Q2 2019 Earnings Call
Good day, ladies and gentlemen, and welcome to the Tempur Sealy second quarter 2019 earnings Conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question answer session and instructions will be given at that time, if anyone should require operator assistance. Please press star then zero I touched on telephone as a reminder, this conference maybe recorded I would now I turn the conference over to your host for today Opry more with Investor Relations you may begin.
Thank you operator.
Good morning, everyone and thank you for participating in today's call.
Joining me in our Lexington headquarters are Scott Thompson, Chairman, President and CEO , and BASCO rout executive Vice President and CFO .
After prepared remarks, we will open the call for QNX.
Forward looking statements that we make during this call are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Investors are cautioned that these forward looking statements, including the company's expectations regarding sales earnings net income and adjusted EBITDA and anticipated performance for 2019 and subsequent periods involve uncertainties.
Actual results may differ due to a variety of factors that could adversely affect the company's business.
The factors that could cause actual results to differ materially from those identified include economic regulatory competitive operating and other factors discussed in the press release issued today.
These factors are also discussed in the company's SEC filings, including but not limited to annual reports on Form 10-K , and the company's quarterly reports on Form 10-Q under the heading special note regarding forward looking statements under risk factors.
Any forward looking statement speaks only as of the date on which it is made.
The company undertakes no obligation to update any forward looking statements.
This morning's commentary will include non-GAAP financial information.
The press release contains reconciliations of this non-GAAP financial information to the most directly comparable GAAP information.
Except as otherwise discussed in the press release.
As well as information regarding the methodology used in our constant currency presentation.
We have posted a press release on the Companys Investor website at Investor Dot Tempur Sealy Dotcom and have also filed with the SEC.
Our comments will supplement the detailed information provided in the press release.
And now with that introduction it is my pleasure to turn the call over to Scott.
Thank you Albert.
Good morning, and thank you for joining us on our 2019 second quarter earnings call.
I will start with comments on the quarter's operating performance.
Then boxcar will review our financial performance with you in more detail.
Finally, I'll wrap up with our overview of our long term corporate initiatives.
Our strong momentum from earlier this year continued into the second quarter and beyond.
In fact from an adjusted EBITDA perspective, the second quarter was just short of our best second quarter in the company's history.
For the second quarter 2019, net sales increased double digits adjusted EBITDA grew 21% and adjusted EPS was 79 cents a share a robust increase of 39%.
The adjusted EPS growth was driven by growth in operations not share repurchase.
Our results have been propelled our premium brands in our industry, leading product quality and services combined with our powerful worldwide Omnichannel platform.
Now some highlights.
First we grew our relationships with existing third party retailers in North America. During the quarter, We grew North America wholesale channel by 7%, including significant growth from our Tempur Pedic brand, which was benefited from the strength of our new Tempur Breeze products.
As a reminder, this is the first quarter that our full line up of the new Tempur Pedic products were in market and these new products continue to receive rave reviews on the basis of their innovation and product quality.
Total North American Tempur Pedic sales grew 17% in the quarter and excluding floor models grew 30%.
Clearly, we are expanding the higher end mattress market and taking a good bit of market share.
Sealy, including Stearns and foster continued to outperform our expectations during the quarter growing 7% versus the second quarter last year.
We were particularly pleased with the Sealy growth was broad based across all price points.
The Sealy hybrid continues to perform exceptionally well even against very difficult comps and our new Stearns <unk> Foster line has exceeded our expectation and it's been successful in driving average retail sales price.
Perhaps the biggest positive inflection this quarter with Sealys returned to growth within the challenging sub 1000 price point.
I believe see lease performance was driven by internal initiatives targeting new channels of distribution.
Market, leading product quality and the recent favorable tariff rulings.
We believe this momentum will continue.
The second highlight is our global direct channel, which grew a robust 55% in the second quarter.
In North America, our direct channel grew 78%, which was above our expectations.
