Somnigroup International Q3 Earnings Call Highlights

Key Points

• Somnigroup posted record Q3 sales of $2.4 billion and adjusted EPS of $1.04, up 10% year over year, but results missed expectations. A July ERP rollout at Dreams disrupted manufacturing and deliveries, costing an estimated $50 million in sales and $25 million in adjusted EBITDA versus the prior year.
• Management lowered its outlook amid Dreams’ underperformance, higher transportation costs and softer bedding demand, guiding to full-year adjusted EPS of $2.85–$2.95 and sales of about $8.65 billion. The company expects the global bedding market to decline by a mid-single-digit percentage in the second half of 2026.
• Somnigroup completed its Leggett & Platt acquisition and plans to expand Mattress Firm from about 2,150 stores to more than 2,500 over time, beginning in 2027. Management also targets a $3.40-per-share 2027 earnings exit run rate, supported in part by acquisition benefits and synergies.

Somnigroup International NYSE: SGI reported record third-quarter 2026 sales and adjusted earnings, but said results fell short of its expectations as a technology rollout disrupted its Dreams business and the global bedding market remained weak.

The company posted net sales of $2.4 billion, adjusted EBITDA of $448 million and adjusted earnings of $1.04 per share, up 10% from a year earlier. Chairman, President and CEO Scott Thompson said the results came against a cautious consumer backdrop and ongoing economic uncertainty.

Somnigroup completed its acquisition of Leggett & Platt on Aug. 26, adding the component manufacturer’s results for the remainder of the quarter. The combination gives the company 160 manufacturing facilities across 35 countries, Thompson said.

Dreams Disruption Weighs on International Results

Thompson said Dreams’ reported sales fell approximately 35% after the July 1 rollout of a new enterprise resource planning system disrupted manufacturing and deliveries. Longer delivery times hurt conversion rates online and in stores, reduced customer satisfaction and led to lost orders, he said.

The company estimated the disruption cost approximately $50 million in sales and $25 million in adjusted EBITDA compared with the prior year. Thompson said the company had redirected resources to address the problems and expects to return Dreams to historical operating levels in early 2027, subject to market conditions.

Tempur Sealy International sales declined 12% both as reported and in constant currency, largely because of the Dreams disruption. Its operating margin fell to 9.4% from 18.1% a year earlier. Thompson said the legacy Tempur International business, excluding the Dreams issue, delivered high-single-digit growth.

Chief Financial Officer Bhaskar Rao said approximately $20 million in tariff refunds arrived earlier than expected in the third quarter, effectively offsetting the unexpected Dreams impact at the enterprise level. Elevated transportation costs reduced third-quarter results by approximately $5 million relative to expectations, he said.

Mattress Firm Sales Slip as Expansion Plans Take Shape

Mattress Firm generated approximately $1 billion in third-quarter sales. Same-store sales fell 2%, while reported sales declined 6%, primarily because of softer online sales, Rao said. Adjusted operating margin rose to 9.6% from 9.4%, helped by increased cooperative advertising dollars.

Thompson said the company had shifted too much advertising away from Mattress Firm’s online channel toward efforts to bring customers into stores. Management has since redirected some investment back online, and sales there have improved since the third quarter, although they remain below expectations, he said.

Somnigroup plans to begin a multiyear Mattress Firm store expansion in 2027. Thompson said the chain has about 2,150 stores and could grow to more than 2,500 over time. The company estimates an average payback period of approximately 18 months per store when benefits across the enterprise are included.

Tempur Sealy North America’s like-for-like sales fell 4% in the quarter, with wholesale sales down 5% and direct sales up 2%. Thompson said Tempur retail stores posted low-double-digit same-store sales growth.

Leggett contributed $373 million in net sales after the acquisition closed and after eliminating sales to other Somnigroup segments. On a full-quarter, like-for-like basis that included those intercompany sales, Leggett had $973 million in sales, Rao said.

Outlook Reflects Softer Demand and Higher Costs

Somnigroup expects full-year adjusted earnings of $2.85 to $2.95 per share, with sales of approximately $8.65 billion and adjusted EBITDA of $1.4 billion at the midpoints of its guidance. The outlook assumes the global bedding industry will decline by a mid-single-digit percentage in the second half of 2026.

Asked about a roughly 20-cent reduction in the earnings guidance midpoint from two months earlier, Rao cited worse-than-expected performance at Dreams, transportation inflation and a slightly softer industry. He estimated the Dreams shortfall at about $25 million in EBITDA versus prior expectations for the second half, and transportation inflation at approximately $15 million across the company’s business units.

Thompson said a price increase in the first half of 2027 was likely if elevated costs persist, though no decision had been made.

For 2027, Thompson outlined a targeted earnings exit run rate of $3.40 per share, starting from the $2.90 midpoint of 2026 guidance and adding roughly 25 cents each from the full-year effect of the Leggett acquisition and scheduled synergies. That figure was described as an exit run rate, not full-year earnings guidance.

New Products Support Growth Plans

Somnigroup began launching a new Stearns & Foster lineup in the third quarter and expects the rollout to continue into early 2027. Thompson said the company had secured an estimated 6% gain in retail floor slots from competing brands, with early sales strong where the products had been placed.

The company also plans to launch a next-generation Tempur-Pedic Breeze mattress in March and an ultra-premium Stearns & Foster Heritage Collection in late 2027. The Heritage line is expected to range from $7,499 to $10,999 for a queen mattress.

Thompson said the company sees approximately $125 million in incremental adjusted EBITDA opportunities from synergies in 2027 and beyond, with additional Leggett opportunities still being quantified. He said Somnigroup expects to grow earnings even in a flat industry environment.

About Somnigroup International (NYSE:SGI)

Somnigroup International, Inc is a bedding company that designs, manufactures, distributes and sells mattresses and related sleep products. Its offerings include adjustable bases, pillows and other bedding accessories, marketed under brands such as Tempur-Pedic, Sealy and Stearns & Foster.

The company also operates Mattress Firm, a mattress retailer with stores across the United States. Through its brands, retail business and other sales channels, Somnigroup serves customers in the U.S.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.