Sealy coil caper

Sealy Corp., the No. 1 mattress maker in the US, struggling with a soft economy and a softer housing market that has produced $9 million in red ink so far this fiscal year, tepid sales and an eroding profit margin, has come up with an interesting marketing plan.

It is going to become more like its rival, Simmons Bedding Co.

Next month, Trinity, N.C.-based Sealy will start selling its flagship Posturepedic mattresses with individually wrapped coils, The Post has learned. Up to now, Posturepedic bedding was only available with foam, latex and interconnected coils.

For the past 90 years, individually wrapped coils have been the chief marketing advantage used by Atlanta-based Simmons.

Many US consumers can remember the time-worn TV commercials run by Simmons featuring bowling pins undisturbed by a bowling ball dropped next to them on a Beautyrest mattresses.

Now, Sealy wants to get into bed with the same type of construction.

It’s like Coke using the same formula as Pepsi, some in the mattress world are saying.

“We know people will say, ‘Look at what they are doing!’ But we know this works,” Sealy lawyer Michael Murray told The Post last week.

Murray believes Sealy’s encased coils with an hourglass design are superior to the Simmons model with its barrel shape. Sealy coils better adjust to a mattress user’s back, Murray said.

He better be right. Sealy, which has not offered a new Posturepedic design in two and a half years, has been slipping. Sales dipped slightly in the three months ended Aug. 29 and will likely be off 25 percent in 2010 compared to 2007.

The company, which is still weighed down by loans taken to finance a 2004 sale to private equity firm KKR, is blaming the recession.

What’s more, the soft sales have forced price cuts, which have reduced margins in the US to 40.4 percent from 43.9 percent last year. Its nine-month loss is $9.3 million compared to a $11 million profit in the year-earlier period.

It also has sapped $50 million in cash from its balance sheet and bloated inventory by 21 percent.

“They are in danger of losing the No. 1 market position they have had for 25 years, to Serta,” a mattress executive said, “and are getting very close to a tipping point.”

Sealy is giving retailers the choice of carrying either the new Simmons-like Posturepedic or an improved, traditional ‘Titanium’ inner-spring Posturepedic. They cannot carry both.

Suggested retail pricing ranges from $599 to $1399.

The hope is it can keep its base since some retailers will keep carrying the traditional Posturepedic while taking market share with the encased coil beds from Simmons that recently was acquired out of bankruptcy, a source with direct knowledge of the strategy said.

Simmons is not taking the challenge lying down. In the first quarter, it will be introducing a new Beautyrest line and will likely claim it is the original free standing coil maker.

KKR owns about 48 percent of Sealy’s publicly traded business.

Sealy shares closed last week at $2.93. Its $1 billion valuation is down about 33 percent from the time of the 2004 KKR buyout.

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