Excluding the recently acquired sleep Outfitter business North America direct channel grew a very robust 37% in the quarter. This was driven by strong growth in both our E Commerce business and our company owned stores.
During the quarter, we opened three new Tempur pedic stores, bringing our total to 47.
And we expect to be approximately 60 by year end.
In terms of our recent acquisition of sleep Outfitters.
Im pleased to report the integration is complete.
And the turnaround of that business is running a good bit ahead of plan.
In addition to driving sales growth, our North America direct to consumer web team has continued to focus on marketing efficiencies keeping our customer acquisition costs low resulting in a very profitable business. This is the second quarter in a row, we have experienced declining customer acquisition cost and expanding profit margins.
The third last highlight I'd like to discuss is our record second quarter gross profit margin.
Our gross margin expanded over 200 basis points versus the same period last year.
After several quarters of ongoing efforts to offset significant headwinds from commodities launch costs and unfavorable merchandising mix. We're now reporting the positive impact of our efforts.
Drivers of margin expansion are the completion of our Tempur Pedic product launch all our price actions implemented in 2018 being fully set market. Our continued efficiency efforts and our expansion of our direct channel.
One area that was a bit of a challenge during the quarter was international.
Although we experienced 7% net sales growth on a constant currency basis. This was slightly below our expectations.
Our internal operations dealt with an unprecedented heat wave in Europe uncertainty of Brexit unrest in France, and a slowing Asia business.
I think all these items, our industry or country specific issues I believe our international team is performing well considering the environment.
This quarter points out one of our strengths.
Diversity of operation, which mitigates regional issues. It makes tempur Sealy a stronger enterprise.
Let me save some on a question regarding current trends.
Third quarter from a sales perspective overall has started off well with growth rates in North America being similar to the second quarter and international a bit slower but in line with expectations.
We're very pleased with our market position and our recent financial performance.
It is interesting that this quarter is just short of our best second quarter in the company's history with or without mattress firm as a customer.
As you know we are now working on rolling out our full array of brands to mattress firm and expect to ship in the fourth quarter of 2019 through the first quarter of 2020.
We expect this incremental volume will fund increased advertising improved operating leverage and enhance our relationship with our component suppliers all over the world.
Now I'll turn the call over to boss grew to review our financial results with you in more detail.
Before going into the details a few highlights from the second quarter.
Global net sales were $723 million, an increase of 10%.
Gross margin was 43.4%.
Adjusted operating margin improved 200 basis points to 11.6%.
Adjusted EBITDA increased 21% to $113 million.
And adjusted earnings per share for the quarter was 79 cents an increase of 39%.
Turning to North America.
First I would like to discuss some financial reporting items.
As previously announced we have acquired sleep outfitters, which was fully integrated into North American direct channel beginning in the second quarter.
Sleep Outfitters had historically been one of our part of our wholesale channel since they were previously a third party retailer.
Accordingly, this impacts our growth rates within both channels.
In addition, our GAAP operating income in North America was impacted by changes from post acquisition restructuring activities and professional fees.
We did not expect further pro forma charges related to sleep outfitters.
North American net sales increased 11%.
On a reported basis, the north the North American wholesale channel increased 7% and the direct channel increased 78%.
Excluding sleep outfitters, the wholesale channel increased 10%.
North American gross profit margin improved 230 basis points to 40.8% as compared to the prior year.
This was primarily driven by favorable brand and Tempur merchandising mix.
Pricing benefits and decreased floor model expenses.
This was partially offset by incremental overtime at our plants due to the higher than expected demand for sealy products.
Going forward, we expect Tempur merchandising mix to continue to be favorable.
Marking the end of negative mix, which we had experienced in 2018 due to the phased launch.
North American adjusted operating margin improved 170 basis points to 13.9% as compared to the prior year.
This was primarily driven by improved gross margins and slight deleverage to operating expenses from the integration of sleep outfitters.
