Somnigroup International Inc.
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ITEM 1. BUSINESS
General
Somnigroup is the world's largest bedding company, dedicated to enriching people's lives through the power of a good night's sleep and transforming how the world sleeps. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in over 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams. Our portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy® and Stearns & Foster®, and our global omni-channel platform enables us to meet consumers wherever they shop, offering a personal connection and innovation to provide a unique retail experience and tailored solutions.
Somnigroup has a strong competitive presence in the bedding marketplace with a leadership position that comes from product and service quality, culture, strategy and people, backed with financial strength and a disciplined approach to returning value to shareholders.
On February 5, 2025, we completed the previously announced acquisition of Mattress Firm, the nation's largest mattress specialty retailer. The total purchase price was approximately $5.1 billion, net of cash acquired of $0.3 billion. The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of our common stock on the NYSE on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.
In connection with the closing of the Mattress Firm Acquisition, we amended our Certificate of Incorporation to change our name to "Somnigroup International Inc." effective February 18, 2025. The name Somnigroup reflects our position as a global holding company and provider of sleep solutions with a portfolio of bedding businesses. Somnigroup's purpose is to drive long-term shareholder returns through sustainable competitive advantages and disciplined capital allocation as we oversee our investments in the $120 billion global sleep industry.
To comply with commitments made in securing approval for our acquisition of Mattress Firm, we set our merchandising plan to provide 43% of horizontal premium ($1,500+) floor slots, on average across all our open Mattress Firm stores, for the placement of third-party premium mattresses as assessed at calendar year end. To monitor the Company's fulfillment of the merchandising plan, the Company has designed and instituted certain protocols in conjunction with an independent consulting firm. Based on these protocols, management determined that the Company was in compliance with the floor slot commitment as assessed on December 31, 2025.
Our powerful distribution and retail model operates through an omni-channel strategy. As of December 31, 2025, Somnigroup's combined global footprint included over 2,800 retail stores, approximately 30 e-commerce platforms, over 70 manufacturing facilities and four state-of-the-art research and development facilities worldwide. Our combined operations are supported by more than 20,000 employees with a collective focus on providing breakthrough sleep solutions to consumers.
Our long-term strategy is to drive earnings growth with high return on invested capital and strong free cash flow, which is a non-GAAP financial measure. In order to achieve our long-term strategy, we focus on developing the most innovative bedding products in all the markets we serve, making significant investments in our iconic global brands and optimizing our worldwide omni-channel distribution. We also intend to generate earnings growth through ongoing investments in research and development and productivity initiatives, which will improve our profitability and create long-term stockholder value.
We have a balanced approach to capital allocation that includes investments in our operations to facilitate long-term growth and returning capital to shareholders via quarterly cash dividends and share repurchases. From time to time, we also look at acquisition opportunities that could complement and strengthen our core business. When doing so, we seek to balance our assessment of the industry environment, our business outlook and the potential for further strategic expansion, while also prudently managing our business.
Following the completion of the Mattress Firm Acquisition in the first quarter of 2025, we have operated in three segments: Mattress Firm, Tempur Sealy North America and Tempur Sealy International. These segments are strategic business units that are managed separately. Our Mattress Firm segment consists of retail stores and distribution centers located in the
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U.S. Our Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations). Our Tempur Sealy International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results.
Our principal executive office is located at 100 Crescent Ct. Suite 700, Dallas, Texas 75201 and our telephone number is (800) 878-8889. Somnigroup International Inc. was incorporated under the laws of the State of Delaware in September 2002. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed with or furnished to the Securities and Exchange Commission ("SEC") pursuant to Section 13(a) of the Exchange Act, are available free of charge on our website at www.somnigroup.com as soon as reasonably practicable after such reports are electronically filed with the SEC. Our website and its contents are not incorporated by reference into this Report.
The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The website of the SEC is www.sec.gov.
Our Products and Brands
We have a comprehensive offering of products that appeal to a broad range of consumers, some of which are covered by one or more patents and/or patent applications. We also routinely introduce new bedding products and update our existing bedding products in each of our segments.
