Daily News
From Home Furnishing Business
Sleep Number Reports Third Quarter Financial Results
October 30,
2024 by Karen Parrish in Business Strategy, Industry 
“Our actions throughout the business over the past year are driving sustainable operating model improvements and contributing to our increased financial flexibility and durability. Our initiatives drove broad cost efficiencies and a gross margin rate improvement to 60.8%, resulting in third quarter adjusted EBITDA of $28 million, which was in-line with expectations even with persistent consumer demand weakness,” said Shelly Ibach, Chair, president and CEO.
“At the same time, we continue to leverage our innovation superiority to provide customers with life-changing sleep solutions, like our new ClimateCool™ smart bed.”
“Throughout my tenure, I have been inspired by our team’s commitment to our purpose, beloved brand, and pioneering smart beds that deliver proven quality sleep,” added Ibach. “As I transition to retirement, our talented team and strong competitive advantages, combined with our increased financial resilience, give me confidence in Sleep Number’s continued market leadership and its ability to accelerate profitable growth and value creation for all stakeholders when industry demand recovers.”
Third Quarter Overview
- Net sales of $427 million were down 10% versus the prior year, including approximately two percentage points of pressure from year-over-year order backlog changes and one-point of pressure from lower store count versus the prior year
- Gross margin of 60.8% was up 340 basis points versus the prior year, driven by year-over-year product cost reductions through value engineering and ongoing supplier negotiations, favorable product mix, and efficiency gains in our home delivery and logistics operations
- Operating expenses of $249 million (before restructuring charges) were down $17 million versus the prior year’s third quarter, with year-to-date operating expenses down $60 million (before restructuring charges)
- Adjusted EBITDA of $28 million was up 11% compared to the prior year, with an adjusted EBITDA margin of 6.5%, up 120 bp versus the prior year
Cash Flow Review
- Net cash provided by operating activities of $51 million for the first nine months of the year, up $19 million, or 60%, versus the same period last year
- Free cash flow of $34 million for the first nine months of the year, up $50 million versus the same period last year
- Leverage ratio of 4.2x EBITDAR at the end of the third quarter versus covenant maximum of 5.0x for the quarter
Financial Outlook
With ongoing weakness in the bedding industry, the company has updated its full-year 2024 adjusted EBITDA outlook to a revised range of $115 million to $125 million. The company expects 2024 full-year net sales to be down approximately 10%, consistent with year-to-date net sales performance. The company’s outlook includes at least 150 basis points of gross margin rate improvement for the year. The company expects to generate $10 million to $20 million of free cash flow for the year with capital expenditures of approximately $25 million.
Conference Call Information
The webcast replay will remain available for approximately 60 days. We have also posted an updated investor presentation to the investor relations area of the Sleep Number website.