Airbed maker Select Comfort reported that net sales for its fiscal third quarter increased 25% to $200 million, compared with $160 million in the third quarter of 2010. The Minneapolis-based company attributed the increase to company-controlled comparable sales growth of 26% and retail comparable sales growth of 29% over the prior-year period.
Select Comfort reported net income of $17.2 million in the third quarter, a 64% increase over the $10.5 million recorded during the same period in 2010.
Operating income of $26.5 million and an operating profit margin of 13.3% each represented the best third-quarter performance in company history and resulted in earnings per diluted share of $0.31, a 63% improvement versus the prior-year period.
Gross profit margins in the third quarter of 2011 increased 50 basis points to 63% of net sales, compared with 62.5% in the prior-year period. The company attributed the increase to manufacturing efficiencies and pricing actions, partially offset by $1.6 million of additional customer service reserves during the quarter.
“Our outstanding performance in the third quarter further demonstrates the strength of our unique product, our advantaged business model and the success our strategic initiatives are having in driving profitable growth and increased share,” said Bill McLaughlin, Select Comfort president and chief executive officer. “We’re especially pleased with the quality and sustainability of our earnings, driven by continued double-digit revenue growth and record operating margins.”
Sales and marketing costs in the third quarter increased by 23% to $83.9 million, representing 42.1% of net sales. This compares with $68.3 million, or 42.6% of net sales in the prior-year period. Media investments in the third quarter totaled $24 million, 38% higher than a year ago.
Cash flows from operating activities were $75 million for the first nine months of 2011 compared with $71 million a year ago. Capital expenditures for the first nine months of 2011 increased to $14.5 million, compared with $3.5 million during the same time period last year.
They were driven by increased investment in stores and information systems. At the end of the quarter, cash, cash equivalents and marketable debt securities totaled $136 million and the company had no borrowings under its revolving credit agreement.
“Given our low brand awareness and under-penetrated distribution in major markets, we believe we are still early in our growth curve,” McLaughlin said. “Our plan calls for continued share and earnings growth, fueled by a sustained focus on executing our proven, consumer-driven product, marketing and distribution initiatives.”
