CEO Shelly Ibach to retire in 2025.
Specialty bedding manufacturer and retailer Sleep Number Corp. said third-quarter sales fell 9.7% to $426.6 million and its net loss widened to $3.14 million amid continued weak demand.
However, the Minneapolis-based company said its gross margin of 60.8% was the highest since the third quarter of 2021, due largely to a restructuring plan that reduced operating expenses by $17 million.
“Our actions throughout the business over the past year are driving sustainable operating model improvements and contributing to our increased financial flexibility and durability,” said Shelly Ibach, chair, president and CEO. “Our initiatives drove broad cost efficiencies and a gross margin rate improvement … resulting in third quarter adjusted EBITDA of $28 million, which was in line with expectations even with persistent consumer demand weakness.”
The net loss of $3.14 million, or 14 cents per share, was greater than last year’s third quarter loss of $2.32 million or 10 cents per share.
Comparable-store sales at Sleep Number’s company-owned retail stores, which account for nearly 90% of overall sales, fell 7% in the third quarter and were down 9% for the first nine months of 2024.
The company ended the quarter with 643 retail stores, having closed 40 locations and opened 11 since the beginning of the year.
For the first nine months of 2024, sales fell 10.7% to $1.31 billion. The nine-month net loss totaled $15.67 million, or 69 cents per share, a figure that included $14.39 million in restructuring costs. In the first nine months of 2023, the company recorded a profit of $9.9 million, or 44 cents per share.
Sleep Number said it expects sales to fall about 10% for the full year, and said it is projecting adjusted earnings before interest, taxes, depreciation and amortization of $115 million to $125 million. That’s down from a July projection of $125 million to $145 million.
Separately, Sleep Number said Ibach plans to retire no later than the company’s annual shareholders meeting next spring and will not stand for re-election to the board of directors.
Ibach has been with the company for 18 years and CEO for the past 12 years. She spearheaded a multi-year transformation of the company from Select Comfort, a specialty mattress retailer with $743 million in annual sales, to Sleep Number, a sleep wellness brand with more than $1.9 billion in sales in 2023.
“Shelly transformed the company by consistently demonstrating visionary, results-oriented leadership and driving significant business innovation. Her authenticity has inspired the commitment of the entire Sleep Number team to its purpose: to improve the health and well-being of society through higher quality sleep,” said Michael Harrison, the independent lead director on Sleep Number’s board. “Shelly’s passion for Sleep Number’s bold vision, combined with her courage, ingenuity, and resolve, have propelled the company’s strategic differentiation and growth in a highly commoditized market, earning Shelly and the company well-deserved recognition.”
The board has hired an independent executive search firm to help identify Ibach’s CEO successor. To support an effective transition, Ibach will continue to serve as chair through the conclusion of the 2025 annual meeting and has agreed to serve as a strategic adviser to the new CEO and board through the end of 2025.