aligns our messaging with a cohesive voice. The campaign educates consumers on the importance of a well-suited mattress for restorative sleep and activates them to take the next step in their purchase journey. It highlights some of the most common impacted sleep disruptors and shows how certain products and Mattress Firm’s sleep experts can effectively address these important sleep issues.
We’re very encouraged by the strong consumer response to Sleep Easy campaign. Initial research identified it as the highest performing campaign in Mattress Firm’s recent history across all metrics. Subsequent studies have reinforced this finding, showing the campaign significantly outperformed both industry benchmarks and Mattress Firm’s previous messaging. Although it’s still early in the campaign’s rollout, we are confident that we are on the right path. We expect the positive impact to grow as the campaign becomes more established in the marketplace. Overall, we are pleased with the rapid progress in both sales and cost synergy efforts and remain excited about the long-term opportunities for retail customers, Somnigroup employees and shareholders.
Susan Maklari Goldman Sachs Group, Inc., Research Division
I want to talk about demand. It’s interesting to see how it sounds like the industry is starting to come back a bit and that’s really counter to what we’ve seen in the housing market, but also just what we’re hearing in terms of housing and consumer-related categories broadly. Can you talk about what is driving the relative divergence that we’re seeing in bedding and how much of it do you think is attributable to the efforts that you’ve put in over the last several months and years around new products, more recently, some of the ad spend and the initiatives there. And how we should think about the sustainability of it, just given the macro and the environment that we’re in?
Scott Thompson Chairman of the Board, CEO, President & Interim CEO of Mattress Firm
Thank you for your question, Susan. All 12 of them that you wound into one. First of all, I think we’ve talked about this before. Look, the housing market can be a headwind or a tailwind for the bedding industry. But we’ve always thought of it as it’s in the top 5 items that we think about, but it’s certainly not the first or second. And I think the point you make in your question is exactly right. The bedding industry can be successful without the housing market necessarily be turning around. And we’ve always thought about in the bedding industry, what drives the bedding industry, of course, is innovation. And clearly, the new Sealy Posturepedic product that came out this summer is helping us, Mattress Firm and the industry.
It’s also — the other thing we think that drives the industry is advertising. And you know that we’ve completely retooled we’ll call it the advertising at Mattress Firm, and Mattress Firm is the leading advertiser in the U.S. by a factor of 2 and we’ve changed their creative and we’ve changed the placement and some of the strategies there. And we’re seeing benefits again for us and for the industry. For the first time in, I think, probably 15 or 20 years, we had direct advertising coming out of Tempur Sealy on the Sealy brand in support of the new Sealy product. That certainly has been incremental. And then the other things we watch obviously are consumer confidence. And it hasn’t been robust, but at least it hasn’t been negative. So when we look forward, certainly, we’re hoping for lower interest rates. And I think if you put a 5 handle, on the 30 year, you might get quite a bit of activity in housing and probably furniture and bedding.
We’re getting close. We’re a low 6. But we can be successful without the housing market turning around and it does feel like if you look at the numbers in the industry, you can’t get perfect industry numbers. But there’s no question the industry, I think step — had a good step forward from the second quarter. So sequentially, certainly improved. I think we’re calling it somewhere close to flat from a sales standpoint. And then as expected and as designed, we performed better than the marketplace, and you can see that in our numbers. I think one of the things that I really focused on this quarter was when I take a look back, in the first quarter, we delivered basically flat EPS, adjusted EPS. In the second quarter, we were down 16%, had some launch costs in there. And then we delivered quarter-to-date at plus 16%. And obviously, people can squeeze out what the implied fourth quarter is, and we’ll call that 15% to 20%.
So you can see the momentum as the industry has gotten slightly better. We have implemented some of our strategies, and we’re getting the synergies both in sales and costs from Mattress Firm acquisition.
