Bedding manufacturer Somnigroup (NYSE: SGI) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 34.9% year on year to $1.6 billion. Its non-GAAP EPS of $0.49 per share was 5.1% above analysts’ consensus estimates.
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Somnigroup (SGI) Q1 CY2025 Highlights:
- Revenue: $1.6 billion (34.9% year-on-year growth)
- Adjusted EPS: $0.49 vs analyst estimates of $0.47 (5.1% beat)
- Adjusted Operating Income: $182.8 million vs analyst estimates of $185.4 million (11.4% margin, 1.4% miss)
- Management lowered its full-year Adjusted EPS guidance to $2.47 at the midpoint, a 11.6% decrease
- Operating Margin: 0.8%, down from 11.1% in the same quarter last year
- Market Capitalization: $13.6 billion
StockStory’s Take
Somnigroup’s first quarter performance was shaped by the initial integration of Mattress Firm and the ongoing launch of new product lines, particularly the Sealy Posturepedic collection in North America. CEO Scott Thompson cited “continued strong performance in our international business” and highlighted solid mid-single-digit sales growth in key markets, despite the impact of foreign exchange. Management also addressed weaker-than-expected U.S. consumer demand over the President’s Day period and a challenging market backdrop. The company’s operational focus included expanding distribution, accelerating private label initiatives, and streamlining logistics, all of which were intended to counteract industry headwinds and drive market share gains.
Looking forward, Somnigroup’s revised outlook reflects lowered expectations for the U.S. bedding market, with management now projecting a mid-single-digit industry decline for the year. CFO Bhaskar Rao attributed the guidance cut primarily to a “rapid change in consumer confidence or sentiment in the U.S.,” describing it as volatile and policy-driven. The company plans to offset new tariff costs by combining supplier negotiations and price increases, which are set to take effect in the third quarter. Management emphasized upcoming marketing campaigns and the ongoing rollout of the Sealy collection as potential drivers for a modest second-half improvement, though they cautioned that overall industry demand is likely to remain subdued.
Key Insights from Management’s Remarks
Management discussed the integration of Mattress Firm, evolving market conditions, and the company’s response to tariff developments as major themes impacting the quarter.
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International business momentum: The international segment, led by the Tempur brand, delivered mid-single-digit sales growth on a reported basis and high single digits in constant currency. Management highlighted the success of new Tempur products and an expanded price range that increased distribution opportunities and market reach.
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Sealy Posturepedic launch progress: The comprehensive rebranding and rollout of the Sealy Posturepedic collection in North America was a major operational focus. Early locations showed encouraging results, and the product is expected to be widely available by Memorial Day, supported by a national advertising campaign.
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Mattress Firm integration and synergies: Somnigroup completed the first phase of integrating Mattress Firm, focusing on leadership alignment, cost reduction, and logistics optimization. The company increased its near-term synergy target for 2025 to $15 million and is leveraging Mattress Firm’s home delivery network for enhanced operational efficiency.
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Tariff mitigation strategy: Facing new tariffs, Somnigroup acted to reduce exposure through supplier changes and cost-sharing arrangements. The remaining impact will be addressed by a 2% price increase in North America, effective in the third quarter, with management expecting the combination of actions to fully offset the tariff cost.
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Advertising and merchandising changes: Somnigroup is doubling down on advertising scale, aiming for more effective campaigns by aligning messaging and leveraging buying power. Mattress Firm is also expanding its assortment through new vendor partnerships and increasing the share of Tempur Sealy-manufactured products, including an expanded private label offering.
Drivers of Future Performance
Somnigroup’s updated outlook centers on cautious U.S. consumer sentiment, cost pressures from tariffs, and the pace of synergy realization from the Mattress Firm acquisition.
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Consumer confidence uncertainty: Management attributed the lower guidance to a double-digit decline in U.S. consumer confidence, which it sees as the main determinant of short-term demand. While this index is considered highly volatile and policy-sensitive, any recovery in sentiment could improve sales trends.
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Tariff pass-through and cost management: The company expects to manage increased tariff-related costs by shifting suppliers and raising prices. While these actions are intended to neutralize the margin impact, there is a lag in implementation, leading to a temporary headwind in the second quarter.
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New product and marketing initiatives: The ongoing rollout of the Sealy Posturepedic collection and the reimagined Mattress Firm advertising campaign are expected to drive incremental demand in the second half. Management is also focused on merchandising changes and expanded vendor partnerships to enhance store traffic and average order value.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace of synergy realization and operational improvements following the Mattress Firm acquisition, (2) the market response to new product launches and expanded vendor partnerships, and (3) the effectiveness of tariff mitigation and price increase strategies. Progress on these fronts, as well as shifts in U.S. consumer confidence, will be key indicators of future performance.
Somnigroup currently trades at a forward P/E ratio of 22.7×. In the wake of earnings, is it a buy or sell? The answer lies in our full research report (it’s free).
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