Core Insights - Sleep Number reported a significant decline in revenue and a widening net loss for Q2 2025, indicating a challenging quarter for the business [1][5][10] Financial Performance - Q2 2025 GAAP revenue was $327.9 million, down 19.7% from $408.4 million in Q2 2024 and below analyst expectations of $357.4 million [1][2] - The company reported a net loss per share of $(1.09), compared to expectations of $(0.11) and a loss of $(0.22) per share a year ago, reflecting a 395.5% increase in loss [1][2] - Gross profit margin remained stable at 59.1%, consistent with Q2 2024, despite the revenue decline [2][6] - Adjusted EBITDA fell 16.7% year-over-year to $23.6 million [2][6] - Free cash flow was negative at $(6.9) million, a decline of 173.4% from $9.4 million in Q2 2024 [2][6] Business Strategy and Operations - Sleep Number focuses on smart beds with technology that personalizes sleep experiences, with nearly 88% of sales from its direct-to-consumer network [3] - The company has been reducing marketing expenses significantly, attributing the revenue decline to previous inefficient marketing strategies [5][7] - Operating expenses before restructuring decreased by 21% year-over-year, but the net loss widened to $25 million due to weaker sales volume and adjustments to deferred tax assets [7] Market Position and Sales Channels - Sleep Number ended Q2 2025 with 630 retail stores, a decrease of 16 from the previous year, with comparable-store sales down 18% [8] - Online and phone sales also fell by 19%, while the average revenue per smart bed unit increased slightly to $5,880 [8] Future Outlook - The company forecasts full-year 2025 net sales of $1.45 billion, representing a 14% year-over-year decline, with an expected slight improvement in gross profit margin to 61% [10] - Operating expenses are projected to be $830 million for the year, with a target of break-even free cash flow in the second half [10] - The leverage ratio stands at 4.56 times EBITDAR, nearing the maximum allowed by banks, indicating potential financial strain [10]

Financial Performance - Sleep Number reported revenue of $327.93 million for the quarter ended June 2025, reflecting a year-over-year decline of 19.7% [1] - The EPS for the same period was -$1.09, compared to -$0.22 a year ago, indicating a significant deterioration in profitability [1] - The reported revenue was an 8.97% miss compared to the Zacks Consensus Estimate of $360.25 million [1] - The EPS surprise was -808.33% against the consensus estimate of -$0.12 [1] Market Performance - Sleep Number's shares have returned +15.9% over the past month, outperforming the Zacks S&P 500 composite's +3.4% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3] Store Metrics - The number of stores at the end of the period was 630, compared to an average estimate of 638 by two analysts [4] - Total company sales change rate was -20%, significantly worse than the -8.7% estimated by two analysts [4] - The number of stores at the beginning of the period remained unchanged at 637, matching the average estimate [4]

Company Performance - Sleep Number reported a quarterly loss of $1.09 per share, significantly worse than the Zacks Consensus Estimate of a loss of $0.12, representing an earnings surprise of -808.33% [1] - The company's revenues for the quarter ended June 2025 were $327.93 million, missing the Zacks Consensus Estimate by 8.97%, and down from $408.41 million a year ago [2] - Over the last four quarters, Sleep Number has surpassed consensus EPS estimates only two times and topped revenue estimates just once [2] Stock Outlook - Sleep Number shares have declined approximately 46.5% since the beginning of the year, contrasting with the S&P 500's gain of 8.3% [3] - The company's current Zacks Rank is 4 (Sell), indicating expectations of underperformance in the near future [6] - The consensus EPS estimate for the upcoming quarter is $0.15 on revenues of $405.95 million, while for the current fiscal year, it is -$0.25 on revenues of $1.54 billion [7] Industry Context - The Furniture industry, to which Sleep Number belongs, is currently ranked in the bottom 25% of over 250 Zacks industries, suggesting a challenging environment for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment [5]

