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1. Company Snapshot

1.a. Company Description

Sleep Number Corporation, together with its subsidiaries, offers sleep solutions and services in the United States.The company designs, manufactures, markets, retails, and services beds, pillows, sheets, and other bedding products under the Sleep Number name.It also provides adjustable bases under the FlextFit, and smart beds under the Sleep Number 360 brands.


The company sells its products directly to consumers through retail, online, phone, and chat as well as through its e-commerce activities.As of January 2, 2022, it operated approximately 648 retail stores in 50 states.The company was formerly known as Select Comfort Corporation and changed its name to Sleep Number Corporation in November 2017.


Sleep Number Corporation was founded in 1987 and is headquartered in Minneapolis, Minnesota.

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1.b. Last Insights on SNBR

Deteriorating U.S. consumer confidence poses a significant risk to Sleep Number Corporation's growth prospects. The company's focus on product innovation and technological solutions may not be enough to offset declining consumer confidence. Furthermore, Stadium Capital Management's nomination of four director candidates to Sleep Number's board may indicate underlying governance issues. This could lead to uncertainty and potential disruptions to the company's operations.

1.c. Company Highlights

2. Sleep Number's Turnaround Efforts Underway

Sleep Number reported a disappointing Q3 with net sales of $343 million, down 19.6% year-over-year, and an adjusted EBITDA of $13.3 million. The gross profit margin stood at 59.9%, indicating some resilience in the face of declining sales. The actual EPS came out at $0.07, missing estimates of $0.15. The company's financial performance has been under pressure, but cost-cutting measures have shown some progress, with operating expenses reduced by $115 million since the beginning of the year.

Publication Date: Nov -17

📋 Highlights
  • Q3 Net Sales Decline:: Reported $343 million, down 19.6% YoY, with gross profit margin at 59.9% and adjusted EBITDA of $13.3 million.
  • Cost Reduction Progress:: Achieved $115 million in operating expense cuts since January, surpassing $130 million annual target, with plans for further fixed-cost reductions in 2026.
  • Financial Restructuring:: Secured bank agreement extension through 2027, enabling $50 million negative free cash flow guidance and renewed marketing investment flexibility.
  • 2026 Growth Strategy:: Targets $1.4 billion annual sales, 60% gross margin, and $70 million adjusted EBITDA, focusing on product simplification, efficient marketing, and accessible pricing.
  • Marketing Reset Impact:: Cut media spend 32% YoY in Q2-Q3 but reallocated to efficient channels, planning gradual Q4 spend recovery with a focus on ROI optimization.

Cost Reduction and Operational Efficiency

The company has made significant strides in reducing costs, with a comprehensive plan to stabilize sales and return to growth in 2026. As Linda Findley, President and CEO, noted, new product initiatives will simplify their offering and attract a broader set of customers. The company expects to exceed its $130 million cost-out target, having already reduced headcount to 2017 levels. Further cost reductions are anticipated, particularly in real estate, as they consolidate sales into their highest-performing stores.

Guidance and Outlook

The company expects net sales for the year to be approximately $1.4 billion, with a gross profit margin of around 60%, and adjusted EBITDA of approximately $70 million. They anticipate negative free cash flow of around $50 million. For Q4, Sleep Number expects slightly better sales trends, with media spend slightly down year-over-year. The new debt covenants provide room for the company to reinvest in marketing and operations, and the 53rd week in Q4 will provide a lift on a reported basis.

Valuation and Future Prospects

Analysts estimate next year's revenue growth at -1.3%. The current valuation metrics indicate a challenging outlook, with a P/S Ratio of 0.06 and an EV/EBITDA of -22.76. The ROE stands at 8.03%, while the ROIC is -8.54%. The company's efforts to drive traffic to stores, increase conversion rates, and launch a refreshed product assortment in early 2026 will be crucial in determining its future prospects. With a more efficient marketing stack in place, Sleep Number is poised to test and lean into more effective marketing channels.

