Sleep Number(SNBR) - 2025 Q4 - Annual Results

Financial Performance - Sleep Number reported FY2025 net sales of $1.4 billion, a decrease of 16% year-over-year, primarily due to ongoing industry pressure and lower store traffic [6]. - For Q4 2025, net sales were $347 million, down 8% year-over-year, with a gross profit margin of 55.6%, down from 59.9% in the same period last year [5]. - Adjusted EBITDA for FY2025 was $78 million, a decline of 35%, with an adjusted EBITDA margin of 5.5%, down 160 basis points from the previous year [6]. - Sleep Number's net loss for FY2025 was $132 million, compared to a net loss of $20 million in the previous year [6]. - The company reported a net loss of $131,958,000 for the fifty-three weeks ended January 3, 2026, compared to a net loss of $20,334,000 for the fifty-two weeks ended December 28, 2024 [21]. - Adjusted EBITDA for the trailing twelve months ended January 3, 2026, was $78,255,000, down from $119,579,000 for the trailing twelve months ended December 28, 2024, representing a decline of approximately 34.5% [24]. - Free cash flow for the trailing twelve months ended January 3, 2026, was negative at $(17,690,000), compared to positive free cash flow of $3,638,000 for the trailing twelve months ended December 28, 2024 [26]. Cost Management - The company achieved $185 million in annualized cost savings through operational efficiencies and restructuring efforts [6]. - Operating expenses for FY2025 were $880 million, a decrease of 14% year-over-year, driven by lower marketing, selling, and administrative expenses [6]. - Operating expenses for the three months ended January 3, 2026, were $201,334,000, a decrease from $222,803,000 for the same period in 2024, reflecting a reduction of $19,796,000 [29]. - The company executed proforma annualized cost reductions of $50,000,000, which are expected to impact future financial performance positively [31]. - Sleep Number is implementing an additional $50 million in annualized fixed cost savings in 2026 to further enhance financial resilience [6]. Sales and Inventory - Retail comparable-store sales decreased by 15% for the fourteen weeks ended January 3, 2026, compared to a 9% decrease for the thirteen weeks ended December 28, 2024 [23]. - Average revenue per smart bed unit increased to $6,393 from $5,959 year-over-year, indicating a growth of approximately 7.3% [23]. - The company closed 46 stores over the trailing twelve months, resulting in a total of 600 stores at the end of the period [23]. - The company reported a significant increase in inventory obsolescence write-offs amounting to $9,565,000 for the trailing twelve months ended January 3, 2026, compared to no such write-offs in the previous year [24]. Future Outlook - The company anticipates double-digit adjusted EBITDA growth in 2026 as it continues to execute its turnaround strategy [3]. - The launch of the ComfortMode bed exceeded expectations, selling at 3.5 times the planned rate, contributing to stronger margins than previous models [4]. - The company engaged Guggenheim Securities to evaluate opportunities to improve liquidity and balance sheet flexibility [7]. Balance Sheet - Total current assets decreased to $149,957,000 from $181,284,000, a decline of approximately 17.2% year-over-year [21]. - Total liabilities increased to $1,258,535,000 from $1,312,396,000, reflecting a slight decrease of about 4.1% [21]. - Consolidated funded indebtedness increased to $597,159,000 as of January 3, 2026, compared to $553,988,000 as of December 28, 2024 [31]. - The net leverage ratio under the revolving credit facility improved to 4.1 to 1.0 as of January 3, 2026, from 4.2 to 1.0 in the previous year [31]. Profitability Metrics - Non-GAAP gross profit margin for the three months ended January 3, 2026, was 58.4%, slightly lower than 59.9% in the same period of 2024 [29]. - Adjusted net operating profit after taxes (Adjusted NOPAT) for the trailing twelve months ended January 3, 2026, was $(17,751,000), compared to $37,740,000 for the same period in 2024 [34]. - Average adjusted invested capital decreased to $439,902,000 for the trailing twelve months ended January 3, 2026, from $497,972,000 in the previous year [34]. - Adjusted ROIC for the trailing twelve months ended January 3, 2026, was (4.0%), a decline from 7.6% in the prior year [34].