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $328 million, down 19.7% year over year, primarily due to a significant cut in marketing spend [22][24] - Gross profit margin remained flat at 59.1%, with reductions in material costs offset by unit volume deleverage and a shift towards lower-priced products [23] - Operating expenses were $185 million, down 21% year over year, reflecting cost-saving initiatives [24][26] - Adjusted EBITDA was $23.6 million, down $4.7 million from the prior year, with an adjusted EBITDA margin of 7.2%, which is 30 basis points higher than the prior year [24][25] Business Line Data and Key Metrics Changes - The company is focusing on optimizing its product portfolio and distribution channels, with plans to enhance the product lineup to meet a broader customer base [12][13] - Marketing efficiency has improved, with a 24% increase in conversion year over year in Q2 [15] Market Data and Key Metrics Changes - The company expects full-year net sales of approximately $1.45 billion, representing a 14% year-over-year decline, with second-half sales anticipated to be roughly comparable to the first half [29][30] - The promotional strategies implemented are driving a higher Average Revenue per Unit (ARU) while improving product mix [31] Company Strategy and Development Direction - The company is implementing a reset strategy focused on cost discipline, commercial and product improvement, and better cash flow management [21][26] - Plans include exploring digital-first retail partnerships and enhancing distribution channels while maintaining a strong margin profile [40][49] - The company aims to generate breakeven cash flow in the second half of the year, prioritizing debt repayment with any positive operating cash flow [28][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that sales results are not yet in line with the industry but sees encouraging recent trends [27] - The company is actively engaged with lenders to improve its capital structure and is exploring refinancing options [28][16] - Management remains focused on executing the sales forecast and maintaining compliance with debt covenants [29][69] Other Important Information - The company has identified $130 million in cost reductions for 2025, exceeding the original target of $80 million to $100 million [26] - The organizational redesign has led to significant savings, with a 22% reduction in operating expenses compared to Q1 [26] Q&A Session Summary Question: Breakdown of additional cost savings expected this year - Management indicated that the $130 million in cost savings roughly follows the same percentages as previously announced, focusing on structural changes in G&A and R&D [36][37] Question: Consideration for digital-first retail partnerships - Management emphasized the importance of their vertically integrated model and the intent to enhance distribution without compromising margins [39][40] Question: Changes to product assortment and pricing strategy - Management is conducting significant consumer research to understand customer needs and will start rolling out new products in 2026 [44][46] Question: Advertising strategy and future marketing spend - Management aims to optimize marketing spend as a percentage of sales, expecting it to become more efficient and lower in the long term [53][54] Question: Guidance on gross margin expansion and tariff pressure - Management expects to mitigate tariff impacts through previous pricing actions and material cost reductions, maintaining confidence in their gross profit margin [62][63]

[Executive Summary & Strategic Update](index=1&type=section&id=1.%20Executive%20Summary%20%26%20Strategic%20Update) This section provides an overview of the company's recent financial performance and outlines strategic initiatives for business turnaround and profitable growth [Second Quarter 2025 Highlights](index=1&type=section&id=1.1.%20Second%20Quarter%202025%20Highlights) Sleep Number reported a significant decline in net sales for Q2 2025, alongside an increased net loss. However, the company achieved substantial operating expense reductions and exceeded its cost savings targets, maintaining compliance with debt covenants Second Quarter 2025 Highlights | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :----------------------- | :---------- | :---------- | :----------- | | Net Sales | $328 million | $408 million | -19.7% | | Gross Profit Margin | 59.1% | 59.1% | Flat | | Operating Expenses (pre-restructuring) | N/A | N/A | -$48 million (-21%) | | Net Loss | $25 million | $5 million | +$20 million | | Adjusted EBITDA | $24 million | $28 million | -17% | - The company is implementing **$130 million** of cost savings for 2025, exceeding its prior annualized target of **$80 million to $100 million**, while maintaining compliance with debt covenants[4](index=4&type=chunk)[10](index=10&type=chunk) - The net sales decline was primarily driven by lower volume and a reduced store count[5](index=5&type=chunk) [CEO Commentary & Business Turnaround Initiatives](index=1&type=section&id=1.2.