Turning to international.
Net sales increased 2% on a reported basis.
On a constant currency basis international net sales increased 7%.
The direct channel increased a robust 32%.
In the wholesale channel increased slightly.
As Scott previously mentioned, we faced a challenging environment across a handful of countries during the second quarter.
We anticipate these headwinds will continue into the back half of the year.
Our international gross margin improved 200 basis points to 54.5% as compared to the prior year.
This was primarily driven by foreign exchange country mix.
International operating margin improved 190 basis points to 20.3%.
This was principally driven by improvement in gross margin.
And advertising expense leverage.
Turning to our company's global performance.
Adjusted operating margin was 84 million and adjusted EBITDA was $113 million up $20 million from last year.
The increase in adjusted EBITDA was primarily driven by pricing benefits.
Higher volumes.
Favorable floor model expenses and product mix.
This was partially offset by higher variable compensation.
Innovation investments and headwinds as we turnaround the sleep outfitters business.
The adjusted tax rate was 28%.
Interest expense was $23 million and adjusted EPS for the quarter was 79 cents.
Now moving to the balance sheet and cash flow items.
We generated operating cash flow from continuing operations of $41 million in the second quarter.
The cash cycle was unfavorable by seven days compared to the second quarter of 2018.
This was principally driven by the timing of cash payments.
At the end of the second quarter net debt was $1.6 billion down slightly from the first quarter of 2019.
Our leverage ratio was 3.65 times down versus the prior quarter.
Turning now to our annual adjusted EBITDA guidance.
We have raised our adjusted EBITDA guidance to be between $450 million and $480 million. This narrowed the range around the midpoint of $465 million.
The increase at the midpoint is primarily driven by our over performance of the North American Sealy bedding products and our direct business today.
Both have been above our expectations.
This is slightly offset by increases to variable compensation.
And softness internationally.
As previously announced we recently signed supply agreements with two new retail accounts.
Not just from a big lots.
We will be bringing on significantly higher volume into our North American operations.
We anticipate some investments during these launches.
We will hire new personnel and our focus will remain on producing quality products and continuing to provide great customer service to our existing third party retailers.
This will result in some inefficiencies of about $5 million in the third quarter, which will not be offset by incremental revenues.
We continue to expect that these new accounts will be immaterial to EBITDA and in total for 2019.
Significant contributors in 2020 and beyond.
I would like to flag a few items for modeling purposes.
For the full year 2019, we currently expect DNA to be between 115 and $120 million.
Total capex to be between 70 and $75 million.
Which includes maintenance capex existing million dollars.
Interest expense of $90 million to $95 million.
A tax rate of 27% to 28%.
And a diluted share count of 56 to 57 million shares.
Please note the above items consider the impact of our new share repurchase plan.
With that I will turn the call back over to Scott.
Thank you Boster great job.
Turning to our long term corporate initiatives.
First developing the most innovative bedding products in all the markets we serve.
In the second quarter as I mentioned, we finished the north American launch with our all new Tempur Pedic Breeze lineup.
This completed the largest tempur pedic rollout in the company's history.
With industry, leading technology from core to cover the new formulation of these mattresses provide the ultimate Tempur Pedic sleep experience.
Most importantly, the new Breeze is positioned to accelerate ASP growth and drive improved product mix for both third party retailers and our direct to consumer business.
So far the breeze products are doing what we thought they would do improving temper product mix.
As an example, breeze represents almost 40% of the mattress units sold in our Tempur Pedic retail stores. This is helping drive same store sales growth of 29% for the quarter.
Last quarter, we introduced three new innovative products that are being tested in the market first a cutting edge sleep tracker and monitoring solution.
Second.
And all new innovative temp repeated mattress in a box product Infat finally, the most premium tempur pedic mattresses in history, featuring state of the art active cooling technology.
These opportunities complement our existing product lines.
