We expect our second-half performance to be challenging as industry trends weakened further in June and retail traffic remains soft.
Larry Rogers, Interim CEO, Sealy

Continuing what has been a "not so good day to be in the furniture business", Sealy Corporation (NYSE:ZZ), the largest bedding manufacturer in the world, announced net sales for the quarter ending June 1, 2008 decreased 6.6% compared to 2007. Earlier today, specialty furniture retailer Jennifer Convertibles announced a 12.6% decrease in sales (see story). Also today, furniture manufacturing giant Stanley Furniture announced a plant closing due to soft retail conditions (see story).

Wholesale domestic net sales (units) were off 16.1%. Wholesale domestic unit volumes were impacted by softer demand, as well as lost distribution from a few of the Company's accounts, such as Levitz and Wickes, who were forced to shut down operations beginning in the fourth quarter of 2007 owing to the difficult economic environment. Sales of the Sealy's new Posturepedic product line and specialty products outperformed other products in the U.S. portfolio.

International net sales grew 18.3% from the second quarter of 2007, or 6.1%. The increase in international net sales represents 7.6% growth in unit volume.

Larry Rogers, Sealy's interim Chief Executive Officer and President of North America, stated, "The U.S. mattress retail environment deteriorated during the second quarter of 2008, impacting our ability to drive domestic sales volumes. Even though our sales performance was pressured and inflation has impacted our profitability, we were pleased to see the initiatives we implemented to accelerate our cost reductions begin to take hold, leading to the second consecutive quarter of SG&A leverage for the Company. We also completed the majority of the rollout of our new Posturepedic innerspring line by the end of June. Initial results are encouraging as retail customers that have rolled out the new Posturepedic line have started to see an improvement in their Posturepedic innerspring sales compared to the old line. Our specialty business was impacted by the industry-wide softening in retail demand for higher price point mattresses, although we believe we continued to gain share in the specialty market segment in the second quarter."

"Looking ahead, we expect our second-half performance to be challenging as industry trends weakened further in June and retail traffic remains soft. We also expect to incur significantly higher material costs due to rapidly growing inflation on core materials, along with additional promotional expenses associated with new product launches. While we cannot control these external forces, we will continue to focus on managing those areas of our business that we can control, including executing on our strategic initiatives, completing the rollout of our Posturepedic innerspring line, implementing price increases to protect our profitability, aggressively managing our costs and working capital, and expanding distribution of our latex products including the new Posturepedic PurEmbrace line to retain our leadership position in the worldwide bedding industry. We are confident that when the market turns, the steps we are taking will lead to improved long-term growth prospects for Sealy and our shareholders," Mr. Rogers concluded.

Sealy is the largest bedding manufacturer in the world with sales of $1.7 billion in 2007.