%20CEO%20Commentary%20%26%20Business%20Turnaround%20Initiatives) CEO Linda Findley outlined the company's turnaround strategy, focusing on enhancing product assortment, value proposition, and consumer engagement. Key initiatives include aggressively reducing expenses, resetting the cost structure, and rebuilding marketing programs for efficiency to drive a return to profitable growth - The new leadership team is focused on enhancing product assortment, value proposition, and consumer engagement to return to profitable growth[2](index=2&type=chunk)[10](index=10&type=chunk) - Aggressively reduced expenses in Q2 to reset the cost structure and ensure ongoing compliance with debt covenants, including a dramatic cut in inefficient marketing spend[3](index=3&type=chunk) - Rebuilding the marketing program with a new, more efficient approach and optimizing the product portfolio, value, and distribution[3](index=3&type=chunk)[10](index=10&type=chunk) [Financial Performance Overview](index=1&type=section&id=2.%20Financial%20Performance%20Overview) This section provides a high-level summary of the company's financial results, including key income statement, cash flow, and balance sheet metrics [Second Quarter 2025 Key Financials](index=1&type=section&id=2.1.%20Second%20Quarter%202025%20Key%20Financials) The second quarter saw a significant decline in net sales and an increased net loss, primarily due to lower sales volume. Despite this, the gross profit margin remained stable, and operating expenses were substantially reduced Consolidated Statements of Operations (Three Months Ended) | Metric (in thousands) | June 28, 2025 | June 29, 2024 | | :-------------------- | :------------ | :------------ | | Net sales | $327,925 | $408,413 | | Cost of sales | $134,180 | $166,923 | | Gross profit | $193,745 | $241,490 | | Total operating expenses | $193,820 | $235,370 | | Operating (loss) income | $(75) | $6,120 | | Net loss | $(25,012) | $(5,051) | | Net loss per share – diluted | $(1.09) | $(0.22) | - Net loss increased by **$20 million**, driven primarily by lower net sales, partially offset by lower operating expenses[9](index=9&type=chunk) [Cash Flows, Liquidity and Balance Sheet Highlights](index=2&type=section&id=2.2.%20Cash%20Flows,%20Liquidity%20and%20Balance%20Sheet%20Highlights) The company experienced a decrease in net cash provided by operating activities and a negative free cash flow for the quarter. While the leverage ratio increased, it remained within the covenant maximum, indicating maintained compliance with debt obligations Cash Flow Highlights (Three Months Ended) | Metric (in thousands) | June 28, 2025 | June 29, 2024 | Change (YoY) | | :-------------------- | :------------ | :------------ | :----------- | | Net cash provided by operating activities | $1,196 | $23,518 | -$22,322 | | Free cash flow | $(6,856) | $9,443 | -$16,300 | - The company's leverage ratio was **4.56x EBITDAR** on a trailing 12-month basis, compared to the covenant maximum of **4.75x**, indicating compliance with debt covenants[9](index=9&type=chunk)[27](index=27&type=chunk) Balance Sheet Snapshot (in thousands) | Metric | June 28, 2025 | December 28, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $1,349 | $1,950 | | Total assets | $804,512 | $860,810 | | Total liabilities | $1,285,200 | $1,312,396 | | Total shareholders' deficit | $(480,688) | $(451,586) | [Financial Outlook](index=2&type=section&id=3.%20Financial%20Outlook) This section provides the company's forward-looking projections for the full year, including anticipated sales, margins, expenses, and cash flow targets [Full Year 2025 Projections](index=2&type=section&id=3.1.%20Full%20Year%202025%20Projections) Sleep Number projects a decline in full-year net sales for 2025, with a stable gross profit margin and controlled operating expenses. The company anticipates achieving break-even free cash flow in the latter half of the year Full Year 2025 Financial Outlook | Metric | Projection | | :-------------------------- | :----------- | | Net Sales | ~$1.45 billion (approx. 14% YoY decline) | | Gross Profit Margin | 61% (consistent with Q1 2025) | | Operating Expenses (excl. restructuring) | ~$830 million | | Free Cash Flow | Break-even in H2 2025 | [Detailed Consolidated Financial Statements](index=4&type=section&id=4.%20Detailed%20Consolidated%20Financial%20Statements) This section presents the comprehensive consolidated financial statements, including income statements, balance sheets, and cash flow statements for various periods [Consolidated Statements of Operations (Three Months Ended June 28, 2025)](index=4&type=section&id=4.1.