Sleep Number Reports Financial Results for Third Quarter

November 5, 2025  by Karen Parrish in Business Strategy, Industry   

Linda Findley, president and CEO, commented, “We have successfully executed an amendment and extension of our bank agreement through 2027, giving us greater flexibility to further our turnaround plans. With this new agreement, combined with meaningful fixed cost reductions achieved in 2025, we will invest in growth in 2026. To drive consumer demand, we are making strategic shifts in three key areas: product, brand positioning and distribution.”

"My learnings thus far make me incredibly optimistic about Sleep Number’s future and the ability to create significant shareholder value in the coming years. To be clear, this is a full turnaround of an inherently great company. I came to Sleep Number because I saw huge potential, and I remain excited about what is ahead. As in many situations like this, there were more challenges than I expected, which required us to move extremely fast to fix the business. The pace of our work, along with constraints imposed by our capital structure, has made the first six months difficult. However, we have accomplished a lot and are optimistic that this work positions us to execute the turnaround in 2026."

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

- Net sales of $343 million were down 19.6%, driven by lower volume and a reduced store count.

- Gross profit was $205 million, a decrease of $54 million. Gross profit margin of 59.9% compared to 60.8% for the same period last year.

- Operating expenses were $204 million before restructuring and other non-recurring costs, a decrease of $45 million, or 18%, driven by lower marketing and selling expenses, general and administrative expenses, and research and development expenses.

- Restructuring and other non-recurring costs in the quarter were $41 million, driven by severance and employee-related benefits, contract termination costs, and asset impairment charges.

- Net loss was $40 million or $1.73 per diluted share, down $37 million, driven primarily by lower net sales, partially offset by lower operating expenses.

- Adjusted EBITDA was $13 million, down $14 million or 52%, driven by a decline in net sales and associated loss of fixed cost leverage, partially offset by lower operating expenses. Adjusted EBITDA margin decreased 260 basis points to 3.9%.

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

- Net cash used in year-to-date operating activities was $5 million, down $56 million.

- Year-to-date Free cash flow was a use of $17.0 million, down $51 million.

- The Company's leverage ratio was 5.0x EBITDAR on a trailing 12-month basis at the end of the quarter versus the amended covenant maximum of 5.25x.

Financial Outlook

- Amended and extended bank agreement provides flexibility of covenants to enable business turnaround. Refer to 8-K, filed concurrent with this press release, for additional information.

- Given the pressures on the business, the company is revising its outlook for 2025. The company now expects the full year 2025 net sales to be approximately $1.4 billion and gross profit margin to be approximately 60%. With incremental cost reductions, operating expenses, excluding restructuring and other non-recurring costs, are expected to be approximately $825 million. The company now expects adjusted EBITDA to be approximately $70M and negative free cash flow of approximately $50 million in 2025.

Conference Call Information

Management hosted its regularly scheduled conference call to discuss the company’s results on Nov. 5. To access the webcast, 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.