New CEO inherits reawakened Select Comfort

  • Article by: SUSAN FEYDER , Star Tribune
  • Updated: May 30, 2012 - 10:04 PM

Select Comfort's William McLaughlin handed over to Shelly Ibach.

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Incoming CEO Shelly Ibach will take over a company that posted its 13th consecutive quarterly profit.

Photo: Bruce Bisping, Star Tribune

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Saying it's "an opportune time for a transition," William McLaughlin handed the reins at Select Comfort Corp. to his successor at the company's annual meeting Wednesday.

"We have the strategies in place," McLaughlin told stockholders. "Our leadership team is well-prepared."

McLaughlin officially retires as president and CEO Friday and will be succeeded by Chief Operating Officer Shelly Ibach, a veteran of Target Corp., Marshall Field's and Macy's, who joined Select Comfort in 2007.

The company Ibach will lead is worlds apart from the one McLaughlin joined in 2000. Sales growth had slowed, and the company was struggling with profitability and consumer awareness of its adjustable-firmness air beds.

Last month, Select Comfort posted its 13th consecutive quarterly profit. In 2011, the company earned more than $60 million on sales of $743 million, up from just $278 million in 2000.

Select Comfort has set goals of more than doubling its sales to $1.5 billion and boosting its operating margin to 15 percent by 2015.

McLaughlin is credited with reviving sales growth by helping create and launch the marketing concept of the Sleep Number -- a number corresponding to the ideal firmness of a bed based on a person's size, body shape and preferred sleeping position.

"Bill understood the power of the brand, something that could convey the unique quality of the company's products," said Scott Link, a portfolio manager at Disciplined Growth Investors Inc. The Minneapolis investment firm is the largest stockholder in Select Comfort with a 5.4 percent stake.

Ibach has gotten more mileage out of the marketing strategy McLaughlin launched by renaming Select Comfort stores Sleep Number stores, said Peter Keith, an analyst at Piper Jaffray & Co. in New York. "I give her a lot of credit for implanting the Sleep Number name in people's minds and eliminating customers' confusion," he said.

Speaking to stockholders at the annual meeting, Ibach said there's still more work to be done to increase consumers' awareness of Sleep Number products. A company study done last year showed that 15 percent of those surveyed recognized the brand name, a high point for the company but much lower than the recognition of competitors' brands, she said.

Select Comfort is trying to boost awareness through increased spending on advertising and by making its stores easier to find by opening more free-standing stores. Until 2010, all the stores were inside shopping malls.

"We are pleased with the results [of the nonmall stores] and expect to have more than 70 by the end of the year," Ibach said. The company currently has about 380 stores and expects to increase the number of mall and non-mall outlets by 5 percent to 8 percent a year, she said.

In addition to reviving sales growth, Keith said McLaughlin can be credited with steering the company through two recessions, including the deep downturn in the late 2000s that hit companies tied to the housing market especially hard. Select saw its stock price tumble to 19 cents a share at the end of 2008, and in 2009, fended off an attempt by an investment group to wrest control of the company.

The stock has recovered, and so far this year is up 24 percent, closing Wednesday at $27.45 a share. Chairman Jean-Michel Valette got a laugh from stockholders when he said Select Comfort's market capitalization has increased at an average annual compound rate of 30 percent during McLaughlin's tenure but added that it hasn't been a steady upward climb. "We enjoyed a little more of a thrill ride than that," he said.

He thanked McLaughlin for making investors who stuck with the company during its tough years look smart. "You never traded the short-term expedient for the long-term right," he said.

Susan Feyder • 612-673-1723

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