Key points
- Sleep Number is a leading bedding retailer specializing in the design and sale of smart adjustable beds powered by SleepIQ technology.
- The company is in a restructuring process which has resulted in a workforce reduction of 4,100 people.
- Sleep Number’s cost-savings initiative saved the company $85 million in 2023, and the company expects an additional $40 to $45 million in savings in 2024.
- 5 titles we prefer to Sleep Number
Sleep Number Co. NASDAQ: SNBR shares jumped 33% following the release of Q4 2023 earnings. The consumer discretionary company is a leading manufacturer of smart adjustable beds and accessories. It competes with the mattress giant Temperament Sealy International Inc. New York Stock Exchange: TPX. Their flagship product is Sleep Number smart beds, which allow users to adjust the firmness on each side of the bed by selecting a number. Its SleepIQ technology tracks billions of nightly data points to offer insights to improve sleep quality. The company has been undergoing restructuring, which caused shares to drop from $18.11 on December 14, 2023 to a low of $9.04 on February 7, 2024.
Beds from the Innovation series
Sleep Number sells three Innovation Series beds with air chamber technology to adjust firmness from the i8 smart bed to the i10 and the limited edition iLE 360-degree smart bed. They vary in price, height, support and cooling. They have advanced temperature balancing with a combination of 4x more layers of ceramic gel to release excess heat or quickly move it away for temperature-balancing comfort. They all feature dual adjustability, responsive air that adjusts firmness, and SleepIQ to monitor sleep parameters. Zero-G option is available.
Is the worst behind us?
On February 22, 2024, Sleep Number Q4 2023 reported EPS losses of $1.12, missing analysts’ consensus estimates by 24 cents. Revenue fell 13.8% year-over-year to $429.52 million, still beating consensus estimates of $420.78 million. Comparable-store retail sales fell 15%, while the company’s total comparable-store sales fell 15% year-over-year. Gross margin was 56.6%, up 190 basis points year-over-year, primarily driven by easing commodity prices, pricing actions and reduced operating costs. This was partially offset by increased promotions. Check the heat map of the sector on MarketBeat.
Update on the renovation
Sleep Number provided updates on the renovation’s progress. Large-scale cost management initiatives are progressing as planned. Operating expenses were reduced by $85 million in full-year 2023. The company will see another $40-45 million cut in additional operating expenses in full-year 2024. Sleep Number reduced its workforce by 4,100 employees in 2023. This is 7% less than in 2019. The company has specific ongoing workstreams to accelerate growth and efficiency in the short term, which include simplifying services, rationalizing suppliers, redefining spending priorities to accelerate efficiency and growth, and improving product value engineering.
Outlook for 2024
Sleep Number expects continued pressure on the mattress industry through 2024. Against this backdrop, Sleep Number expects adjusted EBITDA of between $125 million and $145 million. Net sales are expected to decline by mid-single digits compared to the prior year’s single-digit demand decline. Sleep Number expects gross margin rate improvement of nearly 100 basis points and $12 million in restructuring charges in 2024. Get AI-powered insights on MarketBeat.
Free cash flow generation
The company expects to generate $60 million to $80 million in free cash flow with capex of $30 million. First quarter 2024 net sales are expected to decline 10% year-over-year versus 10.5% forecast, including 3-4 headwinds from year-over-year order backlog changes. First quarter adjusted EBITDA is expected to be just over $30 million.
Shelly Ibach, CEO of Sleep Number, commented: “Through large-scale restructuring actions to rationalize our cost structure, restore margins and strengthen our balance sheet, we are transforming our operating model to improve our financial resilience and position our business to accelerate growth as a mattress industry.” the demand environment improves. Importantly, our long-term opportunities remain intact as we lead through this transformation.”
Sleep Number Analyst Ratings and Price Targets I’m on MarketBeat. Sleep Number colleagues and competitor actions can be found with MarketBeat Stock Screener.
Descending triangle daily breakout
The daily candlestick chart on SNBR illustrates a descending triangle breakout pattern. The descending trendline formed at a high of $18.11 on December 14, 2024, before selling off to a low of $9.04 on February 7, 2024. The daily market structure (MSL) low was triggered at $ 9.88 the next day, causing SNBR to break. the descending trend line at $10.46. Shares rallied to $11.83 before retreating to retest the descending trend line for support. SNBR retested the $11.83 resistance ahead of the Q4 2023 earnings report. SNBR rose to $13.41 and peaked just below the gap-filling level of $15.95 versus Q3 2024 earnings. The daily relative strength index (RSI) is rising to test the 70 band. Pullback support levels are at $13.41, $11.83, $10.46 and $9.88.
Before you consider Sleep Number, you’ll want to hear this.
MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Sleep Number wasn’t on the list.
While Sleep Number currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.
View the five stocks here
MarketBeat analysts just released their top five short stocks for March 2024. Find out which stocks have the most short interest and how to trade them. Click the link below to see which companies are on the list.
Get this free report