3. NewsRoom

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Sleep Number Names Amy O'Keefe as CFO

Dec -02

Source: businesswire.com

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First Look: CME outage, Black Friday shifts, AI job impact

Nov -28

Source: gurufocus.com

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Sleep Number Earns J.D. Power Award, Ranked #1 in Customer Satisfaction with Mattresses Purchased In-Store and Online

Nov -12

Source: businesswire.com

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Sleep Number Corporation (SNBR) Q3 2025 Earnings Call Transcript

Nov -05

Source: seekingalpha.com

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Sleep Number (SNBR) Q3 Earnings: Taking a Look at Key Metrics Versus Estimates

Nov -05

Source: zacks.com

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Sleep Number (SNBR) Lags Q3 Earnings and Revenue Estimates

Nov -05

Source: zacks.com

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Sleep Number Announces Third Quarter 2025 Results

Nov -05

Source: businesswire.com

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Sleep Number to Participate in Upcoming December Investor Conferences

Oct -16

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.40%)

6. Segments

Retail Stores

Expected Growth: 10.4%

Growing demand for personalized sleep solutions, increasing awareness of sleep health, and innovative retail experiences drive Sleep Number's growth, with a forecast CAGR of 10.4%.

Online, Phone,Chat and Other

Expected Growth: 10.4%

Online sales growth driven by increasing e-commerce adoption, Phone sales growth driven by targeted marketing, Chat sales growth driven by improved customer service, and Other sales growth driven by strategic retail partnerships.

7. Detailed Products

Sleep Number 360 Smart Beds

A line of smart beds that adjust to individual comfort preferences, providing optimal support and pressure relief.

Sleep Number Adjustable Bases

Adjustable bed bases that allow for customizable head and foot elevation, massage, and other features.

Sleep Number Mattresses

A range of mattresses designed for comfort, support, and pressure relief, available in various firmness levels.

SleepIQ Technology

A sleep tracking and analytics platform that provides insights into sleep patterns and offers personalized recommendations.

Sleep Number Bedding and Accessories

A range of bedding and accessories designed to enhance the sleep experience, including sheets, pillows, and mattress protectors.

8. Sleep Number Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Sleep Number Corporation faces moderate threat from substitutes, as customers can opt for traditional mattresses or other sleep solutions. However, the company's proprietary Sleep Number 360 smart bed technology and its focus on sleep health and wellness provide a competitive edge.

Bargaining Power Of Customers

Customers have limited bargaining power due to Sleep Number Corporation's strong brand reputation, patented technology, and limited availability of similar products in the market.

Bargaining Power Of Suppliers

Suppliers have limited bargaining power due to Sleep Number Corporation's large scale of operations and its ability to negotiate favorable terms with suppliers.

Threat Of New Entrants

The threat of new entrants is high due to the growing demand for smart mattresses and sleep technology. New companies can enter the market with innovative products, posing a threat to Sleep Number Corporation's market share.

Intensity Of Rivalry

The intensity of rivalry is moderate due to the presence of established players in the mattress industry. However, Sleep Number Corporation's focus on sleep health and wellness, as well as its proprietary technology, helps to differentiate it from competitors.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 183.27%
Debt Cost 5.67%
Equity Weight -83.27%
Equity Cost 14.14%
WACC -1.38%
Leverage -220.09%

11. Quality Control: Sleep Number Corporation passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Lovesac

A-Score: 3.9/10

Value: 8.1

Growth: 7.4

Quality: 4.3

Yield: 0.0

Momentum: 1.5

Volatility: 2.3

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Purple Innovation

A-Score: 3.9/10

Value: 10.0

Growth: 2.6

Quality: 4.6

Yield: 0.0

Momentum: 5.0

Volatility: 1.3

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Aterian

A-Score: 3.8/10

Value: 9.8

Growth: 6.9

Quality: 4.8

Yield: 0.0

Momentum: 0.0

Volatility: 1.3

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Sleep Number

A-Score: 2.7/10

Value: 8.8

Growth: 2.2

Quality: 3.9

Yield: 0.0

Momentum: 0.5

Volatility: 1.0

1-Year Total Return ->

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Traeger

A-Score: 2.7/10

Value: 6.9

Growth: 4.8

Quality: 2.0

Yield: 0.0

Momentum: 0.5

Volatility: 1.7

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iRobot

A-Score: 2.5/10

Value: 9.8

Growth: 1.0

Quality: 4.0

Yield: 0.0

Momentum: 0.0

Volatility: 0.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

6.66$

Current Price

6.66$

Potential

0.00%

Expected Cash-Flows