Minneapolis-based airbed manufacturer and retailer Sleep Number Corp. reported net sales of $388.6 million for the first fiscal quarter of 2018, which ended March 31, a 1% decrease compared with the same period in 2017, which had a 12% growth rate.
The company said that first-quarter 2018 sales were impacted by the ongoing transition to the new line of Sleep Number 360 smart beds.
“We are on track to complete the transition to our revolutionary Sleep Number 360 smart beds by midyear,” said Shelly Ibach, president and chief executive officer of Sleep Number. “Our smart beds differentiate and strengthen our competitive position through measurably better sleep. We expect to benefit from the related growing enthusiasm for our brand and operating efficiencies as we progress our initiatives this year.”
Sleep Number recorded a gross profit of $237.4 million in the first quarter of 2018. The gross profit rate for the quarter was 61.1%, a slight decline from 62.6% in 2017, primarily due to inefficiencies associated with operating two supply chains as Sleep Number transitions to the new smart bed line, the company said. Earnings per diluted share were $0.52, compared with $0.56 in 2017. Return on invested capital was 14.1% for the trailing 12-month period, well above the company’s cost of capital.
During the quarter, Sleep Number generated operating free cash flow of $40 million. The company invested $9 million in capital expenditures, compared with $13 million for the first quarter of 2017. It also increased share repurchases 50% to $75 million for the first quarter, compared with $50 million in the same period of last year.
In its earnings statement, the company reiterated its outlook for 2018 earnings per diluted share of $1.70 to $2. The outlook assumes mid- to high-single-digit sales growth for 2018. The 2018 outlook also assumes an estimated effective income tax rate of 25%. The company anticipates 2018 capital expenditures to be approximately $50 million. The outlook expects a slow-growth economy.