Will Sealy look outside for new leader?
By David Perry -- Furniture Today, March 24, 2008
High Point — The sudden departure of Dave McIlquham as Sealy chairman and CEO earlier this month left bedding leaders wondering if Sealy will turn to a bedding outsider to head the company. A number of analysts who follow the bedding business suggest that Sealy will look beyond the industry for new leadership.
Such a move would be following a now-established trend that gained prominence after a talented Samsonite executive joined Sealy in 1990.
That up-and-comer was Dave McIlquham.
"He was among the first to bring an outside consumer marketing perspective to the bedding industry," said Bob Hellyer, CEO of Spring Air, who was working for Stearns & Foster in 1990 when McIlquham joined Sealy, S&F's parent. "It was refreshing at the time and the industry needed that contribution."
But in recent years, Sealy lost its way in an increasingly competitive industry, with critical merchandising and product missteps that occurred on McIlquham's watch, industry leaders said. Sealy's recent struggles made McIlquham's departure inevitable, the leaders said. "You don't perform," one Top 15 bedding producer commented, "and you are out. Kohlberg Kravis Roberts & Co. (Sealy's largest shareholder) doesn't tolerate non-performance. They have benchmarks for comparison, like Simmons and Tempur-Pedic."
Added another bedding leader: "Dave got caught in the Wall Street game and failed to understand the importance of his customers and the attitude being projected by the company, of which he was CEO. All private equity firms are tough and all expect performance or they will take action."
Englander President Kevin Toman, who worked with McIlquham in the early 1990s at Sealy, said that McIlquham "did a good job for Sealy over the years. He built the Sealy brand and resurrected Stearns & Foster." But in recent years, he said, Sealy made "miscalculations in merchandising," including a slow entry into specialty sleep, and saw its S&F brand struggle as it "lost its edge."
In the end, Toman said, "the numbers weren't there" and Sealy made a management change.
Hellyer said Sealy's problem was that the company "became uncompetitive at retail."
Larry Rogers, interim CEO at Sealy, declined to address those assessments of Sealy's recent track record. "This is a time when we should let our deeds, going forward, define the company," he said.
McIlquham started his bedding career with considerable promise, his former colleagues said.
Hellyer said McIlquham was "one of the first classic marketers" to join the bedding industry. "That was his strength," he said. "He was a great brand marketer."
McIlquham joined Sealy as vice president of marketing in 1990. He was named president in February 2001 and CEO in April 2002. He added the chairman's title in 2004.
Former Comfort Solutions president Larry McKay, who worked with McIlquham when both were on the senior management team at Sealy, remembered him quickly grasping the intricacies of the mattress industry. "He was a very quick study," McKay recalled. "He was one of the few guys from outside the industry who learned the industry very quickly, in fact almost immediately. He quickly became a bedding guy, understanding the retailer and the consumer."
McKay also cited McIlquham's passion for the mattress industry as a key to his success over the years. "Dave put his heart and soul into that business," he said. "He was a very hardworking guy."
The model pioneered by McIlquham has been followed by a number of companies in the industry, including Sealy, which have brought marketers from other industries into key mattress positions, bedding leaders said. They believe Sealy's next leader may be from outside the industry.
Asked if he thinks Sealy will go outside the industry to pick McIlquham's successor, Hellyer responded: "They will develop a short list of internal candidates. It is likely they will go outside the industry."
Analysts who follow the industry share that view. "Will the new CEO come from outside the bedding industry?" asked Keith Hughes of SunTrust Robinson Humphrey. "We firmly believe that will be the case as it was in the recently announced CEO search at Tempur-Pedic."
Budd Bugatch of Raymond James Equity Research made this comment: "The board has retained Spencer Stuart to spearhead the search for a permanent CEO, which will most likely focus on external candidates."
The timing of McIlquham's departure caught some by surprise. Hellyer thought McIlquham would have been given time to see how the new Posturepedic line, launched with much fanfare at the Las Vegas Market earlier this year, performed at retail. "It did have a pretty strong reception at the Las Vegas Market," he said.
Bugatch said he was "very surprised by the timing of the announcement," but noted that he did "appreciate the mounting frustration felt by management, board members and other stakeholders given Sealy's floundering share price, market share issues, major product transition needs and desire to develop new marketing initiatives in a changing industry."