In order to deliver on our mission to be every consumer's choice for better sleep by advancing innovation and expertise in the bedding industry, one of our strategic initiatives is to leverage and strengthen our comprehensive portfolio of iconic brands and products. Our portfolio of product brands includes many highly recognized brands, including Tempur-Pedic®, Sealy® and Stearns & Foster®, which are described below:
•Tempur-Pedic® - Founded in 1991, the Tempur brand is our specialty innovation category leader designed to provide life changing sleep for our wellness-seeking consumers. Our proprietary Tempur material precisely adapts to the shape, weight and temperature of the consumer and creates fewer pressure points, reduces motion transfer and provides personalized comfort and support.
•Stearns & Foster® - The Stearns & Foster brand offers our consumers high quality mattresses built by certified craftsmen who have been specially trained. Founded in 1846, the brand is designed and built with precise engineering and relentless attention to detail and fuses new innovative technologies with time-honored techniques, creating supremely comfortable beds.
•Sealy® - The Sealy brand originated in 1881 in Sealy, Texas, and for over a century has focused on offering trusted comfort, durability and excellent value while maintaining contemporary styles and great support. The Sealy Posturepedic® brand, introduced in 1950, was engineered to provide all-over support and body alignment to allow full relaxation and deliver a comfortable night's sleep.
•Sleepy's® - The Sleepy's brand is our private label brand offering at our Mattress Firm stores and online at www.mattressfirm.com. Sleepy's is well-positioned to compete in a space where consumers prioritize quality and value.
•Non-Branded - We offer non-branded products through our OEM business, including mattresses, pillows and other bedding products and components at a wide range of price points. The addition of non-branded offerings expands our capabilities to service third-party retailers to capture manufacturing profits from bedding brands outside our own.
In 2026, we plan to launch an all-new collection of Stearns & Foster products in North America. This new line is designed to further elevate our high‑end traditional innerspring brand by introducing incremental technologies, expanding our range of hybrid offerings, and providing a refreshed aesthetic.
Our portfolio of retail brands includes Mattress Firm®, Dreams®, Tempur-Pedic® retail stores, SOVA retail stores in Sweden and a variety of other retail brands internationally, which operate in various countries. The retail brands named above are described below:
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•Mattress Firm® - Mattress Firm is the largest multi-branded mattress specialty retailer in the U.S., helping to make better sleep a reality by matching consumers to their perfect mattress through its highly trained team of Sleep Experts® across its over 2,100 stores and robust online operations. Mattress Firm is a leading retailer of brands such as Tempur-Pedic®, Sealy®, Stearns & Foster®, Purple®, Sleepy's®, Beautyrest®, Nectar®, Serta®, Simmons®, Tuft & Needle® and tulo®.
•Dreams® - Dreams is the leading specialty bedding retailer in the United Kingdom ("U.K."). As a multi-branded retailer, Dreams sells a variety of products across a range of price points. In addition to operating over 200 brick-and-mortar stores and an e-commerce channel throughout the U.K., Dreams also manufacturers the majority of the bedding products it sells in-house.
•Tempur-Pedic® retail stores - Tempur-Pedic® retail stores are designed for the consumers that prefer to purchase directly from the manufacturer, and for those seeking a more personalized and educational sales experience. These retail boutiques are strategically located in high traffic, premium retail centers that attract customers whose interests and purchasing behaviors align with our brand.
•SOVA - SOVA is a highly respected and well-established premium bedding chain in Sweden. Our stores are connected to the urban areas of Stockholm, Gothenburg and Malmö. The assortment primarily focuses on premium to ultra-premium brands and well-trained sales staff targeting to sell quality beds with a strong average selling price.
Omni-Channel Distribution
Our primary selling channels are Direct and Wholesale. These channels align to the operating margin characteristics of our business and our marketplace. Direct channel sales represented 63.5% of net sales in 2025, compared to 24.9% in 2024, primarily driven by the acquisition of Mattress Firm. Our wholesale distribution complements our broad direct channel distribution, and we believe this balanced approach enhances the overall global sales potential and profitability of Somnigroup.
Our Direct channel includes over 2,800 company-owned retail stores and our e-commerce platforms and call centers worldwide. Growth opportunities for our Direct channel include improving conversion, average order value and traffic, and through opening new brick and mortar stores and e-commerce channels.
Our Wholesale channel includes sales of product to third-party retailers, hospitality businesses and healthcare customers. Growth opportunities for our Wholesale business include driving slot velocity, increasing our slot placements with existing customers and expanding distribution through new retail partners and alternative distribution channels.