%20Consolidated%20Statements%20of%20Operations%20(Three%20Months%20Ended%20June%2028,%202025)) This section presents the detailed income statement for the three months ended June 28, 2025, compared to the same period in 2024, showing a decrease in net sales and a shift from operating income to operating loss, resulting in a higher net loss | Metric (in thousands) | June 28, 2025 | June 29, 2024 | | :-------------------------------- | :----------------- | :----------------- | | Net sales | $327,925 | $408,413 | | Cost of sales | $134,180 | $166,923 | | Gross profit | $193,745 | $241,490 | | Sales and marketing | $146,464 | $182,400 | | General and administrative | $29,604 | $39,573 | | Research and development | $9,420 | $11,578 | | Restructuring costs | $8,332 | $1,819 | | Total operating expenses | $193,820 | $235,370 | | Operating (loss) income | $(75) | $6,120 | | Interest expense, net | $11,734 | $12,270 | | Loss before income taxes | $(11,809) | $(6,150) | | Income tax expense (benefit) | $13,203 | $(1,099) | | Net loss | $(25,012) | $(5,051) | | Net loss per share – diluted | $(1.09) | $(0.22) | [Consolidated Statements of Operations (Six Months Ended June 28, 2025)](index=5&type=section&id=4.2.%20Consolidated%20Statements%20of%20Operations%20(Six%20Months%20Ended%20June%2028,%202025)) This section provides the year-to-date income statement for the six months ended June 28, 2025, compared to the same period in 2024, illustrating a broader trend of decreased net sales and a significantly higher net loss | Metric (in thousands) | June 28, 2025 | June 29, 2024 | | :-------------------------------- | :----------------- | :----------------- | | Net sales | $721,186 | $878,862 | | Cost of sales | $286,906 | $361,198 | | Gross profit | $434,280 | $517,664 | | Sales and marketing | $335,567 | $390,912 | | General and administrative | $68,223 | $78,652 | | Research and development | $20,323 | $24,019 | | Restructuring costs | $8,392 | $12,419 | | Total operating expenses | $432,505 | $506,002 | | Operating income | $1,775 | $11,662 | | Interest expense, net | $22,815 | $24,569 | | Loss before income taxes | $(21,040) | $(12,907) | | Income tax expense (benefit) | $12,618 | $(374) | | Net loss | $(33,658) | $(12,533) | | Net loss per share – diluted | $(1.48) | $(0.56) | [Consolidated Balance Sheets](index=6&type=section&id=4.3.%20Consolidated%20Balance%20Sheets) The consolidated balance sheets show a decrease in total assets and total liabilities from December 2024 to June 2025, with a notable increase in borrowings under the revolving credit facility and a larger shareholders' deficit | Metric (in thousands) | June 28, 2025 | December 28, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $1,349 | $1,950 | | Total current assets | $175,525 | $181,284 | | Total assets | $804,512 | $860,810 | | Borrowings under revolving credit facility | $563,900 | $546,600 | | Total current liabilities | $903,221 | $908,012 | | Total liabilities | $1,285,200 | $1,312,396 | | Total shareholders' deficit | $(480,688) | $(451,586) | [Consolidated Statements of Cash Flows (Six Months Ended June 28, 2025)](index=7&type=section&id=4.4.%20Consolidated%20Statements%20of%20Cash%20Flows%20(Six%20Months%20Ended%20June%2028,%202025)) For the six months ended June 28, 2025, net cash provided by operating activities significantly decreased compared to the prior year. Cash used in investing activities also decreased, while financing activities shifted from a net use to a net provision of cash, resulting in a net decrease in cash and cash equivalents | Metric (in thousands) | Six Months Ended June 28, 2025 | Six Months Ended June 29, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,196 | $23,518 | | Net cash used in investing activities | $(11,332) | $(17,017) | | Net cash provided by (used in) financing activities | $9,535 | $(7,020) | | Net decrease in cash and cash equivalents | $(601) | $(519) | | Cash and cash equivalents, at end of period | $1,349 | $2,020 | [Supplemental Financial Information & Operational Metrics](index=8&type=section&id=5.%20Supplemental%20Financial%20Information%20%26%20Operational%20Metrics) This section provides additional details on sales channel performance, store metrics, and other operational insights supporting the financial results [Sales Channel Performance & Store Metrics](index=8&type=section&id=5.1.