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A new leader at Sealy: retailers see Jones rebuilding ties.

CLEVELAND--Ron Jones, who last week was named president and CEO of Sealy Corp., the nation's largest bedding maker, has his work cut out for him.

Jones, the former president of Masco Home Furnishings, faces the challenge of reclaiming the bedding maker's declining market share and rebuilding relations with retailers, many of whom said they felt alienated under previous management.

Lyman Beggs, a veteran consumer marketing and financial executive better known as John, brought in as chairman, president and CEO in 1992, has left to pursue other interests. While each mattress vendor takes a different approach to determining market share, industry estimates suggest that Sealy's market share when Beggs joined the company in August of 1992, was approximately 22.3 percent. By comparison, Simmons and Serta followed, with 13.9 percent and 11.1, respectively.

Today, however, the gap is considerably smaller. Sealy is put at 17 percent of the market, still the industry leader, but Serta and Simmons are within striking distance of that number, industry watchers maintain. Indeed, more than one observer believes that the three companies could end the year in a dead heat for first place.

Sealy was preparing to go public a year ago but has yet to put its stock on the market. Several sources close to the action said the company changed its mind because of its slipping market share.

What's more, Spring Air dealt Sealy a double blow in the past two years. First, Spring Air took over as Sears private-label supplier of innerspring bedding in 1994 and then picked up Sears' foam bedding business last March.

According to sources, Sears' foam mattress business was estimated to represent about $25 million at retail. Sears still carries Sealy brand merchandise.

Under Beggs, Sealy took steps to strengthen its foundation for going public, in part by relaunching the Stearns & Foster premium bedding line in 1994 and early last year repositioned its Posturepedic brand, to focus on more profitable, higher-priced merchandise. He also launched a $40 million ad campaign to increase public awareness of the company and its brands.

In a just-released 10-K report detailing performance for the year ended Nov. 30, 1995, Sealy reported net sales for the year of $653.9 million, a decrease of 6.3 percent from $697.7 million. Sealy estimates about $9 million of the difference is due to the closing of its unprofitable sleeper-sofa business last March. Almost $35 million represents declining sales in it core bedding business.

Sealy said, "Bedding shipments declined due to a lower volume of promotional and private-label bedding units, primarily attributable to the loss of Sears' private-label business in the year ended Nov. 30, 1994."

Shoring up the company's balance sheet and market share are only two of the jobs Jones must handle. Retail relationships are just as critical.

Retailers expressed hope that, under Jones' leadership, Sealy will be more responsive to their needs.

Observers said that when Beggs came to Sealy from the $300 million Norelco consumer products division, he brought his philosophy of advertising directly to consumers to strengthen the brand name. In his national television consumer advertising campaign, at present estimated at more than $40 million, the retailer has been conspicuously absent.

Many bedding marketers believe a consumer's loyalty to a bedding brand is developed primarily through a relationship with the retail salesperson and the store in which the consumer purchases the product.

Observers also said that Sealy strained its relations within the bedding community when it canceled its membership in the International Sleep Products Association in a disagreement over funding the group's publicity arm, the Better Sleep Council.

"From my perspective as a retailer, I think that with Ron now at the helm, Sealy will be much more in touch with the retailers than it had been," said Jim Kittle, chairman and CEO of Indianapolis-based Kittle's Home Furnishings.

"Sealy was broken and needed someone to fix it," Kittle maintained. "I think that Ron, being a lot closer to the industry than his predecessor was, is the guy who can do it."

Others, including Jim Downey, national bedding buyer for Sears, were equally optimistic about Jones' arrival. "Sealy is one of our four major brands," he said. "We look for a continued and growing relationship with this company."

Jones said of his task: "A manufacturer's job is to be responsive to the customers' needs, helping them solve problems. It's not selling a product or trying to build a consumer brand identification that's so strong that somehow you get the feeling you don't need the retailers."

He added: "I am certainly committed to keeping Sealy's name and image strong in the consumer's mind; it's got to be balanced with a sensitivity to the retailers, and a willingness to listen. Commercial success will come as a byproduct.

Neil Goldberg, president and CEO of Raymour & Flanagan in Liverpool, N.Y., said: "Indeed, the key to success in bedding, particularly at Sealy is to re-establish the rapport with the major retail accounts. I'm hopeful that Ron's addition to Sealy will allow it to focus attention on strong relationships. As one of the few major bedding retailers who only carry one line, our success has been very closely intertwined with Sealy's."

Another question on the minds of observers is who the players on Jones' team will be. Key executives have jumped ship in the past several months to sign on with the competition.

For example, last July, McKay, who had been with Sealy for 17 years, most recently as vice president of national accounts, left to join Spring Air as senior vice president of sales and marketing. Mike Rakauskas, a 22-year Sealy veteran who served as vice president of planning and development, also left, joining Spring Air as its chief financial officer. Other key executives--David McIlquham, vice president of marketing; Gary Fazio, vice president of sales, and Jesse Hogan, chief financial officer--remain on board.

According to Jones: "As I've just told the Sealy management group, I think it's a great sense of accomplishment and achievement if you can come into an organization and work with the existing management and achieve organizational success. And I'd much prefer it that way than having to come in and wipe the slate clean."

Some industry sources pointed out that Jones' experience is with conventional furniture, an upper-end segment of the home goods business, and at Sealy he will be dealing with the highly promotional bedding business.

Retailers said that, although Jones may face a learning curve in the bedding business, his credentials suggest that he has the ability to put Sealy back on track.

For example, Rich Branch, vice president of marketing and advertising for Upper Marlboro, Maryland-based Mattress Discounters, the nation's largest mattress retailer, disagreed. "Granted, while it may take some time to learn the particulars of the bedding industry, if you have the tools to run a business, you can run a business."

At press time, Jones was dividing his time between Sealy and Masco. "I've committed to help Masco for several weeks to make the transition as smooth as possible for them," Jones notes.

According to Samuel Cypert, a Masco Corp. spokesman, since the Home Furnishings Group is still in discussion with some potential buyers, for the time being, all the operating company presidents will report directly to Wayne Lyon, director/president of Masco. "They reported indirectly to Wayne through Ron anyway," Cypert says.
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Title Annotation:Sealy Corp. CEO and President Ron Jones
Author:Wray, Kimberly; Allegrezza, Ray; Sorcher, Jamie; Wray, Christina
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Date:Mar 4, 1996
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