Minneapolis-based airbed manufacturer and retailer Sleep Number Corp. beat Wall Street analysts’ expectations on both sales and income in the second quarter of fiscal 2018.
After a loss in the prior-year quarter, net sales increased 11% to $316.3 million and net income swung into positive numbers, topping $3.7 million. Comparable sales for the latest quarter were up 9%, although second-quarter 2017 sales were impacted by an inventory shortage that shifted about $25 million in sales to the third quarter.
“We are excited to provide proven quality sleep to our customers with our Sleep Number 360 smart beds,” said Shelly Ibach, president and chief executive officer. “With our transition (to the new smart bed) now complete, we expect performance acceleration from our new marketing campaign, differentiated retail experience and operating improvements.”
Select Comfort’s operating income in the second quarter increased to $2.08 million, compared with a net operating loss of $3.06 million in the same period of 2017. The current quarter included 230 basis points of gross margin pressure and 400 basis points of operating expense leverage, compared with the same period of 2017.
Earnings per diluted share were $0.10, including a one-time tax planning benefit of $0.08 associated with the 2017 Tax Cuts and Jobs Act. That compares with an earnings-per-share loss of $0.02 for the prior year’s quarter.
The company ended the quarter with a $120 million liquidity cushion against its credit facility, compared with $138 million at the end of the prior year’s second quarter, excluding $3 million letters of credit in both years. It opened 11 stores and closed four, bringing the store total to 565.
Return on invested capital was 14.3% for the trailing 12-month period, “well above our cost of capital,” the company said.
Sleep Number reiterated its outlook for 2018 earnings per diluted share of $1.70 to $2. The outlook for the second half of 2018 assumes mid-single-digit sales growth and an estimated effective income tax rate of 25%. The company anticipates 2018 capital expenditures to be approximately $50 million.