Sleep Number Q4 Sales Edge Up, Gross Margin Falls

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Hampered by weak consumer demand and difficulty obtaining semiconductor chips for its technology-laden beds, vertically integrated Sleep Number recorded a fourth-quarter net loss of $5.43 million, or 24 cents per share.

That compares with a profit of $11.1 million, or 47 cents per share, in the fourth quarter of 2021.

Sales in the most recent quarter edged up edged up 1% to $497.5 million, but gross margin fell to 54.7% from 56.9% in the fourth quarter of 2021.

For the 2022 calendar year, sales fell 3% to $2.11 billion. The company said demand declined 13% versus the prior year, but that was partially offset by the delivery of excess backlog. Full-year gross margin fell to 56.9% from 60.4% in 2021 due to cost increases in raw materials and inefficiencies from semiconductor chip deliveries.

Full-year earnings totaled $36.6 million, or $1.60 per share. That was well below 2021 earnings of $153.7 million, or $6.16 per share.

“As we navigated a series of significant macro challenges in 2022, we achieved important strategic advancements that strengthen our sleep technology leadership. These advancements will position Sleep Number to capitalize on profitable growth opportunities when the consumer environment improves,” said Shelly Ibach, chair, president and CEO. “Consumer response to our best innovation to date — the new Climate360 smart bed — has been strong, and we are excited to introduce our next-generation smart beds beginning in the second quarter.”

Ibach said demand trends are improving in early 2023 “with the consistent flow of microchips supporting normalized delivery times for our smart beds and adjustable bases.”

For 2023, Sleep Number is projecting sales will be flat to down in the mid-single digits compared with 2022. Earnings per share are projected at $1.25 to $2.

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