Select Comfort dials up surprising profit growth

  • Article by: STEVE ALEXANDER , Star Tribune
  • Updated: February 8, 2012 - 8:20 PM

The mattress maker beat fourth-quarter expectations.

Specialty mattress maker Select Comfort Corp. beat fourth-quarter earnings expectations by 5 cents a share Wednesday, and attributed much of the gain to national advertising that raised awareness of its Sleep Number product.

The company earned $15.4 million, or 27 cents a share, in the fourth quarter, on revenue of $189.1 million. Analysts had been expecting 22 cents a share on revenue of $178.4 million. A year ago, the firm earned $7.1 million, or 13 cents a share, on revenue of $148.7 million.

"We're entering a new chapter of sustained profitable growth," CEO Bill McLaughlin told analysts on a conference call.

For the year, the company earned $60.5 million, or $1.07 per share, on revenue of $743.2 million. A year ago, the firm earned $31.6 million, or 57 cents a share, on revenue of $605.7 million.

The gains were made partly on the strength of a national advertising campaign to raise awareness of the company's products, combined with the fact that it has relatively low market share of 5 percent in the $12 billion U.S. bedding industry, said Joan Storms, an analyst with Wedbush Securities in Los Angeles.

The company also benefited from a better mix of mall-based stores and locations outside of malls, Storms said. The company said it now has 381 stores, but expects to have 400 to 410 by the end of the year.

Select Comfort also boosted earnings by having what many consider a technological lead in the specialty part of the mattress market, Storms said.

"The vast majority of bedding sales are for spring mattresses, which are considered old technology," Storms said. "Select Comfort is ahead in the specialty segment of the bedding market, which uses foam and air support."

Select Comfort said it expects to earn about $1.32 to $1.40 per share in 2012. Storms, who raised her rating on the stock to outperform from neutral this week, had been expecting a slightly lower earnings range of $1.25 to $1.36 for the year.

Steve Alexander • 612-673-4553

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