Somnigroup International Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Susan Maklari - Goldman Sachs & Company, Inc. - Analyst : Good morning, everyone. Scott, I want to talk a bit about demand. Can you give us some color on how things trended through the quarter, what you saw coming into the second quarter? And then when you talk about a modest second-half improvement this year, how should we think about what that means and what the drivers are of that?

Question: Bobby Griffin - Raymond James & Associates, Inc. - Analyst : Scott, I wanted to touch on -- I think it was in your prepared remarks, just some comments on Mattress Firm merchandising and kind of letting the brands compete against themselves. I think you called out the potential of Tempur Sealy-related products in the high-40s as their sales by the end of this year. Can you put that in context of that versus maybe balance of share in some of your other accounts where we can get a sense of what the ceiling is or what normal is now that some of the restrictions on kind of the brands competing freely on the floor are going to be taken off?

Question: Rafe Jadrosich - BofA Global Research (US) - Analyst : Hi, good morning. Thanks for taking my question. In the presentation, the investor presentation, it shows that you're kind of keeping that 2028 target of $4.85 million, but off of a lower base for 2025. Can you just talk about the confidence in sort of hitting that run rate kind of sort of a higher growth rate going forward. And now that you've had a little bit of time of actually owning Mattress Firm, has anything sort of changed from your initial expectations, either positively or negatively, in terms of hitting those longer-term targets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:00PM, SGI.N - Q1 2025 Somnigroup International Inc Earnings Call

Question: Peter Keith - Piper Sandler & Co. - Analyst : Good morning. On the commodity costs that you're flagging, could you unpack that a little bit and help us understand what the key pressure points are within your COGS? And then on that gross margin outlook, because there's some comparability issues to last year, is 44% still flat year on year? Or are you now taking gross margin down as well?

Question: Dan Silverstein - UBS Securities LLC - Analyst : Hi. Good morning. This is Dan Silverstein on for Michael. Our question is on Mattress Firm. What type of sales growth does the business need to leverage its expense base today, just so we can sensitize some different outcomes? And then just on the stores that were divested, how should we think about the loss-profit associated there for this year? Thank you.

Question: Laura Champine - Loop Capital Markets, LLC - Analyst : Thanks for taking my question. It's really on the shape of the year, and I appreciate all the details on your outlook. It's going to be kind of a rarity this earnings season. But you do expect improvement as the year progresses in industry demand, I think. And I'd love to hear kind of more what that's predicated on.

Question: Laura Champine - Loop Capital Markets, LLC - Analyst : And then I know I'm looking at finer points, but I think you mentioned that $0.50 in Q2 EPS is reasonable. What sort of a gross margin should I be thinking about to get there?

Question: Brad Thomas - Keybanc Capital Markets Inc. - Analyst : Good morning. I also was hoping to follow up on Mattress Firm. And I was wondering if you could talk, Scott, a little bit about some of these partnerships, Purple, Leggett, Resident that you mentioned. For some of them, you're helping with the manufacturing for these products. And if you could just talk about how this fits into your merchandising strategy. And I'm wondering if there's any other changes that you're making operationally at Mattress Firm around employee training, commissions, et cetera, that might be worth highlighting? Thanks.

Question: Jonathan Matuszewski - Jefferies LLC - Analyst : Great. Good morning and thanks for taking my question. Could you talk about the dispersion in performance across the different brands, Sealy, Tempur, Stearns & Foster this quarter? Obviously, you have the Sealy kind of new product launch getting floored, so that kind of impacts results. But just any nuances across the brands and how you're thinking about any relative performance as we go throughout the year? Thanks so much.

Question: William Reuter - BofA Global Research (US) - Analyst : Good morning. Just a question on the $750 million of COGS for the Tempur Sealy products -- or sorry, the Tempur products that are from other countries. What countries is this exposure to? I guess I'm curious whether there is some from China and where it is in the rest of the world. And then you mentioned ways to offset it half price and half other items. Are those other items moving the sourcing of the product? Or how have you been able to find ways to offset that? Thanks.