UPDATE 3-Tempur-Pedic sees weak Q1 profit as US sales disappoint

(Adds analyst's comment, updates share movement)

By Dhanya Skariachan

BANGALORE, March 17 (Reuters) - Tempur-Pedic International Inc (TPX.N: Quote, Profile, Research) forecast a 50 percent drop in first-quarter profit amid concerns of an unprecedented slowdown in the U.S. mattress industry, wiping out more than a third of the mattress maker's market value.

The company, which was one of Citigroup's top picks for 2008 in the industrial sector, said the outlook was weighed down partly by weaker-than-expected sales at its U.S. direct channel.

"Our operating expenses and advertising plans anticipated a stronger retail environment," Tempur-Pedic CEO Thomas Bryant said in a statement.

The company, which reported a profit of 35 cents a share in the first quarter of 2007, also expects its quarterly net debt position to be lower than the levels at year-end 2007.

Shares of the company fell as much as 43 percent to $9.51, their lowest in more than two years, paring some losses before trading at $10.54 in afternoon trade on the New York Stock Exchange.

Last week, Tempur-Pedic's rival Sealy Corp (ZZ.N: Quote, Profile, Research), which has also been struggling with soft sales in the United States amid the housing meltdown and rising materials costs, said U.S. sales in February were way below its expectations.

"The bedding sector, historically, is the most resilient part of home products. So, for it to be seeing this much of a decline is of historic proportions," Morgan Keegan analyst Laura Champine said by phone.