Although we do not expect them to be meaningful meaningfully benefit the sales or EBITDA in 2019, they ensure our brands continue to be most highly desired in the industry.
And they are expected to contribute in 2020.
All three products or end market with limited distribution.
For continued evaluation throughout the year.
Now turning to our second long term initiative to invest significant marketing dollars to promote our worldwide brands.
We continue to make progress in reaching customers more efficiently across media channels wherever they wish to engage.
We are complementing our mass media tactics with improved digital media programs that allow more unique one on one interactions. This allows us to unlock new efficiencies in our advertising spend and as I mentioned previously the combination of new products and new media mix has allowed improved return on advertising spend.
Our brands are stronger than ever and we will continue to support them to drive more customers to seek out our products.
The third long term initiative is to optimize worldwide distribution to make sure. Our products are properly represented in all channels. During the quarter, we made significant strides by expanding our global third party retailer network as previously announced we recently expanded our long term supply agreement with big lots and entered into a new agreement with mattress firms. These wins are testament to our premium brands innovative products and best in class service.
While the most important aspect of our worldwide Omni channel distribution strategy is third party retail or direct to consumer business continues to grow representing 13% of our global sales in the quarter.
We continue to operate this portion of our business in a very profitable manner.
Keeping our customer acquisition costs low while managing high end customers with high end products.
These expansions and further diversification of our worldwide distribution network strengthen our operating model and allow us to reach even more customers around the world.
Our last initiative is to drive EBITDA.
Our business generates significant profit and cash flow.
We're committed to invest capital and opportunities with the highest return on invested capital while balancing our leverage target of between three and four times net debt to adjusted EBITDA.
We anticipate EBITDA to grow which will organically lower our leverage over time.
Additionally, we expect to generate cash in excess of our business needs.
Based on current circumstances, we anticipate accelerating our share repurchase program.
We will manage share buyback based on current and expected cash flows share price and alternative investment opportunities.
In the near term, we expect to deploy excess cash flow to repurchase shares.
For modeling purposes, we are estimating $50 million of share repurchase a quarter going forward.
As a reminder of our history before we paused our share repurchase program in 2017, our robust cash flow allowed us to repurchase almost 50% of our outstanding shares over the preceding 12 years.
We expect our expanding adjusted EBITDA combined with our share repurchase will drive EPS and shareholder value.
In summary.
We expect strong momentum going forward with growth across all of our brands Tempur Pedic.
Sealy and Stearns <unk> Foster.
Looking past 2019, the progress we are making on our long term initiatives has 2020 poised to be the best year in the company's history.
Operator.
We please open the call up for questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press Star then one on your attention from telephone. If your question has been answered the question yourself from the queue. Please press the pound yi, so that any background noise.
Please your line on mute once your question has been stated and address the time yesterday. Please limit yourself to one question any additional questions. Please reenter the queue.
Our first question comes from Seth Basham of Wedbush Securities. Your line is now open.
Thanks, a lot and good morning.
Good morning.
Congrats on a good quarter. My question is on the outlook you guys raised the EBITDA outlook for the year I am just hoping to understand a little bit more cylinders on an moving pieces in the back half of the year versus released to Sealy do you expect the strength to continue or do you expect acceleration second as it relates to some of the costs associated with big lots of mattress firm you mentioned, a 5 million dollar headwind. So what's the gross number you're expecting an incremental cost for the back half of the year. Thank you.
Great. Good good questions first of all.
Let me, let me take Sealy them, then we'll pass it on to Baskin for some of the details.
Sealy has surprised us so far this year the momentum was obviously strong in the second quarter at 7%, if I remember correctly Boscombe, Greg and I think as I said on the call.
It is continued and we would expect that momentum to continue.
Or for a good while.
As it relates to the mattress firm big lots costs, what we that's what we'd estimate as during the third quarter is to make sure that our quality is where it needs to be and then obviously scaling for the launches that we have is that we would invest an incremental $5 million into the third quarter.
