Somnigroup's Sleepless Nights: Can SGI Dream of a Stronger 2025?

The bedding industry is in a slump, but Somnigroup International Inc. (SGI) is fighting back with bold moves to offset headwinds. Let’s dive into the Q1 2025 earnings call transcript to uncover whether this mattress giant can sleepwalk through its challenges or is finally hitting the right pillow.

The Good: International Growth and Strategic Acquisitions

SGI’s international business is the star of the show, reporting mid-single-digit sales growth, rising to high-single-digit growth when excluding currency headwinds. The UK’s Dreams retail business also delivered mid-single-digit growth, proving that SGI’s global reach is a strength in a weakening U.S. market.

The $100 million in annual synergies from the Mattress Firm acquisition by 2028 is a game-changer. Already, SGI is reaping $15 million in 2025 savings, thanks to streamlined logistics and combined advertising power. This merger isn’t just about scale—it’s about turning Mattress Firm into a Tempur Sealy sales powerhouse. By 2025, Tempur Sealy brands will command high-40% of Mattress Firm’s sales, up from mid-40% in 2024.

The Bad: U.S. Market Woes and Tariff Nightmares

The U.S. bedding market is a disaster zone, down a high-single-digit percentage in Q1. SGI’s Tempur Sealy North America division saw 3% like-for-like sales declines, while Mattress Firm’s sales dipped 1%, though it outperformed the broader industry.

Tariffs are another thorn in SGI’s side. While domestic manufacturing and supplier deals cut potential tariff costs by half, a $5 million one-time hit in Q2 is looming. To counter this, SGI is hiking prices by 2% in Q3, which should fully offset tariffs—if consumers bite.

The Ugly: Revised Guidance and Margin Pressures

The company slashed its 2025 adjusted EPS guidance to $2.30–$2.65, down from earlier expectations. Gross margins, once projected at 45%, are now “slightly above 44%” due to lower sales volumes and tariff drag.

Meanwhile, U.S. consumer confidence has cratered, with SGI citing “political dynamics” as a key driver. This is a red flag—bedding is a discretionary purchase, and a weak consumer is a weak business.

The Bullish Case: Long-Term Vision and New Products

SGI isn’t just surviving—it’s innovating. The Tempur product collection expanded distribution by 10%+ via third-party retailers, and the Sealy Posturepedic line is rolling out with aggressive ad spend. These moves could reinvigorate North American sales.

The $4.85 billion 2028 revenue target remains intact, assuming 5% annual growth (potentially 6% if the economy perks up). SGI’s $700 million annual ad budget is a bet on brand dominance, and with Mattress Firm’s 1,000+ stores, it’s positioned to win share in a shrinking pie.

Final Verdict: Hold for Now, Buy the Dip

SGI’s Q1 was a tale of two markets: thriving abroad, struggling at home. While the revised guidance and margin pressures are worrisome, the long-term strategy—tariff mitigation, synergies, and product launches—gives hope.

Action Alert: SGI stock is down 20% year-to-date as investors panic over U.S. weakness. This creates a buying opportunity if you believe in its global growth and synergies. However, wait for the Q3 price hike to take effect before diving in.

In a mattress business that’s losing sleep, SGI’s international dreams might just keep it from hitting rock bottom.

Conclusion: SGI’s Q1 results highlight a company navigating a turbulent U.S. market while capitalizing on global growth and strategic moves. With $100 million in synergies, 2% price hikes, and high-single-digit international growth, the long-term thesis remains intact. The near-term pain of U.S. consumer weakness and margin pressures is real, but patient investors could find this dip a chance to buy a $4.85 billion revenue story at a discount. Sleep tight—this isn’t the end of the bed!