Makers of mattresses are slicing prices and delaying product launches amid falling demand for big-ticket gadgets, marking a reversal for a sector that benefited from elevated home-improvement spending early within the pandemic.
Companies together with
Sleep Number Corp.
and
Tempur Sealy International Inc.
have mentioned in current weeks that demand for his or her merchandise has began to say no. Executives and analysts mentioned shoppers are doubtless pulling again on home-goods spending attributable to a mixture of elements, together with rising inflation and the financial impression of Russia’s invasion of Ukraine. The pullback, analysts mentioned, might mark the start of a extra sustained drop in spending on sturdy discretionary gadgets, a class that features items that offered properly through the pandemic, resembling grills and patio furnishings.
The slowdown marks a shift from the previous two years, when gross sales of mattresses and different furnishings surged as shoppers spent extra time at residence as a result of Covid-19 pandemic.
U.S. shoppers spent about $298.5 billion on furnishings and furnishings in 2021, up 22% from 2020 and 31% from 2019, the 12 months earlier than the pandemic, in line with the U.S. Bureau of Economic Analysis.
“I think mattresses are an early tell on a spending slowdown,” mentioned Peter Keith, an analyst at financial-services firm
Piper Sandler
Cos. A mattress is a comparatively simple buy to defer as a result of they put on out relatively than break and shoppers don’t have a look at them day by day, Mr. Keith mentioned.
Signs of weakening demand prompted Minneapolis-based Sleep Number to chop $10 million from its deliberate bills for the quarter ended April 2, largely by lowering spending on advertising and marketing and bonuses, mentioned
David Callen,
the corporate’s finance chief. Still, complete working bills rose 7% from a 12 months earlier, to $297.9 million, partly attributable to supply-chain issues and the impression of the Covid-19 wave attributable to the Omicron variant.
Sleep Number’s merchandise embody chips for controlling the firmness of a mattress and adjusting the mattress base to boost and decrease the top and foot of the mattress. Net gross sales within the quarter ended April 2 declined 7% from a 12 months earlier, to $527.1 million, attributable to a constrained provide of pc chips, whereas buyer demand fell 3%. Earnings fell to $2.1 million from $66.6 million.
The firm, which has a backlog of orders that’s $200 million greater than regular ranges, mentioned it expects to ship fewer beds within the second quarter than it did within the first.
Mr. Callen mentioned Sleep Number supplied extra promotions after gross sales started to sluggish. That got here after the corporate raised costs a number of instances final 12 months to offset greater labor, delivery and commodities prices.
Prices on Sleep Number’s technology-enhanced mattresses vary from about $900 to about $5,000, in line with the corporate’s web site.
Sleep Number additionally suspended share repurchases when it noticed a drop in demand in March, Mr. Callen mentioned. The firm purchased $42 million of its personal shares through the quarter ended April 2, down from $167 million a 12 months earlier. “We’re being very cautious,” he mentioned.
Sleep Number faces persevering with supply-chain challenges as a result of world semiconductor scarcity. The firm can also be being hit by Covid-19-related manufacturing unit closures and slowdowns in Shanghai, the place a key chip provider is situated, Mr. Callen mentioned. “We’re going to be operating, in effect, inefficiently,” that means the corporate expects a decrease quantity of mattress deliveries within the coming weeks as it really works by its supply-chain points, he mentioned.
Growing pessimism amongst shoppers has begun to weigh on gross sales for big-ticket purchases resembling mattresses, mentioned Atul Maheswari, an analyst at UBS Group AG. Consumer confidence started to tumble final 12 months as costs rose and households spent the money they obtained from pandemic-stimulus applications. Inflation in March accelerated to a four-decade excessive of 8.5%.
“Consumers need to feel confident about themselves. Overall consumer confidence matters a lot for this type of purchase,” Mr. Maheswari mentioned.
Mattress firm Tempur Sealy on March 31 mentioned that its gross sales got here in beneath expectations following the Presidents Day vacation in February attributable to macroeconomic elements together with falling shopper confidence and geopolitical uncertainty. The Lexington, Ky.-based firm, which sells its merchandise in over 100 nations, mentioned it might delay the launch of a brand new worldwide product line from this 12 months till the primary quarter of 2023.
“We remain committed to making investments in marketing, product launches, and our operations this year to support the long-term growth trajectory of the business,” Chief Executive
Scott Thompson
mentioned in an announcement.
The firm, which reviews first-quarter outcomes Thursday, mentioned it expects year-to-year net-sales development of 15%, a deceleration from the quarter ended Dec. 31, when web gross sales elevated 29% from a 12 months earlier, to $1.36 billion.
The price of a Tempur-Pedic mattress—one of many firm’s manufacturers—can vary from about $2,000 to greater than $4,000, in line with the corporate’s web site. A Sealy mattress prices roughly $500 to $2,500. Tempur Sealy declined to make its finance chief obtainable for an interview.
Upscale furnishings maker
RH,
previously Restoration Hardware, additionally mentioned final month it noticed a slowdown in orders beginning in late February. Chief Executive
Gary Friedman
pointed to a spread of things, together with the warfare in Ukraine, to elucidate the pullback in demand.
In addition to waning shopper confidence, current stock-market declines additionally affected the online price of high-income households, including extra strain to shopper spending, mentioned Piper Sandler’s Mr. Keith.
Write to Kristin Broughton at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Source: www.wsj.com”