And and I think we highlighted on even on the last call that during this period, where we're taking on large customers. The primary focus will be on quality of product and service.
And we won't be shy about spending some money to get those businesses up and running correctly and continuing to support our other third party.
Thank you and again, ladies and gentlemen of Intrarosa Tommy <unk>. Please limit yourself to one question.
Our next question comes from Curtis Nagle of Bank of America Merrill Lynch. Your line is now open.
Great. Thanks, very much for taking my question.
So kind of looking at the quarter.
Outstanding gross margin.
Numbers, particularly in North America.
Just kind of rolling through the next three year or the rest of the year I should say.
How should we think about rate growth in the terms of things like commodities that continues to be pretty weak.
Product mix mix within brands DTC growing really well.
Should we continue to expect to continue our gross margin.
To grow on a rate basis is a very high rate I guess I'm sure.
Good question, Kurt So the way I would think about that is.
The underlying margin, excluding the new business that we're adding we would expect that the gross margin to grow on that so as you mentioned is that we would anticipate getting it.
Continued improvement from a channel mix perspective, as well as.
Our outlook for commodities has slightly improved from where we were at the end of the first quarter, what I would want to call out is that at the end of the third quarter will be selling in the big lots business, which is principally in that thousand dollars and below and then the fourth quarter. What we would have as the mattress firm sell in which is going to be heavily weighted toward four models that which will be sold at a discount.
Thank you and our next question comes from Bobby Griffin of Raymond James Your line is now open.
Good morning, and thank you for taking my questions. Congrats on another good quarter.
Thank you I wanted to talk a little bit about advertising expense during the quarter and then kind of plans going forward and when we should expect kind of the uptick.
Involve matches from the new and big lots as well and what promotional activity or advertising, we could expect from those two new relationships in the fourth quarter.
Okay sure.
First of all advertising, we think of is core expense, but certainly there is some variability in it.
And as you can see from the sales growth numbers. There was no reason to pull the advertising lever.
Very hard during the during the quarter, but we certainly expect that will continue to spend approximately the same percentage.
Of our sales number in advertising.
Theres no.
Uptick in advertising expense as a ratio.
During the during the third and fourth quarter.
But certainly we would expect from a ratio standpoint.
Can you continue about the same that fair Buskers sure. We would continue to on a if I just think about it on a full year basis is that we would continue to believe that our dollars would be up and our rate would be up on a year over year basis.
Thank you and our next question comes from Michael Lasser SBBS. Your line is now open.
Good morning, Thanks for taking my question.
What do you think drove your improvement in.
Return on advertising or your lower customer acquisition costs is it possible because match from.
Going through the transition that third being less aggressive and allowing you to take share, particularly at a time, where one of your competitors going through some of its own dynamic.
No.
I don't think.
Our advertising efficiency has anything to do with anything with mattress firm.
Although I think your theory is it has some validity I think it's more likely that the very aggressive bed in the box company.
That their advertising budgets have been probably pulled back quite a bit as those companies continue to run at a deficit.
I think probably that has helped us some.
Also I think as a company we continue.
I had to get better from an advertising standpoint in the team's doing a great job.
Focusing on on efficiency, so I'm going to say some less competitive market coming from the bed in the box guys and say their volumes have in North America mattress is probably flat at best and then our own efficiencies from internal initiatives.
Thank you and our next question comes from John Baugh Stifel. Your line is now open. Thanks, Good morning, and thanks for taking my question.
I was curious Scott it is too early.
In the Breeze launch to look at the mix of what you are selling and you commented about it for your stores, but I was thinking about overall, including wholesale has there been enough time to get a sense for North America Tempur Pedic brand only how the mix compares today say to pre the initial launch of pro and adapt as it same better or worse any trends there. Thank you.
Yes, great question, clearly, we called out some outstanding performance in our direct channel, where we can control the process.
