|Select Comfort’s third quarter|
|Net sales||$247 million|
|Net income||$26.2 million|
|Gross profit margin||65.1%|
|Operating profit margin||16.3%|
Airbed manufacturer and retailer Select Comfort reported net sales for its fiscal third quarter increased 24% to $247 million, compared with $200 million in the third quarter of 2011. The Minneapolis-based company attributed the increase to 21% sales growth at its company-controlled stores.
Net income for the third quarter was $26.2 million, a 52% increase over the prior-year quarter.
Setting new quarterly records for the company, operating income was $40.2 million and operating profit margin was 16.3%. Earnings per diluted share were a record-breaking $0.46, a 48% increase compared with $0.31 per diluted share in the third quarter of 2011.
Gross profit margin in the third quarter increased 210 basis points to 65.1% of net sales, compared with 63% in the prior-year period. The company attributed the increase to improvements in pricing and mix associated with new product innovation, partially offset by $1.6 million of additional customer service reserves during the quarter.
“Customers continue to enthusiastically respond to the Sleep Number brand experience, including our proprietary products and exclusive store experience, which drove record third-quarter sales,” said Shelly Ibach, Select Comfort president and chief executive officer. “And the strength of our business model resulted in record operating margin, as well as record earnings per share.”
Sales and marketing costs in the third quarter increased 21% to $101.7, representing 41.2% of net sales. This compares to $83.9 million, or 42.1% of net sales in the prior-year period. Media spending was $32 million, a 33% increase when compared with the third quarter of 2011.
Cash flows from operating activities were $98 million for the first nine months of 2012, compared with $75 million a year ago. Capital expenditures for the first nine months of 2012 increased to $37 million, compared with $14 million during the same 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 $193 million, and the company had no borrowings under its revolving credit facility.
During the third quarter, the company returned $10 million to shareholders through the repurchase of 0.4 million shares of its common stock, bringing total share repurchases to $20 million, or 0.8 million shares.
Select Comfort raised its outlook for 2012 earnings per diluted share from between $1.35 and $1.41 to between $1.45 and $1.47, a 36% to 37% increase versus the prior year. The outlook assumes total sales growth during the fourth quarter of at least 20%.