Citing sizable costs from new stores and products along with harsh weather in February, Select Comfort Corp., reported first-quarter earnings Thursday that plunged 27 percent, missing Wall Street expectations for a sixth consecutive quarter.
But profits missed expectations by only a penny a share, and revenue rose 7 percent, which exceeded analysts' forecasts. The Plymouth-based maker of the Sleep Number adjustable air bed will happily accept that lift. The company has struggled to impress investors for a year and a half, and its stock is trading at $17.75, about half the level from two years ago.
Despite Thursday's mixed report, CEO Shelly Ibach said, "We are pleased with our results, which were in line with [our] internal expectations. We continue to make progress."
Ibach reminded analysts during a conference call Thursday that the company disclosed in February that it expected expenses to continue to rise during the first quarter. It launched an aggressive TV ad campaign and opened 17 new stores while closing 14 between January and March. Select Comfort also rolled out several new beds plus an array of optional features such as the ability to track sleep, stop snoring, get a massage or raise just one side of the bed.
The new products and stores added about $6 million in costs to the quarter, officials said. For several years, the company has been opening more stand-alone stores and renovating mall-based stores. That activity continued during the quarter.
Ibach said the shock of the quarter were the rash of snowstorms in February. "That was most surprising. None of us expected the kind of store closures that we had. We had to close stores across the country, in the Northeast, and Midwest and Southeast. There were numerous stores over multiple days."
Bad weather in February coincided with the launch of the company's advertising campaign, which was "unfortunate," Ibach said. She said consumers returned to retail stores in March and responded well to the new-product introductions, she said.
Company officials told analysts that they remain "on track" with three growth strategies that include new products, effective marketing and driving more traffic to its stores. Given the big push on new high-tech beds and store openings, Ibach said she still expects full-year 2014 earnings to be flat, matching the $1.07 per-share earnings of 2013.
For the first quarter, Select Comfort's earnings fell 26 percent to $17 million, or 31 cents a share. On average analysts expected 32 cents. In contrast, revenue beat expectations, rising 7 percent to $276 million.
Select Comfort shares closed down 11 cents to $17.75 Thursday, but then jumped 59 cents, or 3.3 percent, to $18.34 in after-hours trading.
Dee DePass • 612-673-7725
