| Revenue of $1.87B (54.68% Y/Y) misses by $62.39M
Somnigroup International Inc. (SGI) Q4 2025 Earnings Call February 17, 2026 8:00 AM EST
Company Participants
Aubrey Moore – Vice President of Investor Relations
Scott Thompson – Chairman of the Board, CEO & President
Bhaskar Rao – Executive VP & CFO
Scott Thompson Chairman of the Board, CEO & President
Aubrey, thank you for your outstanding contributions to Investor Relations. Maybe even a bigger thank you for you jumping into your new role at SGI that is important to our future success.
Moving on to today’s earnings call. Good morning. Thank you for joining us on our fourth quarter and full year 2025 earnings call. I’ll begin with highlights for the quarter and full year and then turn the call over to Bhaskar to review our financial performance in more detail and discuss our 2026 guidance and our updated 3-year EPS targets.
After that, I’ll open the call up for Q&A. In the fourth quarter of 2025, we achieved record net sales and adjusted EBITDA, while our adjusted EPS increased a robust 20%. Year-over-year, net sales were up approximately 55% to $1.9 billion. Adjusted EBITDA was up approximately 59% to $349 million and adjusted EPS was $0.72 per share. This financial performance was particularly notable given it was achieved while the industry is at a record low and underperformed our expectations.
2025 proved to be another challenging year for the bedding industry. We estimate the U.S. industry trend declined mid-single digits in the fourth quarter and full year. The non-U.S. markets we operate in were similarly challenged. After multiple year headwinds, we are confident the bedding industry will normalize to at least historical growth trends in the near future. Our conviction in our industry outlook is supported by our demand-driven innovation, compelling advertising, the industry’s pent-up product demand, growing health and wellness trends, consumer confidence and future growth in housing formation.
We’ll continue to strive to win market share gains, drive cost efficiencies and prudently allocate capital, all to deliver shareholder returns. Before turning the call over to Bhaskar, let me highlight several notable achievements in 2025, which marked a transformational year for Somnigroup. Our first highlight is the successful execution of the Mattress Firm combination and transition to Somnigroup International.
We’ve made significant progress with the combination in our first year, and we’re still in the early stages of realizing all of the benefits. We brought all of our business units together through a holding company structure with unified management and a shared business strategy and focus. This structure allows us to operate effectively while maintaining a large degree of independence at the business unit level.
Building upon the successful combination of Mattress Firm, we were able to accelerate the pace of sales and cost synergies, exceeding our initial expectations. We now expect to deliver $225 million in total EBITDA synergies, $125 million from cost synergies and $100 million from sales synergies. Bhaskar will provide more color on the increase in our cost synergy outlook in just a moment.
We cemented our position as the largest bedding company in the world, allowing us to drive economies of scale, streamline operations, reduce product costs, invest in advertising and fully support industry partners. Lastly, this transaction drove earnings, derisked distribution volatility as we are now 65% direct-to-consumer and positioned us for sustainable growth.
Our second highlight is the strength of our operating model, which allows us to aggressively execute against long-term growth initiatives while remaining responsive to current market conditions. In 2025, we drove share gains across all business segments, extending our lead as the world’s largest bedding company. Our competitive advantage underpin these strong results and include our diverse portfolio of trusted brands and innovative products, our unmatched global scale and vertically integrated business model, a broad omnichannel reach with our products sold through tens of thousands of third-party retail stores worldwide and direct-to-consumer.
And finally, our strong cash generation and disciplined capital allocation, which supports reinvestment in the business, returning cash to shareholders, deleveraging and providing dry powder to capitalize on compelling opportunities such as our recent investments in Fullpower and Kingsdown.
The third highlight is the outperformance of our U.S. Tempur Sealy business, supported by innovative new products, targeted advertising initiatives and expanded distribution. In 2025, we launched our all-new Sealy Posturepedic line, the largest launch in our history with over 65,000 floor samples shipped. The launch is performing well and the new collections is driving meaningful sales growth.
This year also marked the first national advertising investment to support the Sealy brand and product, amplifying Sealy’s share voice and driving valuable customer traffic industry-wide. As we look ahead to 2026, we’re excited to continue investing in national advertising designed to drive traffic to retailers and reinforce our commitment to innovation with the launch of our new Stearns & Foster products in the back half of the year.
Fourth highlight is that Mattress Firm’s full year performance outpaced the broader U.S. market, driven by our refined merchandising strategy, strengthened supplier relations and exceptional in-store execution. Since closing the acquisition, we’ve elevated Mattress Firm’s merchandising. Our focus has been on curating a portfolio of complementary products that deliver exceptional quality and value across all price points. We deepened partnerships with some suppliers who not only met our quality standards, but also actively supported Mattress Firm’s success through differentiated offerings and traffic-driving advertising initiatives.
We also activated multiple initiatives to deliver retail excellence, including optimizing marketing strategies, enhancing the in-store experience and leveraging our best-in-class retail talent, supporting them with quality sales tools and training to provide customers with targeted sleep solutions. Additionally, we’re making steady progress on our plan to invest $150 million between 2025 and 2027 to refresh certain Mattress Firm stores, bringing them up to our brand standards.