%20Sales%20Channel%20Performance%20%26%20Store%20Metrics) Retail stores continue to be the dominant sales channel, though both retail and online channels experienced significant comparable sales declines. The company also saw a reduction in its store count and average sales per store, while average revenue per smart bed unit slightly increased Sales Channel Performance (Three Months Ended) | Channel | June 28, 2025 (% of sales) | June 29, 2024 (% of sales) | | :-------------------- | :------------------------- | :------------------------- | | Retail stores | 87.8% | 87.8% | | Online, phone, chat and other | 12.2% | 12.2% | Sales Change Rates (Three Months Ended) | Metric | June 28, 2025 | June 29, 2024 | | :-------------------- | :------------ | :------------ | | Retail comparable-store sales | (18%) | (11%) | | Online, phone and chat | (19%) | (13%) | | Total Company | (20%) | (11%) | - The number of stores open decreased from **646** at the end of Q2 2024 to **630** at the end of Q2 2025. Average sales per store (trailing twelve months) declined from **$2,732 thousand** to **$2,395 thousand**[21](index=21&type=chunk) - Average revenue per smart bed unit (trailing twelve months) increased to **$5,880** in Q2 2025 from **$5,802** in Q2 2024[21](index=21&type=chunk) [Non-GAAP Financial Measures Reconciliations](index=9&type=section&id=6.%20Non-GAAP%20Financial%20Measures%20Reconciliations) This section provides reconciliations of non-GAAP financial measures, including Adjusted EBITDA, Free Cash Flow, Net Leverage Ratio, and Adjusted ROIC, to their most directly comparable GAAP measures [Adjusted EBITDA](index=9&type=section&id=6.1.%20Adjusted%20EBITDA) Adjusted EBITDA, a non-GAAP measure, decreased for both the three months and trailing twelve months ended June 28, 2025, compared to the prior year, reflecting the impact of lower net sales despite operating expense reductions Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | Trailing Twelve Months Ended June 28, 2025 | Trailing Twelve Months Ended June 29, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------------------- | :----------------------------------------- | | Net loss | $(25,012) | $(5,051) | $(41,459) | $(40,039) | | Income tax expense (benefit) | $13,203 | $(1,099) | $7,830 | $(10,730) | | Interest expense | $11,734 | $12,270 | $46,614 | $48,214 | | Depreciation and amortization | $13,697 | $16,347 | $59,590 | $69,676 | | Stock-based compensation | $1,549 | $3,992 | $8,835 | $13,073 | | Restructuring costs | $8,332 | $1,819 | $14,039 | $28,147 | | CEO transition/Proxy contest costs | $53 | — | $2,825 | — | | Asset impairments | — | — | $1,220 | $490 | | **Adjusted EBITDA** | **$23,556** | **$28,278** | **$99,494** | **$108,831** | [Free Cash Flow](index=9&type=section&id=6.2.%20Free%20Cash%20Flow) Free cash flow, a non-GAAP measure, turned negative for both the three months and trailing twelve months ended June 28, 2025, primarily due to reduced net cash provided by operating activities and continued capital expenditures Free Cash Flow Reconciliation (in thousands) | Metric | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | Trailing Twelve Months Ended June 28, 2025 | Trailing Twelve Months Ended June 29, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------------------- | :----------------------------------------- | | Net cash provided by (used in) operating activities | $1,196 | $23,518 | $(9,228) | $(4,230) | | Subtract: Purchases of property and equipment | $8,052 | $14,075 | $18,796 | $41,232 | | **Free cash flow** | **$(6,856)** | **$9,443** | **$(28,024)** | **$(45,462)** | [Net Leverage Ratio](index=10&type=section&id=6.3.%20Net%20Leverage%20Ratio) The Net Leverage Ratio under the revolving credit facility, a non-GAAP measure, increased to 4.56 to 1.0 for the trailing twelve months ended June 28, 2025, from 4.35 to 1.0 in the prior year, reflecting changes in total debt and EBITDAR Net Leverage Ratio Calculation (in thousands) | Metric | Trailing Twelve Months Ended June 28, 2025 | Trailing Twelve Months Ended June 29, 2024 | | :-------------------- | :----------------------------------------- | :----------------------------------------- | | Borrowings under revolving credit facility | $563,900 | $540,200 | | Consolidated funded indebtedness | $570,948 | $547,627 | | Total debt including operating lease liabilities (a) | $940,742 | $956,351 | | Consolidated EBITDAR (b) | $206,231 | $219,768 | | **Net Leverage Ratio (a divided by b)** | **4.56 to 1.0** | **4.35 to 1.0** | [Adjusted Return on Invested Capital (ROIC)](index=11&type=section&id=6.4.%20Adjusted%20Return%20on%20Invested%20Capital%20(ROIC)) Adjusted ROIC, a non-GAAP measure of capital deployment efficiency, improved significantly to 8.4% for the trailing twelve months ended June 28, 2025, compared to 3.7% in the prior year, driven by an increase in Adjusted NOPAT and a decrease in average adjusted invested capital Adjusted ROIC Calculation (in thousands) | Metric | Trailing Twelve Months Ended June 28, 2025 | Trailing Twelve Months Ended June 29, 2024 | | :-------------------- | :----------------------------------------- | :----------------------------------------- | | Adjusted NOPAT | $40,018 | $19,091 | | Average adjusted invested capital | $477,676 | $509,369 | | **Adjusted ROIC** | **8.4%** | **3.7%** | [Corporate Information & Disclosures](index=2&type=section&id=7.