Mattress Forum

Not sure what the profit margin is. I doubt anyone but a T. Dealer would know.

However, it has to be high because foam is not that expensive to produce, not even a high end foam like Tempurpedic.

Of course, their sales depend largely on advertising which they do a TON of, so you're paying for that. They advertise in almost every magazine I pick up, they advertise on the net, they advertise more than any other mattress retailer by far (that's an educated guess, not a fact, but...) In any case, I would bet you that THAT is why their prices are so high.

From their total sales of $831 Million

$437 Mil. (52.5%) goes into the cost of making, shipping, etc.

$153 Mil. (18.4%) goes into selling/marketing

$95 Mil. (11.4%) goes into General administrative overhead expenses

$17 Mil. (2.0%) goes to interest expense on debt

$128 Mil. (15.4%) is their profit before income taxes.

$43 Mil. (5.2%) goes to income taxes

$85 Mil. (10.2%) is net profit

So, for a company like this, it is pretty profitable.  But, the profits are not as huge as you might think given the selling price.  A bit more than half of what they sell it for goes to the cost of making it.  Their gross profit is bigger than Sealy from what I have seen, and they spend more on marketing.  They are not as loaded up on debt, so less money goes to pay interest expense.

TP's net profit margin after all expenses and taxes is about 10%, compared to about 1% for Sealy.

This would not include the retail markup.  Budgy would know what that is, but he may not want to say.

So, a TP that sells for $3000 in a store, $1000 may go to the store for their costs and profit margin (this is a guess), $1000 may go into the cost of making/shipping it, $800 goes into marketing, overhead, taxes, etc., and $200 is net profit for TP.

First, Tempur-pedic prices are high because people are willing to pay them.  This probably has to do more with their advertising ("don't be fooled by competitors", "used by astronauts", etc.) than anything else.

However, the funny thing is that Tempur-pedic's selling, general, and administrative expenses are a lot lower than Sealy's.  Tempur-pedic's gross profit margins are higher as well - 47% vs. 40%.  And to top it all off, the company is in much better shape (i.e. less debt) than its closest publicly-traded competitor, which results in a higher net profit to the company.  What does this all mean to you, the consumer?  Probably not much.