"Why Sleep Number (SNBR) Stock Is Falling Today"

Listen up, folks! Today, we're diving into the nitty-gritty of why sleep number corporation (SNBR) stock is taking a nosedive. The bedding industry is in a tailspin, and sleep number is feeling the heat. Let's break it down!

First off, the numbers don't lie. Sleep Number reported a net sales decrease of 11% to $1.68 billion in 2024. That's a whopping $377 million in the fourth quarter alone, down 12% from the previous year. Ouch! And get this—they're blaming it on a lower store count, which added one to two percentage points of pressure on their sales figures. Talk about a double whammy!



But here's the kicker: despite the revenue decline, Sleep Number managed to improve its net income. They reported a net loss of $5 million for the fourth quarter, compared to a net loss of $25 million for the same period last year. That's a $20 million improvement, folks! And their adjusted EBITDA for the fourth quarter was $26 million, up 43% compared to the prior year. That's a 7.0% adjusted EBITDA margin, up 270 basis points versus the prior year. So, while the top line is struggling, the bottom line is showing some signs of life.

Now, let's talk about the industry trends. Tempur Sealy International Inc. (TPX) reported a stock price of $47.37 with a 0.72% increase, while Casper Sleep Inc. (CSPR) had a stock price of $6.68 with a 0.15% increase. These figures suggest that while some competitors are managing to maintain or even increase their stock prices, Sleep Number is struggling to keep up. The industry-wide weakness is further supported by the fact that Sleep Number's gross margin of 59.6% for the full year was up 190 basis points versus the prior year, but this improvement was not enough to offset the decline in sales and the net loss.

So, what's Sleep Number doing to turn things around? They've been busy transforming their operating model for greater financial resilience. Over the past 18 months, they've delivered gross margin rate improvement and operating cost reductions that were nearly double their original targets for the year. They've also reduced operating expenses by $28 million in the fourth quarter and by $88 million for the full year 2024 (before restructuring costs). This has contributed to a net loss reduction from $25 million to $5 million in the fourth quarter compared to the same period last year.

But here's the thing: despite all these efforts, the market is still punishing Sleep Number. Their stock price has been on a rollercoaster ride, ranging from $76.83 to $80.64, with a market capitalization of $1.73 billion. The company's P/E ratio of 9.99 suggests that the stock is relatively undervalued compared to other stocks, which could be due to the recent financial performance and the challenging market environment. However, the company's adjusted EBITDA growth and improved net income could indicate that the stock is undervalued and has the potential for future growth.

So, what's the bottom line? Sleep Number is facing significant headwinds in the market, but they're not sitting idly by. They're making strategic moves to stabilize their financial position and position themselves for long-term growth. But will it be enough to turn things around? Only time will tell, folks. Stay tuned!