Further, we’ve ramped installation of Tempur brand walls, which lead to improved customer engagement and education. These brand walls placed at both Mattress Firm and other retailers have proven to be a worthwhile investment by driving higher retail ASP. We made substantial progress in expanding this initiative in the back half of 2025, and we remain firmly on track to complete the rollout across all Mattress Firm stores nationwide at the end of the year.
As previously mentioned, we undertook a new advertising strategy for Mattress Firm to harmonize the message with Somnigroup initiatives, culminating in the launch of our new Mattress Firm advertising campaign, Breathe Easy in the back half of 2025. We introduced new campaign iterations into the marketplace over the last quarter and continue to achieve all-time high market research scores. Key performance indicators consistently indicate that the campaign is having a measurably positive impact upon customers’ impression of Mattress Firm and brands being presented, enhancing awareness and triggering consumers’ interest in bedding, benefiting all bedding retailers.
Campaign’s strong performance has already prompted 2 non-SGI vendor partners to commit additional advertising dollars directly to Mattress Firm to capitalize on the opportunity. Both our scale and our new messaging platform now clearly represents bedding brands. We are pleased with these preliminary results and expect to see additional momentum as the campaign becomes more established in the market.
Our fifth highlight is related to our international business. We saw impressive sales growth, demonstrating the long-term global growth opportunity ahead. Our Tempur International business delivered low double-digit sales growth in the quarter or on a constant currency basis, high single-digit sales growth in the fourth quarter and full year, outpacing the broader industry while navigating a challenging market. This marks our third consecutive year of solid growth across all key international regions, driven by the refreshed Tempur product lineup, expanded distribution reach and enhanced marketing investments.
Dreams, our U.K.-based retail brand, also posted another solid year of market outperformance, driven by conversion and increased order volume. Full year performance was supported by robust same-store sales and strategic new store openings. The team continued to deliver operational efficiencies, execute on growth initiatives and uphold exceptional product quality and customer satisfaction, driving share gains against the challenging U.K. bedding market. Overall, we are pleased with the momentum we’ve accumulated during 2025 and look forward to carrying that momentum into 2026.
Scott Thompson Chairman of the Board, CEO & President
Thank you, Bhaskar, and well done. Now I want to quickly address our proposed acquisition of Leggett & Platt before opening the call up for Q&A. We welcome Leggett & Platt Board’s willingness to engage in discussions and conduct customary due diligence, which is currently underway. Somnigroup remains committed to pursuing a transaction that will deliver substantial value to shareholders of both companies. There can be no assurances regarding the completion of a transaction or the terms of any transactions, and we will not be commenting further on this topic.
Lastly, I’d like to headline that we will be hosting an Investor Day in New York on March 4. During that day, we expect to share more information on our 3-year EPS target, our strategic vision for Somnigroup, discuss growth initiatives for Tempur Sealy, Mattress Firm and Dreams and provide additional details on our capital allocation strategy.
Susan Maklari Goldman Sachs Group, Inc., Research Division
My question is around the outlook for demand. Can you talk a bit about the state of the consumer, how you’re thinking about the shape of demand as we come into 2026? And how you’re thinking of the drivers and the potential for out or underperformance relative to the guide for Tempur North America sales to be up low single digits on a like-for-like basis?
Scott Thompson Chairman of the Board, CEO & President
Sure, Susan. Thank you for the question. I mean, first thing in demand, I’d say our estimates are for $3, $3.40 for 2026. One of the foundations of it is, it’s basically a flat market. We didn’t call a turn in there. And if we had, obviously, the flow-through on that guidance would be significant. But we thought considering the fourth quarter came in a little light from an industry standpoint from our expectations that probably flat was the right way to go into the year. And then we’ll see how demand develops.
If you’re talking about — what are we thinking about, fourth quarter, again, came in a little bit less from an industry standpoint than we expected. And if you look at the start of the first quarter, it’s kind of a tale of 2 cities. If you look at the pre-President’s Day holiday period, call it, January 1 to, I don’t know, February 10 or so, we had tough weather, and I hate talking about weather, obviously, but if you talk about short period, you always have to think about it. And there was tough weather in the U.S.
And the way I always look at that is I look at lost days and if you look at Mattress Firm, we had 5,000 days of store losses that were incremental to last year. So to be clear, that’s not like rain or something. That means the weather was so bad, the store didn’t open. So we lost 5,000 days of sales during that period off of a possibility of 90,000 days. So it’s about a 6% headwind incrementally in store closings.
So as you would expect during that period, Mattress Firm’s same-store sales were slightly down. But then as soon as you get into the President Holiday period, which we’ll call that February 11 forward, sales have been very robust. And when I say very robust, I mean double digits robust, driven by strong AOV, driven by Tempur, clearly, a customer that’s in the market wanting to buy. And the result is, looking at U.S. Mattress Firm sales because that’s kind of the best index for consumers and it has real-time data is now we’re running positive same-store sales at Mattress Firm to start the quarter.
So when I look at it, it looks like a bedding market and a consumer that wants the market to grow. And we’ve got to get out of our way, whether it be some drama in Washington or whether it be an unusually strong storm slows you down a little bit. But it does feel like it’s a market that’s poised for growth.
