Select Comfort Reports 31% 4Q Sales Decrease
March 20, 2009
Bedding retailer Select Comfort Corp. (NASDAQ: SCSS) reported on Thursday that fourth-quarter 2008 sales fell 31 percent to $131.1 million from the same period last year; and lost $57.4 million, compared with net income of $2.2 million during fourth-quarter 2007.
For the full year of 2008, the Minneapolis-based bedding retailer and creator of the Sleep Number bed lost $70.2 million after sales fell 24 percent from the prior year to $608.5 million. Select Comfort had net income of $27.6 million in 2007.
During the fourth quarter, retail sales declined 25 percent, driven by a 29 percent decline in same-store sales, with a net reduction of seven stores during the past 12 months. During the fourth quarter, the company closed five stores. Fourth quarter e-commerce and direct-marketing sales were lower, with revenues in these channels declining 41 percent and 37 percent, respectively. Wholesale sales declined 61 percent in the period.
Fourth quarter results include $58.9 million in charges, including $32.1 million in asset impairments for stores and information systems, and a $26.8 million charge for the establishment of a deferred tax valuation allowance.
"2008 was a difficult year for the entire bedding industry, including Select Comfort. Economic conditions deteriorated steadily as the year progressed, and consumer sentiment weakened further in the fourth quarter," said Bill McLaughlin, president and CEO, Select Comfort Cor. "Despite this, we achieved positive operating cash flow for the year as a result of proactive and aggressive cost-reduction actions, and we expect significant improvement in earnings for the first quarter of 2009."
McLaughlin said the company is focused on three key priorities in response to the current economic challenges:
Reducing costs to more closely align them with near-term sales trends; re-igniting the Sleep Number brand and enhancing its relevance to consumers seeking greater value; and preserving cash and working to increase financial flexibility.
"During the fourth quarter, we implemented a series of initiatives to reduce fixed and variable costs, maintain margins and improve sales consistency," he said. "These initiatives, which are continuing in the first quarter of 2009, are expected to deliver approximately $80 million in cost savings in 2009. We also have shifted marketing and promotional activities to focus more on affordable entry-level products and have seen an improvement in sales trends during the first quarter of 2009. We anticipate that challenging conditions will persist throughout the year, but believe the cost actions we have taken, and continue to take, should allow us to generate year-over-year improvement in earnings and positive cash flow in 2009."
For the full year of 2008, the Minneapolis-based bedding retailer and creator of the Sleep Number bed lost $70.2 million after sales fell 24 percent from the prior year to $608.5 million. Select Comfort had net income of $27.6 million in 2007.
During the fourth quarter, retail sales declined 25 percent, driven by a 29 percent decline in same-store sales, with a net reduction of seven stores during the past 12 months. During the fourth quarter, the company closed five stores. Fourth quarter e-commerce and direct-marketing sales were lower, with revenues in these channels declining 41 percent and 37 percent, respectively. Wholesale sales declined 61 percent in the period.
Fourth quarter results include $58.9 million in charges, including $32.1 million in asset impairments for stores and information systems, and a $26.8 million charge for the establishment of a deferred tax valuation allowance.
"2008 was a difficult year for the entire bedding industry, including Select Comfort. Economic conditions deteriorated steadily as the year progressed, and consumer sentiment weakened further in the fourth quarter," said Bill McLaughlin, president and CEO, Select Comfort Cor. "Despite this, we achieved positive operating cash flow for the year as a result of proactive and aggressive cost-reduction actions, and we expect significant improvement in earnings for the first quarter of 2009."
McLaughlin said the company is focused on three key priorities in response to the current economic challenges:
Reducing costs to more closely align them with near-term sales trends; re-igniting the Sleep Number brand and enhancing its relevance to consumers seeking greater value; and preserving cash and working to increase financial flexibility.
"During the fourth quarter, we implemented a series of initiatives to reduce fixed and variable costs, maintain margins and improve sales consistency," he said. "These initiatives, which are continuing in the first quarter of 2009, are expected to deliver approximately $80 million in cost savings in 2009. We also have shifted marketing and promotional activities to focus more on affordable entry-level products and have seen an improvement in sales trends during the first quarter of 2009. We anticipate that challenging conditions will persist throughout the year, but believe the cost actions we have taken, and continue to take, should allow us to generate year-over-year improvement in earnings and positive cash flow in 2009."
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