When I look at the total tempur or launch in North America.
I think we can clearly say that weve eliminated the.
The negative mix that we've been working through and when you look at the totality of the launch of the mix is where we expected it.
We don't expect mix issues in Tempur pedic going forward, having said that the mix is going to be slightly less rich than it was before.
But that was planned.
And so overall.
The new launch was a big driver in the creation of EBITDA and we again don't expect any negative mix issues going forward, our tempur product.
Thank you and our next question comes from lore Champagne <unk> capital. Your line is now open.
Thanks for taking my question the gross margin.
Speech was particularly impressive and I'm wondering if you've got any help.
Any material help from input costs and what the trend is in the current quarter.
Sure as it relates to the second quarter and what we saw from a gross margin standpoint.
The outlook, where we're sitting at today, a slightly improved versus where we were in the second quarter. Some of that came to pass in the in the in the second quarter. However, what I would say is is that from a overall perspective, what we felt good about was.
Was that our product mix, specifically as it relate to what we've seen historically, which was the cannibalization and we saw the beginning is that that turning as Scott mentioned, what we anticipate going forward is that that would be fully offset.
So when you look at the second quarter was driven basically on brand.
And then positive Tempur mix and in a very strong performance by direct all of which should continue and really no help from commodities to speak of in the second quarter, although going forward, we'd expected to be a little bit correct a benefit.
Thank you and our next question comes from Peter Keith of Piper Jaffray. Your line is now open.
Thanks, Good morning, guys Great results guys, just looking at the adjustment to the guidance if you could tie together that the the midpoint implies.
Notable step down in the growth rate of EBITDA from first half to second half. So wonder if you could just.
Give us some insight on what some of the changes and headwinds might be that are evolving.
Sure we had a couple of things that we that we called out so on the what we have working in our direction is the continuing momentum that we felt that we see on the sealy side as well as what's happening from a direct direct has performed very well in the first half and we would expect that that that would continue we did call out a couple of items that we have headwinds. It's principally it is the variable compensation just a little bit about that is is that it does vary based on our expectations and prior year. It was.
It was zeroed out based on our performance and in the current year were achieving above our expectations. So it's a headwind as we think about the back half and then finally, we did call out some softness internationally and.
That helps us bridge from midpoint to midpoint.
Thank you and our next question comes from Brad Thomas of Keybanc Capital. Your line is now open.
Thanks, Good morning, great quarter, Great results and I'm looking forward to seeing the new products next week.
My question is around capital allocation I mean, you were pretty explicit today with what your plans are but I guess, Scott in Boston I was hoping for a little bit more.
Thinking on and on.
Why not be a little bit more aggressive today with share repurchase given the strong cash flow outlook and strong EBITDA outlook.
Yes, good question obviously.
Capital.
Allocation is a board issue, so we get lots of input.
From investors debt holders board members and everybody else.
That's one of our core responsibilities.
If you look at the history of the company I mean, it was in 2016.
We bought back over $500 million worth of stock buybacks. So so you know from.
The strategy standpoint, or an appetite standpoint, the company has had a history.
At times to be very aggressive.
I think I think what we said today basically is look.
Things look pretty good and we've given you some number that we've kind of budgeted for share repurchase it could be more.
We've given you some the way we look at it as far as our expectations of cash flow stock price alternative investments.
But then at the same time, we said look we would like to leverage ratio to come down a little bit.
Well from where we are but still obviously within the range that we've said, but I would look at the 50 more as a minimum.
Been a maximum.
And we will continue to fine tune the actual investment as we learn more.
About as the year goes forward as mattress firm and big lots come on board.
But I wouldn't be surprised that if the company didn't become more aggressive in share buyback over the next couple of years. When you look at the anticipated cash flows.
Not just really for this year, but if you start looking at 2020.
The flow through and the cash flows are really impressive when you get to 2020 and I suspect a lot of that cash flow will end up in share repurchase.
