Sleep Number 2025 Q1 Earnings Misses Targets with Net Loss Widening 15.6%

Sleep Number Corporation (NASDAQ:SNBR) recently announced its fiscal Q1 2025 earnings on May 6, revealing a disappointing overall performance. Despite meeting revenue expectations of $393 million, statutory losses increased to $0.38 per share, exceeding analyst predictions. The company did not provide specific guidance for 2025 due to leadership transitions, with the new CEO, Linda Findley, expected to issue guidance after evaluating business strategies. This cautious stance reflects ongoing challenges in consumer demand amid current market conditions.

Revenue

Sleep Number's revenue for fiscal Q1 2025 declined by 16.4% to $393.26 million from the previous year's $470.45 million. The company-controlled channel contributed the entire revenue, with retail stores accounting for $344.44 million, while online, phone, chat, and other sales added $48.82 million. These figures highlight the challenges faced by the company in its various segments.

Earnings/Net Income

In Q1 2025, Sleep Number's losses deepened to $0.38 per share, widening by 15.2% compared to the $0.33 loss per share in Q1 2024. The net loss increased by 15.6% to $-8.65 million from the previous year's $-7.48 million loss. This continued trend of widening losses indicates ongoing financial struggles for the company.

Price Action

The stock price of Sleep Number edged up 0.58% during the latest trading day, but dropped 7.91% over the most recent full trading week. However, month-to-date, the stock surged 24.60%, showing some positive momentum amid broader challenges.

Post Earnings Price Action Review

Over the past five years, the strategy of purchasing Sleep Number shares following a quarter of revenue growth and holding for 30 days has demonstrated strong performance. The annualized return of 24.8% and total profit of $2.5 million significantly outpaced the market's annualized return of 13.2% and $750,000 profit in the same timeframe. Despite a sharp drawdown of 18.9% in 2024 due to Sleep Number's financial difficulties, the strategy remained diversified as the market also experienced volatility. This approach effectively capitalized on growth phases while mitigating risks during downturns, presenting a robust tactic for long-term investors.

CEO Commentary

Shelly Radue Ibach, Chairman, President, and CEO, highlighted the challenges within the mattress industry, attributing declines in mattress volumes to historically low consumer sentiment and economic pressures. Despite these obstacles, Sleep Number achieved a 43% year-over-year increase in fourth-quarter adjusted EBITDA, driven by improvements in gross margin and cost reductions. Ibach emphasized strategic efforts in optimizing media and promotional strategies to spur demand and leveraging data-driven analytics for enhanced consumer engagement. She expressed confidence in the company's transformation initiatives and commitment to long-term growth amidst the preparation for a leadership transition.

Guidance

Sleep Number refrained from providing specific financial guidance for 2025 due to the forthcoming leadership transition. The new CEO, Linda Findley, will assess business strategies before issuing guidance. The company acknowledged persistent pressure on consumer demand and amended financial covenants with its bank to enhance flexibility through 2025. This cautious revenue expectation reflects the current market conditions.

Additional News

In recent weeks, Sleep Number has undergone significant changes in its executive leadership team. Linda Findley, the new President and CEO, announced a series of organizational redesigns aimed at increasing efficiency and accountability. Melissa Barra was appointed as Executive Vice President, Chief Product and Enterprise Strategy Officer, overseeing product portfolio development and distribution. Chris Krusmark took on the role of Executive Vice President, Chief Retail and People Officer, focusing on retail experience and team management. Additionally, Hitesh Patel expanded his responsibilities in technology consolidation, while Tanya Skogerboe became Senior Vice President, Chief Supply Chain and Transformation Officer. These changes aim to streamline operations and improve company performance amid evolving industry conditions.