Sleep Number Corporation Reports Second Quarter 2025 Results

July 30, 2025  by Karen Parrish in Business Strategy, Industry   

Linda Findley, president and CEO, commented, “Sleep Number is in a turnaround. I joined because it is fundamentally a great company, and I continue to believe that. In my first 100 days, the new leadership team has been focused on digging into our product and consumer proposition. It is clear Sleep Number has a strong brand and differentiated products. We are building on these core strengths with plans to return to profitable growth by starting to implement initiatives focused on enhancing our product assortment, value proposition, and consumer engagement.

"At the start of the second quarter, we aggressively reduced expenses to reset our cost structure and ensure ongoing compliance with our debt covenants. We cut marketing spend dramatically in Q2 because the old marketing strategy was inefficient, and we needed to implement a major reset. We expected the sharp drop in second quarter sales based on these changes. We are rebuilding this program and are already seeing signs that our new, more efficient approach is working. In parallel, we are also working to optimize our product portfolio, value and distribution, with the goal of focusing on the products, price points and benefits that matter most to our customers.

"We are energized by the work ahead and have created the right environment, with the right team, for Sleep Number to thrive. We have proven our ability to manage costs and improve efficiency. Although our topline remains pressured, we expect our actions to drive sequential topline improvement in the coming quarters while we continue to aggressively manage our costs."

Second Quarter Overview (all comparisons year-over-year unless otherwise noted)

Net sales of $328 million were down 19.7%, driven by lower volume and a reduced store count.

Gross profit was $194 million, a decrease of $48 million. Gross profit margin of 59.1% was consistent with the prior year.

Operating expenses were $185 million before restructuring and other non-recurring costs, a decrease of $48 million, or 21%, driven by lower marketing and selling expenses, general and administrative expenses, and research and development expenses.

Net loss was $25 million or $1.09 per diluted share, down $20 million, driven primarily by lower net sales, partially offset by lower operating expenses.

Adjusted EBITDA was $24 million, down 17%, driven by a decline in net sales and associated loss of fixed cost leverage, partially offset by lower operating expenses. Adjusted EBITDA margin improved 30 basis points to 7.2%.

Cash Flows, Liquidity and Balance Sheet Highlights (all comparisons year-over-year unless otherwise noted)

Net cash provided by operating activities was $1.2 million for the quarter, down $22 million.

Free cash flow was a use of $6.9 million for the quarter, down $16 million.

The company's leverage ratio was 4.56x EBITDAR on a trailing 12-month basis at the end of the quarter versus the covenant maximum of 4.75x.

Financial Outlook

The company expects the full year 2025 net sales to be approximately $1.45 billion, representing an approximately 14% year-over-year decline. This percentage change is partly driven by softer year-over-year comparisons and the 53rd week in 2025. Gross profit margin is expected to be 61%, which is consistent with the first quarter of 2025, and full year operating expenses, excluding restructuring and other non-recurring costs, are expected to be approximately $830 million. The company expects break-even free cash flow in the second half of 2025.

Conference Call Information

Management hosted its regularly scheduled conference call to discuss the company’s results at. To access the webcast, please visit the investor relations area of the Sleep Number website at https://ir.sleepnumber.com. The webcast replay will remain available for approximately 60 days.