Sales of the new Sleep Number 360 "smart beds" helped drive 9.4 percent revenue growth for Select Comfort in the third quarter, but it was not enough to meet Wall Street expectations.
The Plymouth-based company, which is moving its headquarters to downtown Minneapolis this month, will officially change its name on Nov. 1 to Sleep Number Corp. (symbol: SNBR).
On Wednesday, it reported earnings of $25.6 million, or 62 cents per share, on sales of $402.6 million. Analysts expected the company to earn 68 cents per share from sales of $413.9 million.
Sales were up from $368 million in the third quarter of last year but net earnings were slightly down from $25.7 million. Share repurchases helped the EPS number to increase 11 percent, from the 56 cents per share.
CEO Shelly Ibach told analysts on the company's earnings call that sales were partly affected by disruptions and distractions from hurricanes during the quarter. The company estimated a hurricane effect of $12 million to $15 million in lost or delayed sales during the quarter.
Still Ibach drew confidence from the quarterly results.
"We are excited with how the consumer continues to respond to our innovations focused on quality sleep and wellness," she said in the company's earnings release. "With cash flow generation at record levels and the underlying strength of our business, we are increasing our share repurchase authorization to $500 million and are reaffirming the midpoint of our 2017 EPS guidance."
The company updated its guidance for 2017 earnings narrowing the range to $1.30 to $1.45 per share ($1.25 to $1.50 per share previously). The current outlook includes an 18 percent impact from the incremental costs related to the phased launch this year of the 360 smart beds, which can be programmed to move the bed to certain specifications and even set the temperature.
The company had introduced two versions of the 360 smart bed in the second quarter and will introduce another version in November. The company is expecting to be completely converted to a full lineup of 360 smart beds in the first half of next year.
Shares of Select Comfort closed Tuesday at $30.38, down 17 cents per share or 0.56 percent. Shares closed Wednesday at $32.08, up 5.6 percent.