Select Comfort Reports Year-End Profit

February 7, 2007  by in UnCategorized   

By Home Furnishings Business in Bedding on February 2007 Retail bedding specialist Select Comfort Corp. reported net sales of $198 million for the fourth quarter ended Dec. 30, a 6 percent increase from $187.5 million posted during the same period last year.

In addition, the company reported net income of $10.8 million, a 32 percent decrease compared to the $15.8 million it cleared during the fourth quarter of 2005. Net income in the fourth quarter of 2006 included a $4.2 million asset impairment charge associated with teh company’s decision to adopt a fully integrated SAP Enterprise Resource Planning system to launch in 2008.

Annual net sales increased 17 percent to $806 million, compared to $689.5 million in 2005.

“Despite a challenging fourth quarter, we had a solid year with revenue growth of 17 percent and earnings growth of 23 percent on a like-for-like basis, adjusting 2005 for accounting rule changes related to stock option expense, while absorbing $6 million in asset impairment charges in 2006,” said Bill McLaughlin, Select Comfort chairman and chief executive officer. “This year’s results were in-line with our long-term targets and marked our fifth consecutive year of double-digit revenue and earnings growth.”

The company’s 2006 strategy emphasized distribution expansion. During the fourth quarter, Select Comfort opened 17 net new company-owned stores, increasing total stores at fiscal year-end to 442, compared to 396 stores at year-end 2005. New stores contributed 9 percent toward retail store sales growth, offsetting the 9 percent decline in same-store sales during the fourth quarter. The company’s retail partner program, which includes selected home furnishing retailers and specialty bedding retailers in the United States and Canada, added 95 doors in the fourth quarter, increasing the total to 822 doors at fiscal year-end, compared to 353 doors at year-end 2005.

The company’s long-term growth targets beyond 2007 include net sales growth of 15 percent or more and earnings growth of 20 percent or more.

For 2007, the company expects net sales between $900 million and $925 million and earnings between $1.02 and $1.09 per diluted share.

“Net sales trends are expected to improve throughout the year as growth initiatives and marketing programs take effect,” McLaughlin said. “We are pleased that operating improvements and margin gains are enabling us to sustain the company’s investments in growth and innovation.”

Select Comfort is working with McKinney + Silver, its new creative agency partner, to develop a new advertising and creative campaign that will be tested late in the first quarter. Media spending is forecasted to increase by 10 percent, with improved media productivity expected to gain operating leverage.

The company expects to open approximately a net of 40 new stores, relocate or expand 30 or more stores and expand its new store design test, growing its retail presence by approximately 9 percent.

The number of retail partner doors is expected to remain essentially unchanged for the year.