Select Comfort, maker of Sleep Number bed, announces first-quarter 2012 results

SOURCE: Select Comfort Corp.

Media Contact:
Gabby Nelson, 763-551-7460
gabby.nelson@selectcomfort.com

  • Reports Record Comparable-sales Growth of 34 Percent and Record Net Sales of $262 Million
  • Achieves 13th Consecutive Quarter of Double-digit Year-over-year Operating Income Growth
  • Reports First-quarter Earnings per Diluted Share of $0.39 on a GAAP Basis – $0.45 on an Adjusted Basis, a 50 Percent Year-over-year Increase

MINNEAPOLIS, Apr 18, 2012 (BUSINESS WIRE) –Select Comfort Corporation (NASDAQ: SCSS) today reported first-quarter results for the period ended March 31, 2012. Net sales for the quarter increased 36 percent to $262 million, compared to $193 million in the first quarter of 2011, driven by company-controlled comparable sales growth of 34 percent – a quarterly record. The company reported first-quarter GAAP earnings per diluted share of $0.39. Excluding a $5.6 million non-recurring, non-cash charge associated with the June 1, 2012 chief executive officer (CEO) transition, first-quarter adjusted earnings per diluted share was $0.45, a 50 percent increase versus $0.30 per diluted share in the first quarter of 2011.

“We’re extremely pleased with our first-quarter performance because it demonstrates the continued success of our strategy as we build on strong results from the prior year,” said Bill McLaughlin, president and CEO, Select Comfort. “And the critical elements are in place for future success, including a proven growth formula, resources for sustained investment, and an experienced, talented leadership team that will enable the company to achieve its full potential.”

Shelly Ibach, chief operating officer and incoming president and CEO, Select Comfort, stated, “Our record comparable-sales increase in the quarter reflects the strength of our customer-focused growth strategy. We continue to invest in broadening awareness for the differentiated Sleep Number brand and leveraging our position as a national retailer with exclusive, company-controlled distribution. As we look ahead, we are confident in our ability to continue generating earnings-per-share growth of at least 20 percent per year for the foreseeable future.”

First-quarter Summary
In the first quarter, net sales increased by 36 percent as compared to the prior-year period. The increase in sales was driven by company-controlled comparable sales growth of 34 percent, with average retail sales-per-store during the past 12 months reaching a record $1.9 million.

Operating income for the first quarter was $34.3 million. Excluding the $5.6 million non-recurring charge, adjusted operating income was $39.9 million, and adjusted operating margin during the quarter improved 150 basis points from 13.7 percent in 2011 to 15.2 percent in 2012. This operating margin growth on an adjusted basis was driven by a 280 basis-point improvement in selling expenses and a 160 basis-point improvement in general and administrative expenses, partially offset by planned deleverage of marketing expenses of 170 basis points and a 120 basis-point decrease in gross-profit margin.

Gross-profit margin in the first quarter of 2012 was 62.6 percent of net sales, compared with 63.8 percent in the prior-year period. The decrease reflects the strength of consumer response during key promotional events and changes in product mix, partially offset by pricing increases taken during the past year.

Sales and marketing costs were $106.2 million in the first quarter, or 40.5 percent of net sales. This compares to $80.3 million, or 41.6 percent of net sales in the prior-year period, reflecting continued leverage from the company’s sales growth. Media spending during the quarter was $35 million, a 48 percent increase versus the prior-year period.

General and administrative expenses were $16.9 million in the first quarter, or 6.5 percent of net sales. This compares to $15.6 million, or 8.1 percent of net sales, during the same period last year, again reflecting continued leverage of the company’s fixed-cost base.

Cash flows from operating activities were $45 million in the first quarter compared to $32 million in the prior year. Capital expenditures increased to $9.3 million as compared to $2.7 million in 2011, driven by increased investment in stores and information systems. As of the end of the quarter, cash, cash equivalents and marketable-debt securities totaled $181 million, and the company had no borrowings under its revolving credit agreement.

Fiscal 2012 Outlook
The company anticipates 2012 GAAP earnings per diluted share, including the $5.6 million non-recurring charge, to be within the previously communicated range of between $1.32 and $1.40, a 23 to 31 percent increase versus prior year. Excluding the charge, this represents an increase in non-GAAP guidance to between $1.38 and $1.46, a 29 to 36 percent increase versus prior year. This outlook continues to assume company-controlled comparable sales growth of at least 15 percent and a net increase in store count from 381 at year-end 2011 to between 400 and 410 by year-end 2012. It also continues to assume a year-over-year increase in operating margin of at least 100 basis points.

The company continues to anticipate that 2012 capital expenditures will be approximately $50 million, reflecting new stores, repositioned stores and remodels, along with continued investment in customer-management systems. While the company had no share repurchases during the quarter, it reiterates its plans to initiate share repurchases in 2012, with the objective to maintain share count.

Conference Call
Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. EDT (4 p.m. CDT; 2 p.m. PDT) today. To listen to the call, please dial (800) 593-9959 (international participants dial (517) 308-9340) and reference the passcode “Sleep.” To access the webcast, please visit the investor relations area of the Sleep Number website at http://www.sleepnumber.com/eng/aboutus/InvestorRelations.cfm. The webcast replay will remain available in the investor relations area of the company’s website for approximately 60 days.

About Select Comfort Corporation
Select Comfort Corporation (NASDAQ: SCSS) is leading the industry in setting a new standard in sleep by offering consumers high-quality, innovative and individualized sleep solutions, which include a complete line of SLEEP NUMBER(R) beds and bedding. The company is the exclusive manufacturer, retailer and servicer of the revolutionary Sleep Number bed, which allows individuals to adjust the firmness and support of each side at the touch of a button. The company offers further personalization through its solutions-focused line of Sleep Number pillows, sheets and other bedding products. And as the only national specialty-mattress retailer, consumers can take advantage of an enhanced mattress-buying experience at one of the approximately 380 Sleep Number stores across the country, online at sleepnumber.com or via phone at (800) Sleep Number or (800) 753-3768.

Forward-looking Statements
Statements used in this news release relating to future plans, events, financial results or performance are forward-looking statements subject to certain risks and uncertainties including, among others, such factors as general and industry economic trends; consumer confidence; the effectiveness of the company’s marketing messages; the efficiency of its advertising and promotional efforts; consumer acceptance of its products, product quality, innovation and brand image; availability of attractive and cost-effective consumer credit options; execution of the company’s retail store distribution strategy; the company’s dependence on significant suppliers, and its ability to maintain relationships with key suppliers, including several sole-source suppliers; the vulnerability of key suppliers to recessionary pressures, labor negotiations, liquidity concerns or other factors; rising commodity costs and other inflationary pressures; industry competition; the company’s ability to continue to improve its product line; warranty expenses; risks of pending and potentially unforeseen litigation; increasing government regulations, which have added or will add cost pressures and process changes to ensure compliance; the adequacy of the company’s management information systems to meet the evolving needs of its business and evolving regulatory standards applicable to data privacy and security; the company’s ability to attract and retain senior leadership and other key employees, including qualified sales professionals; and uncertainties arising from global events, such as terrorist attacks or a pandemic outbreak, or the threat of such events. Additional information concerning these and other risks and uncertainties is contained in the company’s filings with the Securities and Exchange Commission (SEC), including the Annual Report on Form 10-K, and other periodic reports filed with the SEC. The company has no obligation to publicly update or revise any of the forward-looking statements in this news release.

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