%20Corporate%20Information%20%26%20Disclosures) This section provides background information on Sleep Number Corporation, details on forward-looking statements, and investor contact information [About Sleep Number Corporation](index=2&type=section&id=7.1.%20About%20Sleep%20Number%20Corporation) Sleep Number Corporation is a sleep wellness company dedicated to improving health through high-quality sleep. It leverages innovations like the Climate360 smart bed and extensive sleep data, operating a vertically integrated direct-to-consumer model through stores and online channels - Sleep Number is a sleep wellness company guided by its purpose to improve the health and wellbeing of society through higher quality sleep, having improved nearly **16 million** lives[8](index=8&type=chunk) - Innovations include the Climate360 smart bed and the application of **34 billion** hours of longitudinal sleep data for personalized insights[8](index=8&type=chunk) - The company operates a vertically integrated business model with exclusive direct-to-consumer selling in **630** stores and online[8](index=8&type=chunk) [Forward-Looking Statements](index=2&type=section&id=7.2.%20Forward-Looking%20Statements) This section serves as a cautionary statement, indicating that any projections or future-oriented statements in the news release are subject to various risks and uncertainties that could cause actual results to differ materially. The company explicitly states it does not undertake any obligation to update these statements - Statements regarding future plans, events, financial results, or performance are forward-looking and subject to risks and uncertainties[9](index=9&type=chunk)[10](index=10&type=chunk) - The most important risks and uncertainties are described in the company's SEC filings, including Item 1A of its Annual Report on Form 10-K[10](index=10&type=chunk) - The company does not undertake any obligation to update any forward-looking statement[10](index=10&type=chunk) [Conference Call & Investor Contact Information](index=2&type=section&id=7.3.%20Conference%20Call%20%26%20Investor%20Contact%20Information) Details for accessing the company's conference call to discuss the second quarter results and contact information for investor and media inquiries are provided - Management hosted a conference call on July 30, 2025, at 8:30 a.m. EDT to discuss results, with webcast replay available for approximately **60 days** at https://ir.sleepnumber.com[7](index=7&type=chunk) - Investor contact: investorrelations@sleepnumber.com[11](index=11&type=chunk) - Media contact: Muriel Lussier, muriel.lussier@sleepnumber.com[11](index=11&type=chunk)

Market Cap Comparison - Useless Coin's market cap (153 million) has surpassed Sleep Number Corp's (152 million) [1] Business Model Contrast - Sleep Number Corp generated 1.68 billion in revenue from smart bed sales [1] - Useless Coin offers "nothing at all" [1] Market Sentiment - The market seemingly favors Useless Coin despite its lack of tangible product or service [1]

Industry Overview - The Zacks Furniture industry is experiencing growth through digital transformation, with investments in e-commerce, augmented reality (AR), and artificial intelligence (AI) enhancing customer experiences and operational efficiency [1] - The industry includes manufacturers, designers, and marketers of residential and commercial furnishing solutions, catering to various sectors such as construction, healthcare, and education [3] Trends and Innovations - There is a significant growth in e-commerce and digital transformation, with companies integrating AR and virtual reality (VR) to improve customer visualization of products [4] - The demand for multifunctional furniture is increasing, particularly among millennials and Gen Z, as urban living spaces become more compact [4][5] - Companies are focusing on product innovation and digital marketing to enhance customer experience and drive growth [5] Economic Environment - The furniture industry is facing economic uncertainties, including inflation and sluggish housing demand, which may impact consumer spending [2][7] - The Federal Reserve has revised its 2025 GDP growth forecast to 1.4% from 2.1%, reflecting concerns over inflation and economic conditions [7] - The housing market remains sluggish, with mortgage rates stabilizing between 6% and 7%, which is deterring potential buyers [8] Competitive Landscape - The industry is highly competitive, with companies investing in digital presence and shipping capabilities to capture market share [9] - Rising selling, general and administrative (SG&A) expenses, along with increased labor and occupancy costs, are putting pressure on profit margins [9] Performance Metrics - The Zacks Furniture industry has underperformed compared to the broader Zacks Consumer Discretionary sector and the S&P 500, declining 24.2% over the past year [12] - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 9.11X, significantly lower than the S&P 500's 20.73X and the sector's 22.13X [15] Company Highlights - **Virco Mfg. Corporation**: The company has seen a gross margin improvement to 47.5% in the first quarter, benefiting from a favorable sales mix and U.S.