Our third-party retailers, Mattress Firm®, Tempur-Pedic® retail stores, Dreams® and our other company-owned store concepts reach the vast majority of consumers who still prefer to touch and feel a mattress and speak to a retail sales associate prior to making a purchase decision. However, our consumer insights also demonstrate that there is a growing segment of the population that prefers to purchase products online and, to a lesser degree, via a call center. As such, having an omni-channel presence is more important than ever, with most customers completing research and shopping both online and in-stores before making their purchase decision.
For customers that prefer the convenience of making purchases online and having their bedding products delivered right to their front door, we have evolved our distribution model to include multiple online options to reach those that want to purchase our products without the need to go into a brick-and-mortar store.
Marketing
Our overall marketing strategy is to drive consumer demand for our brands by distinguishing them in the marketplace. To accomplish this, we target each brand to a particular and complementary audience, and tailor our product design/development, distribution and advertising accordingly. To maximize awareness and purchase intent for our brands, we invest at industry-leading levels in national television, radio, search-engine marketing, social media and other media channels. We also complement our own direct-to-consumer marketing activities and investments with marketing activity conducted in cooperation with our retail partners. This activity includes investments in co-operative advertising, new product launches and the deployment of in-store point-of-sale material and training programs designed to enhance the visibility of, and advocacy, for our brands.
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Seasonality
We believe that sales of products to furniture and bedding stores are typically subject to modest seasonality inherent in the bedding industry, with sales expected to be generally lower in the second and fourth quarters. Sales in a particular quarter can also be impacted by competitive industry dynamics and global macroeconomic conditions. Additionally, the U.S. bedding industry generally experiences increases in sales around holidays and promotional periods.
Operations
Mattress Firm
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the 2025 Annual Report, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in ITEM 7 of Part II of the 2025 Annual Report, and the accompanying Condensed Consolidated Financial Statements and notes thereto included in this Report. Unless otherwise noted, all of the financial information in this Report is consolidated financial information for the Company. The forward-looking statements in this discussion regarding the mattress and pillow industries, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are subject to numerous risks and uncertainties. See "Special Note Regarding Forward-Looking Statements" elsewhere in this Report and in the 2025 Annual Report, the section titled "Risk Factors" contained in ITEM 1A of Part I of the 2025 Annual Report. Our actual results may differ materially from those contained in any forward-looking statements.
In this discussion and analysis, we discuss and explain the consolidated financial condition and results of operations for the three months ended March 31, 2026, including the following topics:
•an overview of our business and strategy;
•results of operations, including our net sales and costs in the periods presented as well as changes between periods;
•expected sources of liquidity for future operations; and
•our use of certain non-GAAP financial measures.
Business Overview
General
We are the world's leading bedding company, dedicated to transforming how the world sleeps. With superior capabilities in design, manufacturing, distribution and retail, we deliver breakthrough sleep solutions and serve the evolving needs of consumers in more than 100 countries worldwide through our fully-owned businesses, Tempur Sealy, Mattress Firm and Dreams.
We operate in three segments: Mattress Firm, Tempur Sealy North America and Tempur Sealy International. These segments are strategic business units that are managed separately. Our Mattress Firm segment consists of retail stores and distribution centers located in the U.S. Our Tempur Sealy North America segment consists of manufacturing, distribution and retail subsidiaries and licensees located in the U.S., Canada and Mexico (other than Mattress Firm retail and distribution locations). Our Tempur Sealy International segment consists of manufacturing, distribution and retail subsidiaries, joint ventures and licensees located in Europe, Asia-Pacific and Latin America (other than Mexico). Corporate operating expenses are not included in any of the segments and are presented separately as a reconciling item to consolidated results. We evaluate segment performance based on net sales, gross profit and operating income. For additional information refer to Note 12, "Business Segment Information," included in Part I, ITEM 1 of this Report.
Our portfolio includes the most highly recognized brands in the industry, including Tempur-Pedic®, Sealy® and Stearns & Foster® and our global omni-channel platform enables us to meet consumers wherever they shop, offering a personal connection and innovation to provide a unique retail experience and tailored sleep solutions.
As of March 31, 2026, we operated 2,839 company-owned stores, including 2,161 Mattress Firm stores, Tempur Sealy owned stores, Dreams stores and joint venture stores. Our distribution model operates through an omni-channel strategy. The Mattress Firm segment sells products through one channel: Direct. The Tempur Sealy North America and Tempur Sealy International operating business segments sell products through two channels: Direct and Wholesale. Our Direct channel includes product sales through company-owned stores, online and call centers. Our Wholesale channel includes all product sales to third-party retailers, including third-party distribution, hospitality and healthcare.
