Last week, Tempur Sealy — one of the giants of the mattress industry — saw its stock price collapse to the lowest point in four yearrs. The drop in price also marked the largest one-day drop in Tempur Sealy’s stock price since 2008. So what caused this dramatic fall in the company’s value?
Tempur Sealy announced at the end of January that they were terminating their contracts with Mattress Firm, one of their business partners. The two parties were trying to agree to new contracts to ensure that their companies could function in an ever-changing business landscape, but they could not reach a final agreement. The dispute over the contracts never reached the point where a lawsuit would be necessary, but it is still having a significant impact on Tempur Sealy.
There are a couple of lessons to learn from this story, with the first being that implementing the terms of a contract is a difficult process. Take the termination of the Tempur Sealy-Mattress Firm contracts as an example. It will take the rest of the first quarter of 2017 for Tempur Sealy to cease their business with Mattress Firm. The provisions and terms for terminating a contract are usually covered by the contract itself.
The other lesson here is that issues over contracts can have wide-ranging ramifications for one party, many parties or all parties involved in the dispute or disagreement. Given this point, it is imperative for business to strategically plan their approach to delicate legal matters.
Source: MarketWatch, “Tempur Sealy’s stock rocked after Mattress Firm contracts are terminated,” Tomi Kilgore, Jan. 31, 2017