Select Comfort Stock Plunges After Co. Warns of Lagging Sales

Select Comfort Stock Plunges After Co. Warns of Lagging Sales

The bed maker said that it has experienced “below-plan” sales since February 1, news that prompted shares of its stock to slide about 17 percent Monday.

Select Comfort Corporation said Monday that it is likely to miss its internal sales goals for the first quarter—news that sent the bed maker’s stock to its lowest level since fall 2011.
 
Plymouth-based Select Comfort, which makes Sleep Number adjustable beds, said that it has experienced “below-plan” sales since February 1.
 
“We believe this is a short-term issue associated with accelerated changes made to our media-buying strategy, and we are making the necessary corrections to both media buying and near-term expenses,” Select Comfort President and CEO Shelly Ibach said in a statement. “We remain confident in our growth formula and are committed to our strategy of delivering an unparalleled sleep experience for our customers.”
 
Shares of Select Comfort’s stock were trading down about 17 percent at $17.07 mid-day Monday on the news and closed at $17.28. That’s the lowest stock price since October 2011. Select Comfort’s stock closed at $20.51 on Friday.
 
The company said that it will discuss its outlook for the remainder of 2013 after it releases its first-quarter financial results on April 17. Select Comfort doesn’t provide quarterly financial guidance and said it won’t reveal additional information about its first-quarter sales or earnings until the scheduled release. Sales for the first quarter of 2012 totaled $262.4 million.
 
In late January, Select Comfort announced that sales for the fourth quarter that ended December 29 increased 16.7 percent to a record $220.6 million, but net income for the period fell 18.7 percent to $12.5 million, or 22 cents per share. (Fourth-quarter 2011 results included a $1.9 million income tax benefit.) Analysts polled by FactSet expected earnings of 32 cents per share and sales totaling $229.8 million.
 
Ibach said at the time that fourth-quarter results were hurt by “a significant sales slow-down the last two weeks of December,” and the company said that earnings during the fourth quarter included expenses related to sales, marketing, and research and development costs.
 
Ibach also said in late January that sales had “quickly normalized” in the first few weeks of 2013 and vowed that Select Comfort would continue to work toward its goal to reach $1.5 billion in sales and 15 percent operating margin by 2015.
 
As of late January, the company expected full-year 2013 earnings to reach between $1.65 and $1.80 per share, representing a 15 to 26 percent increase over the adjusted $1.43 per share that it reported in 2012.
 
In conjunction with Select Comfort’s fourth-quarter earnings announcement, the company revealed that it acquired the business and assets of Greenville, South Carolina-based Comfortaire Corporation—a manufacturer and marketer of “adjustable air-supported sleep systems” and a key competitor—in a $15.5 million deal that closed January 17.
 
For full-year 2012, net sales grew 25.6 percent to a record $935 million. Net income, meanwhile, increased 29.1 percent to $78.1 million. Select Comfort is among Minnesota’s 40-largest public companies based on revenue.