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General Business and Economic Conditions
We believe the bedding industry is structured for sustained growth, driven by product innovation, sleep technology advancements, consumer confidence, housing formations and population growth. In our opinion, the industry is no longer engaged in uneconomical retail store expansion, startups have shifted from uneconomical strategies to becoming profitable and legacy retailers and manufacturers have become skilled in producing profitable online sales.
Over the last decade, consumers have made the connection between a good night's sleep and overall health and wellness. As consumers make this connection, they are willing to invest more in their bedding purchases, which positions us well for long-term growth.
The global bedding industry was challenged in 2025 due to certain macroeconomic pressures on the consumer, which continued during the first quarter of 2026. Ongoing geopolitical conflicts, including trade disputes and the imposition of tariffs, along with the U.S. government shutdowns, may also introduce further uncertainty for the consumer. We have taken actions to mitigate the impact of proposed tariffs, and we implemented pricing actions to mitigate the remaining impact. The majority of our products sold in the U.S. are also manufactured in the U.S. Accordingly, we believe proposed tariffs will not have a material impact on our results of operations in 2026. However, the duration and extent of tariffs remain uncertain, and we are continuing to evaluate the potential future impacts of the imposition of tariffs. We expect to outperform the bedding industry as a result of our investments in new product launches and continued investments in innovation, quality, advertising and customer service.
Definitive Agreement with Leggett & Platt, Incorporated
On April 13, 2026, Somnigroup International and Leggett & Platt, Incorporated ("Leggett & Platt") entered into a definitive agreement (the "Merger Agreement") for a proposed business acquisition in which Somnigroup International, through a wholly-owned subsidiary, will acquire Leggett & Platt in an all-stock transaction valued at approximately $2.5 billion based on the closing price of Somnigroup International's common stock as of April 10, 2026 and inclusive of Leggett & Platt's existing indebtedness.
The transaction is currently anticipated to close by year-end 2026, subject to the satisfaction of customary closing conditions, including approval by Leggett & Platt’s shareholders and receipt of applicable regulatory approvals. The transaction does not require Somnigroup International shareholder approval. Following the close of the transaction, Leggett & Platt is expected to operate as a separate business unit within Somnigroup and to maintain its offices in Carthage, Missouri.
Acquisition of Mattress Firm
On February 5, 2025, we completed the Mattress Firm Acquisition for an aggregate purchase price of approximately $5.1 billion, net of cash acquired of $0.3 billion. The aggregate purchase price consisted of $3.1 billion in cash and approximately 34.2 million shares of common stock valued at $65.65 per share, which represents the simple average of the opening and closing price per share of our common stock on the NYSE on the trading day immediately prior to the date of acquisition, with the value of any fractional shares paid in cash.
Mattress Firm operates as a separate business segment. Mattress Firm's financial results for the period February 5, 2025 through March 31, 2025 (the "stub period") are included in our Condensed Consolidated Financial Statements for the three months ended March 31, 2025.
On May 1, 2025, we completed the previously announced divestiture of 73 Mattress Firm retail locations and our Sleep Outfitters subsidiary, which includes 103 specialty mattress retail locations and seven distribution centers, to MW SO Holdings Company, LLC ("Mattress Warehouse").
Product Launches
In 2026, we plan to launch an all new collection of Stearns & Foster products in North America. This new line is designed to further elevate our high‑end traditional innerspring brand by introducing incremental technologies, expanding our range of hybrid offerings and providing a refreshed aesthetic.
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Results of Operations
A summary of our results for the three months ended March 31, 2026 include:
•Total net sales increased 12.3% to $1,801.5 million as compared to $1,604.7 million in the first quarter of 2025, primarily driven by the inclusion of Mattress Firm sales for a full quarter as compared to the first quarter of 2025, which included Mattress Firm for the stub period.
•Gross margin was 43.1% as compared to 36.2% in the first quarter of 2025. Adjusted gross margin(1) was 43.6% as compared to 42.2% in the first quarter of 2025.
