Sleep Number's 2025 Earnings Call: Navigating Contradictions in Product Strategy, Marketing Spend, and Gross Margins

Revenue and Marketing Strategy:
- Sleep Number Corporation reported net sales of $328 million for Q2, a 19.7% decline from the prior year.
- The decline was primarily due to a significant cut in marketing spend, which was reduced by 30% year-over-year to reset inefficient programs.

Cost Management and Savings:
- The company is expected to remove over $130 million in operating expenses in 2025 compared to 2024, surpassing the original target of $80 million to $100 million.
- The savings are from streamlining leadership layers, simplifying operations, and narrowing R&D focus, which contributed to a 22% reduction in Q2 operating expenses compared to Q1.

Product and Distribution Strategy:
- Sleep Number is reassessing its product portfolio and distribution channels, with initiatives to simplify selection and create new price points to meet a broader customer base.
- This includes considering new digitalfirst, retail partnerships, and emerging platforms to enhance the customer experience and drive future growth.

Gross Profit Margin and Tariffs:
- Gross profit margin remained stable at 59.1%, flat compared to the prior year, despite unit volume deleverage and a mix shift towards lower-priced products.
- The company's cost management efforts and previous pricing actions have mitigated the impact of tariffs on its gross margin structure.