Thank you and our next question comes from Carla Casella of Jpmorgan. Your line is now open.
On the other side of the capital allocation that question.
Any thoughts on you've outlined on that's callable in that can tease stepped on call price your thoughts on refinancing or.
On cap structure in terms of loans versus bonds do you prefer.
To be tapped certain market versus the other.
Yes, great Great question, and we do look on up in the capital structure at the debt structure too.
And we will continue to study that obviously the markets are are very attractive obviously, our leverage profile is getting better and our outlook certainly looks.
Rosie so.
We will continue to look at the debt structure I think that sometime in the future. There is some opportunity to optimize in the debt structure also.
Thank you and our next question comes from Karru Martinson of Jefferies. Your line is now open.
Good morning, given the strong direct to consumer business that you had or are we seeing a shake out in the bed in a box model here.
I don't know I'm going to say you're seeing several things.
One is I think that the we're tapping the market, it's not well served right now, which I'm just going to call.
Hi, embedding in North America.
And our Tempur pedic flagship stores.
Our design for high end customers and I think thats, an underserved market. So I think I think that would be the first driver.
I think the second driver is clearly a lot of disruption in the traditional distribution model.
Some large customers have gotten into financial trouble and their share of the market decline. So theres quite a bit of what a bedding is kind of open for a good retail performers and we're seeing some of our strong retail performers.
We were really good taking significant share themselves. So I think there is some betting it's up for grab in the in the marketplace and then I think third is really kind of the point you probably raised is there's certainly a significant deceleration.
Of what I'll call the traditional bed in the box brand in the marketplace, but having said that some people get confused that doesn't mean that there is a decline in compressed bedding.
If we look at our compressed bedding offerings.
In total they grew 40%.
In the second quarter.
In most people haven't really focused on we've got a total.
Compressed bed offerings, starting with Sealy conform.
Which is start to 399.
Which is very competitive in the marketplace, then we kind of have our middle market compressed bed cocoon.
Which is like a 799 product.
Which is doing very well in fact since we've changed some marketing strategies to go kind of directly after.
The Disruptors, it's up 250%.
And then we have are in test our Tempur cloud product, which is a premium product that starts. It 17, 99, and you compare that premium product with what some of the bed in the box guys are trying to do in the premium area you would see that it's a relative value. So when you look across our offering.
In the in that area, because we're vertically integrated in our scale.
We can produce a higher quality bed.
For a lower cost and make money.
The part that we that we needed to learn over the last couple of years was really marketing and how to market online and I think our performance recently shows that we've learned a lot in that area in a very competitive.
Thank you and we do have a follow question from Michael Lasser VBS. Your line is now open.
Thanks, a lot for taking my follow up can you give us more detail on the break down between units and price for the Tempur line.
In on this.
Business.
How much of the improvement is coming on a same store basis versus.
Expanded relationship.
Sealys easy because thats all on same stores effectively sure we haven't picked up in either of the new business yet on ceiling right and more broadly the nicety about sealy is that were seeing growth in in all the price points. We were challenged from legacy standpoint in that sub $1000 business. So what we've seen in the in the second quarter as is.
Remaining growing in the above 1000 and and.
A good opportunity there in the below 1000 as it relates to.
The Tempur side is that we have seen a growth in units. The those the momentum that we saw in the first quarter that continues in the second quarter and with the launching of the Breeze and the high end RSP continues to improve.
Thank you and ladies and gentlemen, this does conclude our question and answer session I would now like to turn the call back over to Scott Thompson for any closing remarks.
Thank you.
To the over 6000 employees worldwide. Thank you for what you do everyday to make the company successful.
To our retail partners. Thank you for your outstanding representation of our brands for our shareholders and lenders. Thank you for your confidence in Tempur Sealy leadership team and its board of directors. This ends our call today operator. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program you may all disconnect everyone have a great day.