•Operating income increased 1,317.4% to $187.1 million as compared to $13.2 million in the first quarter of 2025. Adjusted operating income(1) increased 17.4% to $214.6 million as compared to $182.8 million in the first quarter of 2025. Both were primarily driven by the inclusion of Mattress Firm and realized sales and cost synergies.
•Net income increased 414.8% to $104.2 million as compared to net loss of $(33.1) million in the first quarter of 2025. Adjusted net income(1) increased 28.4% to $124.5 million as compared to $97.0 million in the first quarter of 2025.
•Earnings per diluted share ("EPS") increased 388.2% to $0.49 as compared to loss per diluted share of $(0.17) in the first quarter of 2025. Adjusted EPS(1) increased 20.4% to $0.59 as compared to $0.49 in the first quarter of 2025.
For a discussion and reconciliation of non-GAAP financial measures as discussed above to the corresponding GAAP financial results, refer to the non-GAAP financial information set forth below under the heading "Non-GAAP Financial Information."
We may refer to net sales, earnings or other historical financial information on a "constant currency basis," which is a non-GAAP financial measure. These references to constant currency basis do not include operational impacts that could result from fluctuations in foreign currency rates. To provide information on a constant currency basis, the applicable financial results are adjusted based on a simple mathematical model that translates current period results in local currency using the comparable prior corresponding period's currency conversion rate. This approach is used for countries where the functional currency is the local country currency. This information is provided so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates, thereby facilitating period-to-period comparisons of business performance. Constant currency information is not recognized under GAAP, and it is not intended as an alternative to GAAP measures. Refer to Part I, ITEM 3 of this Report for a discussion of our foreign currency exchange rate risk.
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THREE MONTHS ENDED MARCH 31, 2026 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2025
The following table sets forth the various components of our Condensed Consolidated Statements of Income (Loss) and expresses each component as a percentage of net sales:
| Three Months Ended March 31, | |||||||||||||||||||||||
| (in millions, except percentages and per share amounts) | 2026 | 2025 | |||||||||||||||||||||
| Net sales | $ | 1,801.5 | 100.0 | % | $ | 1,604.7 | 100.0 | % | |||||||||||||||
| Cost of sales | 1,024.6 | 56.9 | 1,024.2 | 63.8 | |||||||||||||||||||
| Gross profit | 776.9 | 43.1 | 580.5 | 36.2 | |||||||||||||||||||
| Selling and marketing expenses | 428.5 | 23.8 | 362.6 | 22.6 | |||||||||||||||||||
| General, administrative and other expenses | 166.9 | 9.3 | 209.5 | 13.1 | |||||||||||||||||||
| Equity income in earnings of unconsolidated affiliates | (5.6) | (0.3) | (4.8) | (0.3) | |||||||||||||||||||
| Operating income | 187.1 | 10.4 | 13.2 | 0.8 | |||||||||||||||||||
| Other expense, net: | |||||||||||||||||||||||
| Interest expense, net | 60.0 | 3.3 | 61.3 | 3.8 | |||||||||||||||||||
| Other (income) expense, net | (10.2) | (0.6) | 1.2 | 0.1 | |||||||||||||||||||
| Total other expense, net | 49.8 | 2.8 | 62.5 | 3.9 | |||||||||||||||||||
| Income (loss) before income taxes | 137.3 | 7.6 | (49.3) | (3.1) | |||||||||||||||||||
| Income tax (provision) benefit | (33.4) | (1.9) | 16.5 | 1.0 | |||||||||||||||||||
| Net income (loss) before non-controlling interest | 103.9 | 5.8 | (32.8) | (2.0) | |||||||||||||||||||
| Less: Net (loss) income attributable to non-controlling interest | (0.3) | — | 0.3 | — | |||||||||||||||||||
| Net income (loss) attributable to Somnigroup International Inc. | $ | 104.2 | 5.8 | % | $ | (33.1) | (2.0) | % | |||||||||||||||
| Earnings (loss) per common share: | |||||||||||||||||||||||
| Basic | $ | 0.50 | $ | (0.17) | |||||||||||||||||||
| Diluted | $ | 0.49 | $ | (0.17) | |||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 210.3 | 194.9 | |||||||||||||||||||||
| Diluted | 212.6 | 198.9 | |||||||||||||||||||||
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NET SALES
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | Consolidated | Mattress Firm | Tempur Sealy North America | Tempur Sealy International | |||||||||||||||||||||||||||||||||||||||||||
| Net sales by channel | |||||||||||||||||||||||||||||||||||||||||||||||
| Direct | $ | 1,196.3 | $ | 906.0 | $ | 885.9 | $ | 593.7 | $ | 90.0 | $ | 121.7 | $ | 220.4 | $ | 190.6 | |||||||||||||||||||||||||||||||
| Wholesale | 605.2 | 698.7 | — | — | 473.5 | 584.5 | 131.7 | 114.2 | |||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | 1,801.5 | $ | 1,604.7 | $ | 885.9 | $ | 593.7 | $ | 563.5 | $ | 706.2 | $ | 352.1 | $ | 304.8 | |||||||||||||||||||||||||||||||
Net sales increased 12.3%, and on a constant currency basis increased 10.4%. The change in net sales was driven by the following:
•Mattress Firm net sales increased $292.2 million, or 49.2%, primarily driven by the inclusion of net sales for a full quarter as compared to the first quarter of 2025, which included Mattress Firm for the stub period. All Mattress Firm sales are reported through the direct channel.