-based manufacturing, which insulates it from tariffs [19] - **Sleep Number Corporation**: Despite a 16% year-over-year drop in net sales, the company has achieved gross margin expansion and is implementing cost-cutting measures to save $80 to $100 million annually [23]

Financial Performance and Outlook - Sleep Number expects to generate over $100 million of operating cash in 2023[10, 18, 21] - The company anticipates ending 2023 with approximately $400 million of available liquidity under its revolving credit facility[16, 21] - Sleep Number projects debt leverage under 40x EBITDAR by the end of 2023[10, 15, 21] - For the second half of 2023, the company anticipates net sales to be down low-single to up mid-single digits compared to the previous year[12] - Sleep Number is targeting a 60% gross margin rate for 2024 and returning to approximately 62% within the next couple of years[10] Strategic Initiatives and Market Position - Sleep Number's innovations have improved over 145 million lives to date[5] - The company completed the next-generation smart bed rollout in the third quarter, ahead of the important Labor Day selling period[10] - The mattress industry unit volumes are currently below 2016 levels, with a 14% decrease[22, 23] - Climate360 smart sleepers experience up to 44 minutes more restful sleep per night[26]

Company Overview - Sleep Number is a sleep wellness technology leader, designing, engineering, manufacturing, distributing, and marketing innovative sleep solutions[4] - The company has 28 million smart sleepers[5] - Sleep Number has over 800 patents and patents pending worldwide[7] Financial Performance - Sleep Number's revenue was $22 billion in 2014, $21 billion in 2015, and $19 billion in 2016[5] - Adjusted EBITDA was $148 million in 2014, $146 million in 2015, and $133 million in 2016[5] - The company expects to generate $60 million to $80 million of free cash flow in 2024 to pay down debt[59, 69] Market and Strategy - 33% of American adults are not getting enough sleep on a regular basis[12] - 45% of consumers rank better sleep as a "very high priority"[12] - Sleep Number's smart bed monthly active user rate (MAU) is over 80%[39] - The company is targeting $40 million to $45 million of operating expense reductions in 2024, with $130 million of operating expense reductions over a two-year period (2023/2024)[59]

Group 1 - Momentum investing is characterized by the strategy of "buying high and selling higher," contrasting with the traditional "buy low and sell high" approach [1] - Identifying the right entry point for momentum stocks can be challenging, as they may lose momentum if their valuations exceed future growth potential [1] - Investing in bargain stocks that have recently shown price momentum can be a safer strategy, utilizing tools like the Zacks Momentum Style Score to identify such opportunities [2] Group 2 - Sleep Number (SNBR) has demonstrated significant price movement, with a 25.5% increase over the past four weeks, indicating growing investor interest [3] - Over a longer timeframe, SNBR has gained 54.2% in the past 12 weeks, showcasing its ability to deliver sustained positive returns [4] - SNBR has a Momentum Score of B, suggesting it is an opportune time to invest in the stock to capitalize on its momentum [5] Group 3 - SNBR has received a Zacks Rank 2 (Buy) due to upward revisions in earnings estimates, which typically attract more investor interest and drive prices higher [6] - The stock is currently trading at a Price-to-Sales ratio of 0.14, indicating it is undervalued, as investors pay only 14 cents for each dollar of sales [6] - SNBR appears to have significant growth potential, supported by its fast-paced momentum characteristics [7] Group 4 - In addition to SNBR, there are other stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, presenting further investment opportunities [7] - Zacks offers over 45 Premium Screens tailored to different investing styles, which can assist in identifying winning stock picks [8]