Somnigroup International Inc

Reported first-quarter 2026 net sales were $1.8 billion, up 12%; adjusted EBITDA was $297 million, up 20%; and adjusted EPS was $0.59, up 20%. Mattress Firm net sales were about $886 million, with same-store sales flat; North America like-for-like sales rose 5%; and international sales rose 16% reported and 7% constant currency. Gross margin trends were mixed: Mattress Firm adjusted gross margin fell 360 basis points to 31.5%, North America adjusted gross margin rose 1,300 basis points to 58.3%, and international gross margin rose 140 basis points to 50.4%. For 2026, the company guided to adjusted EPS of $3.00 to $3.40, sales midpoint of about $7.8 billion after intercompany eliminations, reported gross margin slightly above 45%, and nearly 100 basis points of net margin expansion. Management also said Q2 will face an approximately $10 million profit headwind from commodity timing, which should offset in the back half, and that pricing actions should be dollar neutral to full-year earnings.

Scott Thompson emphasized that the company outperformed in a weak category because of operating leverage, brand strength, and disciplined pricing. He pointed to improved closing rates, strong advertising share of voice, and the company’s balance sheet and cash flow as competitive advantages that should help it keep taking share even in a choppy consumer environment. He also highlighted the Stearns & Foster relaunch, Mattress Firm’s role in supporting it, and the strategic logic of the Leggett & Platt combination.

Bhaskar Rao walked through the quarter’s key financial drivers, including $26 million of pro forma adjustments, $247 million of operating cash flow, and $186 million of free cash flow, both records for a first quarter. He said consolidated debt less cash was $4.5 billion and leverage was 3.1x, with the company on track to return to its 2x to 3x leverage target in the next few months. He also quantified the pricing/inflation bridge: about $50 million of commodity inflation for the rest of 2026, a roughly $10 million second-quarter headwind, and about $100 million of annualized pricing lift intended to offset inflation on a full-year basis. Guidance also included about $225 million of 2026 capex, roughly $75 million for Mattress Firm store refreshes and brand walls, and at least 50% of 2026 free cash flow expected to go to dividends and share repurchases.

Analysts pressed on demand elasticity, price increases, commodity inflation, Mattress Firm traffic and margins, and the new Stearns & Foster launch. Management said closing rates are improving, suggesting elasticity is not high, and argued the company’s pricing actions are modest and broadly in line with historical industry pass-through behavior. On Mattress Firm, management said traffic is down single digits but same-store sales were flat in the quarter and slightly up in April, while gross margin pressure largely reflects accounting and mix effects tied to the post-acquisition relationship with Tempur Sealy rather than a deterioration in the underlying business. On the chemical shortage, management said it now looks more like a pricing event than a supply outage risk, with around 3 to 4 months of safety stock and no current expectation of product shortages.