•Tempur Sealy North America net sales decreased $142.7 million, or 20.2%, net sales in the Wholesale channel decreased $111.0 million, primarily driven by the accounting elimination of sales to Mattress Firm for a full quarter in 2026 as compared to the first quarter of 2025, which eliminated sales to Mattress Firm for the stub period. Net sales in the Direct channel decreased $31.7 million, or 26.0%, primarily driven by a decrease in sales from the divestiture of Sleep Outfitters in the second quarter of 2025.
•Tempur Sealy International net sales increased $47.3 million, or 15.5%, primarily driven by strong performance in key markets. On a constant currency basis, International net sales increased 7.2%. Net sales in the Direct channel increased 7.5% on a constant currency basis. Net sales in the Wholesale channel increased 6.7% on a constant currency basis.
GROSS PROFIT
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||
| (in millions, except percentages) | Gross Profit | Gross Margin | Gross Profit | Gross Margin | Margin Change | |||||||||||||||||||||||||
| Tempur Sealy North America | $ | 326.4 | 57.9 | % | $ | 240.0 | 34.0 | % | 23.9 | % | ||||||||||||||||||||
| Tempur Sealy International | 177.6 | 50.4 | % | 149.3 | 49.0 | % | 1.4 | % | ||||||||||||||||||||||
| Mattress Firm | 272.9 | 30.8 | % | 191.2 | 32.2 | % | (1.4) | % | ||||||||||||||||||||||
| Consolidated gross margin | $ | 776.9 | 43.1 | % | $ | 580.5 | 36.2 | % | 6.9 | % | ||||||||||||||||||||
Costs associated with net sales are recorded in cost of sales and include the costs of producing, shipping, warehousing, receiving and inspecting goods during the period, as well as depreciation and amortization of long-lived assets used in the manufacturing process. Cost of sales also includes retail store occupancy costs such as rent, common area maintenance charges, real estate and other asset-based taxes, general maintenance, utilities, depreciation and certain insurance expenses.
Our gross margin is primarily impacted by the relative amount of net sales contributed by our premium or value products. Our premium products have higher gross margins than our value products. An increase in sales of our premium priced products can positively impact gross margins, while an increase in sales of our value priced products can negatively impact gross margins across all segments. Our margins are also impacted by the relative amount of net sales contributed by each channel. Sales in our Direct channel have higher gross margins than sales in our Wholesale channel.
Our gross margin is also impacted by fixed cost leverage based on manufacturing unit volumes; the cost of raw materials; operational efficiencies due to the utilization in our manufacturing facilities; product, brand, channel and country mix; foreign exchange fluctuations; volume incentives offered to certain retail accounts; participation in our retail cooperative advertising programs; vendor incentives earned on supply agreements, retail store fixed cost leverage based on unit volumes and costs associated with new product introductions. Future changes in raw material prices could have a significant impact on our gross margin.
Gross margin improved 690 basis points. The primary drivers of changes in gross margin by segment are discussed below:
•Mattress Firm gross margin declined 140 basis points. The decline in gross margin was primarily driven by investments in promotional expenses of 110 basis points, product mix of 100 basis points and fixed cost deleverage of 90 basis points. Additionally, in 2025, we incurred $17.4 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition, which were not incurred in 2026.
