We use cookies to improve your experience, analyze site usage, and show relevant ads. Go to our Privacy Policy for details.
Overall the call communicated a predominantly positive operational and financial performance: strong revenue growth (+12%), robust margin expansion and cash generation, meaningful synergy realization, international outperformance, and a clear plan to offset commodity inflation via pricing. Notable near-term headwinds include weaker industry demand (mid-single-digit decline), Mattress Firm margin pressure, a Q2 commodity-related profit headwind (~$10 million) and elevated leverage (3.1x) that management expects to remediate. The strategic combination with Leggett & Platt and reaffirmed 2026 guidance (EPS $3.00–$3.40) further support a constructive outlook despite cyclical and timing risks.
Guidance for 2026 calls for adjusted EPS of $3.00–$3.40 on roughly $7.8 billion of consolidated sales (midpoint), with adjusted EBITDA targeted at about $1.45 billion; reported gross margin is expected to be slightly above 45% with nearly 100 basis points of net margin expansion from synergies and operating leverage. Management assumes the global bedding industry will be flat to slightly down, with Tempur Sealy North America like‑for‑like sales growing mid‑single digits, international like‑for‑like growth mid‑single digits, and Mattress Firm like‑for‑like sales growing low‑single digits; intercompany eliminations (between Mattress Firm and Tempur Sealy) are expected to represent ~23% of global Tempur Sealy sales. The plan anticipates the pricing actions will be dollar‑neutral for the year (a ~$50 million uplift to back‑half 2026 like‑for‑like sales and ~ $100 million annualized), a Q2 commodity timing headwind of about $10 million to Tempur Sealy profits, Q1 synergy run‑rate of $15 million (sales) and $50 million (cost), ~ $700 million of advertising, CapEx of ~ $225 million in 2026 (including ~$75 million for Mattress Firm refreshes) with normalized CapEx ~ $200 million thereafter, interest expense of about $230 million, a 25% tax rate, ~213 million diluted shares, and a commitment to deploy at least 50% of 2026 free cash flow to dividends and buybacks while returning leverage (Q1 at 3.1x) to the 2–3x adjusted EBITDA target.
Announced definitive agreement to combine with Leggett & Platt (transaction value ~ $2.5 billion including assumption), expected to close by year-end, accretive to adjusted EPS in year one and to generate additional synergies and vertical-integration benefits.
Net sales rose 12% year-over-year to $1.8 billion in Q1 2026, reflecting solid topline growth across segments.
Adjusted EBITDA increased ~20% to $297 million and adjusted EPS grew ~20% to $0.59, demonstrating operating leverage on 12% sales growth.
North America adjusted gross margin improved ~1,300 basis points to 58.3% (including 600 bp stub benefit); adjusted operating margin improved ~710 basis points to 24.3% on realized synergies and efficiencies.
Tempur Sealy International delivered reported sales growth of 16% and 7% on a constant currency basis; international gross margin rose 140 basis points to 50.4% and operating margin rose 160 basis points to 18.4%.
Record Q1 operating cash flow of $247 million and free cash flow of $186 million; net debt reduced by nearly $500 million over the trailing 12 months and ~$250 million returned to shareholders via dividends and buybacks.
Mattress Firm net sales of ~$886 million with flat same-store sales (outperforming an industry down mid-single digits); on track with $150 million store refresh program (approximately $40 million spent to date).
Achieved $15 million of net benefit from sales synergies and $50 million from cost synergies in Q1, supporting margin and cash flow expansion.
Company announced modest global pricing actions expected to be dollar-neutral to full-year '26 earnings: ~$50 million lift to back-half 2026 sales and ~$100 million annualized pricing benefit expected to offset inflation.
Reaffirmed 2026 guidance: adjusted EPS $3.00–$3.40, sales midpoint ~ $7.8 billion (after intercompany eliminations), reported gross margin slightly above 45%, and midpoint adjusted EBITDA of ~ $1.45 billion; CapEx ~ $225 million.
Hello, everyone. Thank you for joining us, and welcome to Somnigroup First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Lauren Avritt, Director of Investor Relations. Lauren, please go ahead.
Thank you, operator. Good morning, and thank you for participating in today's call. Joining me today are Scott Thompson, Chairman, President and CEO; and Bhaskar Rao, Executive Vice President and Chief Financial Officer. This call includes forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve uncertainties and actual results may differ materially due to a variety of factors that could adversely affect the company's business. These factors are discussed in the company's SEC filings, including its annual reports on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements speak only as of the date on which it is made. The company undertakes no obligation to update any forward-looking statements.
This morning's commentary will also include non-GAAP financial information. Reconciliations of the GAAP financial information can be found in the accompanying press release which has been posted on the company's website at www.somnigroup.com, and filed with the SEC. Our comments will supplement the detailed information provided in the release. And with that, it's my pleasure to turn the call over to Scott.
Good morning. Thank you for joining us on our first quarter 2026 Earnings Call. I'll begin with some highlights i...