Sleep Number Corporation ( SNBR ) is wading through a challenging consumer market as new management aims to aggressively cut costs while sparking growth in the coming fiscal year. With the goal of targeting a broader range of cost-conscious consumers, the firm isMonte Independent Investment Research: Michael Del Monte is a buy-side equity analyst with expertise in the technology, energy, industrials, and materials sectors. Prior to working in the investment management industry, Michael spent over a decade i ...

Core Insights - Sleep Number has been undergoing cost-cutting measures and repositioning for over a year, incurring $47.5 million in restructuring costs in the nine months ending September 27, with an expectation of an additional $3 million in costs for the remainder of the year [3][4] - The company reported a net loss of $78.1 million for the trailing 12 months, nearly doubling from $40.8 million in the previous year [4] - CEO Linda Findley expressed optimism about the company's turnaround plan, despite facing unexpected challenges, and noted that over $135 million in costs have been reduced since her tenure began [5] Financial Leadership Changes - Amy O'Keefe has been appointed as the new CFO, effective December 8, replacing interim CFO Bob Ryder, who will leave the company on December 12 [6] - O'Keefe brings over 30 years of experience in financial leadership, having held positions at The Black & Decker Corp, Avaya, and WW [6] - The company reaffirmed its full-year 2025 financial guidance, indicating that its turnaround plan is on track with significant cost reductions implemented since April [6]

Core Insights - The company is optimistic about turning around its top line by 2026 through new product initiatives and improved marketing strategies [1][4][12] - A comprehensive turnaround plan is in place, focusing on cost reductions, financial flexibility, and commercial strategies to stabilize sales and drive growth [3][11][18] Financial Performance - Q3 net sales were $343 million, down 19.6% year-over-year, attributed to reduced marketing spend and competitive pressures [12][13] - Adjusted EBITDA for Q3 was $13.3 million, down $14.4 million from the previous year, driven by lower sales and gross profit margin compression [14] - The company expects full-year net sales to be approximately $1.4 billion, with a gross profit margin of around 60% [16] Cost Management - The company has reduced operating expenses by $115 million since the beginning of the year, exceeding its $130 million cost-out target [10] - Fixed cost reductions will continue into 2026, with a focus on consolidating real estate and optimizing the store footprint [18][36] Marketing and Sales Strategy - A new marketing strategy is being deployed to drive traffic to stores and digital channels, with a focus on efficiency and higher returns [5][30] - The company plans to increase marketing spend slightly in 2026 compared to 2025, while still reducing overall operating expenses [6][50] Product Development - The company is working on a product lineup refresh aimed at appealing to a broader consumer base, emphasizing comfort, durability, and value [12][40] - New product offerings are expected to launch in early 2026, focusing on price point moderation while maintaining premium quality [39][51] Distribution Strategy - The company is exploring new distribution channels, including partnerships and digital expansions, to enhance market reach [5][27] - A test show on HSN is planned as part of the strategy to expand distribution while retaining the strength of its vertical model [6][26]

Core Insights - Sleep Number reported a revenue of $342.88 million for the quarter ended September 2025, reflecting a year-over-year decline of 19.6% [1] - The company's EPS for the same period was $0.07, compared to -$0.14 a year ago, indicating a recovery in earnings despite the revenue drop [1] - The reported revenue fell short of the Zacks Consensus Estimate of $365.85 million, resulting in a surprise of -6.28% [1] - The EPS also missed the consensus estimate of $0.15, with a surprise of -53.33% [1] Financial Performance Metrics - Sleep Number's stock has returned -13% over the past month, contrasting with the Zacks S&P 500 composite's +1% change, indicating underperformance [3] - The company currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance against the broader market in the near term [3] - The number of stores at the end of the period was 611, which is below the average estimate of 630 by two analysts [4] - Total company sales change rates were reported at -20%, compared to an estimated -13% by two analysts [4] - The number of stores at the beginning of the period was 630, matching the average estimate of 630 by two analysts [4]