•Tempur Sealy North America gross margin improved 2,390 basis points. The improvement in gross margin was primarily driven by the achievement of synergies of 620 basis points, the elimination of sales to Mattress Firm of 450 basis points, lower product launch costs and operational efficiencies. Additionally, in 2025, we incurred $78.0 million of one-time business combination accounting adjustments related to the Mattress Firm Acquisition, which were not incurred in 2026.
•Tempur Sealy International gross margin improved 140 basis points. The improvement in gross margin was primarily driven by favorable mix of 70 basis points and operational efficiencies.
OPERATING EXPENSES
Selling and marketing expenses include sales and marketing compensation, advertising and media production associated with the promotion of our brands, and other marketing materials such as catalogs, brochures, videos, product samples, direct customer mailings and point of purchase materials. We also include in selling and marketing expense certain new product development costs, including market research and new product testing.
General, administrative and other expenses include salaries and related expenses, information technology, professional fees, depreciation and amortization of long-lived assets not used in the manufacturing, distribution and retail store operations, expenses for administrative functions and research and development costs.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Consolidated | Mattress Firm | Tempur Sealy North America | Tempur Sealy International | Corporate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Advertising expenses | $ | 150.4 | $ | 142.9 | $ | 30.9 | $ | 33.6 | $ | 91.6 | $ | 83.6 | $ | 27.9 | $ | 25.7 | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Other selling and marketing expenses | 278.1 | 219.7 | 153.9 | 101.5 | 62.0 | 68.0 | 56.1 | 46.6 | 6.1 | 3.6 | |||||||||||||||||||||||||||||||||||||||||||||||||
| General, administrative and other expenses | 166.9 | 209.5 | 54.7 | 49.3 | 41.1 | 48.1 | 33.8 | 30.7 | 37.3 | 81.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 595.4 | $ | 572.1 | $ | 239.5 | $ | 184.4 | $ | 194.7 | $ | 199.7 | $ | 117.8 | $ | 103.0 | $ | 43.4 | $ | 85.0 | |||||||||||||||||||||||||||||||||||||||
Operating expenses increased $23.3 million, or 4.1%, and decreased 260 basis points as a percentage of net sales. The primary drivers of changes in operating expenses by segment are explained below:
•Mattress Firm operating expenses increased $55.1 million, or 29.9%, and decreased 410 basis points as a percentage of net sales. The increase was primarily driven by the inclusion of operating expenses for a full quarter as compared to the first quarter of 2025, which included operating expenses for the stub period.
•Tempur Sealy North America operating expenses decreased $5.0 million, or 2.5%, and increased 630 basis points as a percentage of net sales. The decrease in operating expenses was primarily driven by decreases in general, administrative and other expenses and other selling and marketing, partially offset by investments in advertising.
•Tempur Sealy International operating expenses increased $14.8 million, or 14.4%, and decreased 30 basis points as a percentage of net sales. The increase in operating expenses was primarily driven by investments in growth initiatives.
•Corporate operating expenses decreased $41.6 million, or 48.9%. The decrease in operating expenses was primarily driven by decreased transaction costs related to the Mattress Firm Acquisition.
Research and development expenses for the three months ended March 31, 2026 were $8.5 million, compared to $8.1 million for the three months ended March 31, 2025, an increase of $0.4 million, or 4.9%.
25
OPERATING INCOME (LOSS)
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||
| (in millions, except percentages) | Operating Income (Loss) | Operating Margin | Operating Income (Loss) | Operating Margin | Margin Change | |||||||||||||||||||||||||
| Mattress Firm | $ | 33.4 | 3.8 | % | $ | 6.8 | 1.1 | % | 2.7 | % | ||||||||||||||||||||
| Tempur Sealy North America | 131.7 | 23.4 | % | 40.3 | 5.7 | % | 17.7 | % | ||||||||||||||||||||||
| Tempur Sealy International | 64.9 | 18.4 | % | 51.1 | 16.8 | % | 1.6 | % | ||||||||||||||||||||||
| 230.0 | 98.2 | |||||||||||||||||||||||||||||
| Corporate | (42.9) | (85.0) | ||||||||||||||||||||||||||||
| Total operating income | $ | 187.1 | 10.4 | % | $ | 13.2 | 0.8 | % | 9.6 | % | ||||||||||||||||||||
Operating income increased $173.9 million and operating margin improved 960 basis points. The primary drivers of changes in operating income and operating margin by segment are discussed below:
•Mattress Firm operating income increased $26.6 million and operating margin improved 270 basis points. The improvement in operating margin was primarily driven by operating expense leverage of 410 basis points, offset by the decline in gross margin of 140 basis points.
