Tempur Sealy International, Inc. (TPX) is a leading mattress manufacturer. Earnings declined as the industry slowed in 2013, as compared to a very strong 2012, as competitors successfully imitated Tempur Sealy’s “memory foam” products and as the company experienced problems with a new product launch. We initially invested because we believed that the company’s acquisition of Sealy in March 2013 could drive earnings growth in a stagnant mattress market, which could be helped by using cash flow generation to pay down debt and lower interest expense. We sold the stock at a loss due to a surprise sales shortfall that led us to believe that the declines in the company’s core “memory foam” products could be worse than we anticipated and presented a longer-term challenge.
From Meridian Funds's semi-annual report ended December 31, 2013.