Financial Data and Key Metrics Changes - Q3 net sales were $343 million, down 19.6% year-over-year, reflecting challenges in the product portfolio and reduced marketing investments [11][12] - Gross profit margin was 59.9%, down 93 basis points year-over-year but up 82 basis points from Q2 [12] - Adjusted EBITDA was $13.3 million, down $14.4 million from the previous year, driven by lower net sales and gross profit margin compression [14] - Full-year net sales are now expected to be approximately $1.4 billion, with an adjusted EBITDA of approximately $70 million and negative free cash flow of approximately $50 million [15] Business Line Data and Key Metrics Changes - Significant reductions in operating expenses, excluding restructuring and non-recurring costs, by $115 million since the beginning of 2023, with expectations to exceed the $130 million cost-out target [9][10] - Operating expenses for Q3 were $204 million, an 18% decline from 2024 [12] Market Data and Key Metrics Changes - The competitive environment became more aggressive during the Labor Day period, impacting top-line performance [5][9] - Marketing efficiency improved, with cost per acquisition declining 6% versus the prior year, but traffic to stores and the website needs to increase [12] Company Strategy and Development Direction - The company is focused on a comprehensive turnaround strategy, including cost reductions, product evolution, and marketing efficiency improvements [3][9] - Plans to revamp the product offering to better serve consumer priorities of comfort, durability, and total value, with new product initiatives expected to launch in early 2026 [16][48] - The company is exploring new distribution channels, including partnerships and digital expansion, while optimizing its store footprint [6][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledges current performance is below expectations but remains confident in the actions being taken to stabilize demand trends [15] - The company anticipates that the competitive environment will remain intense, but it is prepared to invest in marketing to drive future growth [39][40] Other Important Information - The company secured an amendment and extension of its bank agreement through 2027, providing financial flexibility to focus on growth initiatives [4][10] - Total marketing spend in 2026 is expected to be slightly up compared to 2025, while still reducing operating expenses [7] Q&A Session Summary Question: What is the cash part of the restructuring for all of 2025? - The cash charges include contract termination costs and employee severance costs, with guidance not provided for 2026 [19][20] Question: What are the biggest strategic changes to improve sales? - The company is focusing on refining its product offering and improving marketing efficiency to drive traffic and conversion [39][40] Question: What is the timing for new product introductions? - New products are expected to be introduced in early 2026, focusing on providing value at accessible price points while maintaining premium quality [48][63] Question: How did the competitive advertising impact sales? - The company experienced a 32% decrease in media spend, which limited its ability to compete effectively during high-demand periods like Labor Day [39][66] Question: What is the new debt structure and interest rate? - The new debt agreement includes scaled covenants and adjusted interest rates, details of which will be available in the 8-K filing [69]

Core Viewpoint - Sleep Number (SNBR) reported quarterly earnings of $0.07 per share, missing the Zacks Consensus Estimate of $0.15 per share, and compared to a loss of $0.14 per share a year ago, indicating a significant earnings surprise of -53.33% [1] Financial Performance - The company posted revenues of $342.88 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 6.28%, and down from $426.62 million in the same quarter last year [2] - Over the last four quarters, Sleep Number has surpassed consensus EPS estimates only once [2] Stock Performance - Sleep Number shares have declined approximately 63.9% since the beginning of the year, contrasting with the S&P 500's gain of 15.1% [3] Future Outlook - The company's earnings outlook will be crucial for investors, particularly in light of recent earnings expectations and revisions [4] - The current consensus EPS estimate for the upcoming quarter is $0.10 on revenues of $352.8 million, while for the current fiscal year, it is projected at -$1.22 on revenues of $1.44 billion [7] Industry Context - The Furniture industry, to which Sleep Number belongs, is currently ranked in the top 41% of over 250 Zacks industries, suggesting that the industry outlook can significantly impact stock performance [8]

Core Insights - Sleep Number Corporation will participate in investor conferences on December 8 and 9, 2025, at the Raymond James TMT and Consumer Conference [1] - The company will also host virtual small group and individual meetings with institutional investors on December 12, 2025 [1] Company Participation - CEO Linda Findley and interim CFO Bob Ryder will represent the company at the upcoming investor conferences [1] - The participation includes a panel discussion and direct engagement with institutional investors [1]

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]