•Tempur Sealy North America operating income increased $91.4 million and operating margin improved 1,770 basis points. The improvement in operating margin was primarily driven by the improvement in gross margin of 2,390 basis points, partially offset by operating expense deleverage of 630 basis points.
•Tempur Sealy International operating income increased $13.8 million and operating margin improved 160 basis points. The improvement in operating margin was driven by improvement in gross margin of 140 basis points and operating expense leverage.
•Corporate operating loss decreased $42.1 million, which positively impacted our consolidated operating margin.
INTEREST EXPENSE, NET
| Three Months Ended March 31, | |||||||||||||||||
| (in millions, except percentages) | 2026 | 2025 | % Change | ||||||||||||||
| Interest expense, net | $ | 60.0 | $ | 61.3 | (2.1) | % | |||||||||||
Interest expense, net, decreased $1.3 million, or 2.1%. The decrease in interest expense, net, was primarily driven by lower interest rates on outstanding variable rate debt.
INCOME TAX PROVISION
| Three Months Ended March 31, | |||||||||||||||||
| (in millions, except percentages) | 2026 | 2025 | % Change | ||||||||||||||
| Income tax provision (benefit) | $ | 33.4 | $ | (16.5) | 302.4 | % | |||||||||||
| Effective tax rate | 24.3 | % | 33.5 | % | |||||||||||||
Our income tax provision includes income taxes associated with taxes currently payable and deferred taxes and includes the impact of net operating losses for certain of our domestic and foreign operations.
Our income tax provision increased $49.9 million due to an increase in income before income taxes. Our effective tax rate for the first quarter of 2026 as compared to the prior year declined by 920 basis points. The effective tax rates as compared to the U.S. federal statutory rate for the first quarter of 2026 and 2025 included the favorable impact of the deductibility of stock compensation in the U.S. and a net unfavorable impact of other discrete items.
26
Liquidity and Capital Resources
Liquidity
Our principal sources of funds are cash flows from operations, supplemented with borrowings in the capital markets and made pursuant to our credit facilities and cash and cash equivalents on hand. Primary uses of funds consist of payments of principal and interest on our debt facilities, acquisitions, payments of dividends to our shareholders, capital expenditures and working capital needs.
Cash and Working Capital
Cash and cash equivalents were $110.8 million and $134.9 million as of March 31, 2026 and December 31, 2025, respectively. We had a working capital deficit of $360.5 million as of March 31, 2026, as compared to working capital deficit of $271.1 million as of December 31, 2025.
The amount of cash and cash equivalents held by subsidiaries outside of the U.S. and not readily convertible into the U.S. Dollar or other major foreign currencies is not material to our overall liquidity or financial position.
Cash Provided by (Used in) Operations
The table below presents net cash provided by (used in) operating, investing and financing activities from operations for the periods indicated below:
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-05-22 | Rusing Steven H | President & CEO Mattress Firm | Sell | -6,657 ×2 | $66.93 | -$445,539 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-08-08 10-Q expected by 2026-08-09 (in 54 days)
- ~2026-11-07 10-Q expected by 2026-11-08 (in 145 days)
- ~2027-02-26 10-K expected by 2027-03-04 (in 256 days)
- ~2027-05-08 10-Q expected by 2027-05-09 (in 327 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-05-08 10-Q Quarterly Report
- 2026-05-07 8-K Earnings Release; Other Events; Financial Statements and Exhibits
- 2026-04-13 8-K Material Agreement Entered; Financial Statements and Exhibits
- 2026-02-27 10-K Annual Report
- 2026-02-17 8-K Earnings Release; Other Events; Financial Statements and Exhibits
- 2025-12-01 8-K Regulation FD Disclosure; Other Events; Financial Statements and Exhibits
- 2025-11-07 10-Q Quarterly Report
- 2025-11-06 8-K Earnings Release; Other Events; Financial Statements and Exhibits
- 2025-10-09 8-K Other Events; Financial Statements and Exhibits
- 2025-09-30 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-08-18 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-08-08 10-Q Quarterly Report
- 2025-08-07 8-K Earnings Release; Other Events; Financial Statements and Exhibits
- 2025-06-24 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2025-06-24 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits